The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia Pacific 9781509910182, 9781509910212, 9781509910199

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THE DEVELOPING WORLD OF ARBITRATION The Developing World of Arbitration studies the recent emergence of Asia Pacific ­jurisdictions as regional or international arbitration centres, thanks to various reform efforts and initiatives. This book provides an up-to-date and comprehensive analysis of the ways in which arbitration law and practice have recently been reformed in Asia Pacific jurisdictions. Leading contributors across the Asia Pacific region analyse twelve major jurisdictions representing varying patterns and degrees of development, whether driven from top down, bottom up, or by some hybrid impetus. Setting the arbitration systems and reforms of each investigated jurisdiction in the context of its economic, political, and ­judicial dynamics, this book presents, for the first-time, a cross-jurisdiction comparative and contextual study of the developing world of arbitration in the Asia Pacific and ­contributes to comparative international arbitration literature from an Eastern ­perspective. It also aims to identify an Asia Pacific model of arbitration modernisation, one that may be distinct from a Western model, and predicts future trajectories of development and challenge in light of the ever increasing competition between Eastern- and Western-based arbitration centres. This edited collection will be an invaluable addition to the libraries of academics and practitioners in the field of international commercial arbitration.

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The Developing World of Arbitration A Comparative Study of Arbitration Reform in the Asia Pacific

Edited by

Anselmo Reyes and Weixia Gu

OXFORD AND PORTLAND, OREGON 2018

Hart Publishing An imprint of Bloomsbury Publishing Plc Hart Publishing Ltd Kemp House Chawley Park Cumnor Hill Oxford OX2 9PH UK

Bloomsbury Publishing Plc 50 Bedford Square London WC1B 3DP UK

www.hartpub.co.uk www.bloomsbury.com Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786 USA www.isbs.com HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published 2018 © The editors and contributors severally 2018 The editors and contributors have asserted their right under the Copyright, Designs and Patents Act 1988 to be identified as Authors of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, ­electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www. nationalarchives.gov.uk/doc/open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2018. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: HB: 978-1-50991-018-2 ePDF: 978-1-50991-019-9 ePub: 978-1-50991-020-5 Library of Congress Cataloging-in-Publication Data Names: Reyes, Anselmo, editor.  |  Gu, Weixia, editor. Title: The developing world of arbitration : a comparative study of arbitration reform in the Asia Pacific / edited by Anselmo Reyes and Weixia Gu. Description: Oxford [UK] ; Porland, Oregon : Hart Publishing, 2018.  |  Includes bibliographical references and index. Identifiers: LCCN 2017043893 (print)  |  LCCN 2017044104 (ebook)  |  ISBN 9781509910205 (Epub) |  ISBN 9781509910182 (hardback : alk. paper) Subjects: LCSH: Arbitration and award—Asia.  |  Arbitration and award—Pacific Area.  |  Arbitration agreements, Commercial—Asia.  |  Arbitration agreements, Commercial—Pacific Area.  |  Law reform—Asia.  |  Law reform—Pacific Area.  |  International commercial arbitration. Classification: LCC K2400 (ebook)  |  LCC K2400 .D425 2018 (print)  |  DDC 347.5/09—dc23 LC record available at https://lccn.loc.gov/2017043893 Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters. Jacket/cover image: Arbitration Reform 1 © Wai Pongyu and Hung Fai—2018. All rights reserved.

ACKNOWLEDGEMENTS

In the process of putting this book together, many institutions and people should be acknowledged. We would first like to thank the support from our home institution, Faculty of Law of the University of Hong Kong, which has enabled us to carry out the research work relating to arbitration studies in the Asia Pacific. Sincere thanks are due to our Dean, Professor Michal Hor and Head, Professor Yun Zhao, who have given their full support throughout the organising and writing of the book, particularly in the initial stages when the ideas of the research project were incepted and developed. We are particularly grateful to the generous financial support under the General Research Fund (GRF) Scheme of the Hong Kong Government Research Grants Council for the two comparative arbitration projects (Project Codes: HKU 742813H and 17617416), which have enabled us to invite contributors of this book to hold a conference in November 2015 at the University of Hong Kong for intensive discussion of ideas and draft chapters. The Center for Chinese Law at the University of Hong Kong must also be acknowledged for providing administrative and secretarial support to the conference. The two grants have further enabled us to carry out necessary research trips and talk to experts in the investigated Asia Pacific jurisdictions on the penetrating factors (economic, political, judicial) in the progress and outcome of arbitration reform in their respective jurisdiction. We owe a special debt to Michael Palmer, Professor of Law at University of London School of Oriental and African Studies, and Khory McCormick, President of the Australian Center for International Commercial Arbitration, who have acted as commentators for all the draft chapters at the conference from both theoretical and practical perspectives and have given us many valuable suggestions post the conference, such as how to enrich the arbitration law and development study in the context of Asia Pacific economic booming, with particular relevance to China’s ongoing arbitration reform. We need to thank the support by United Nations Commission on International Trade Law (UNCITRAL), in particular its Regional Center for the Asia Pacific, which have collaborated with us in organising the conference. UNCITRAL’s Head, Renaud Sorieul, and the Asia Pacific Regional Head, Joao Ribeiro, have both participated the conference and put forward many constructive comments on how to develop an Asia Pacific model of arbitration. We are enormously indebted to all the contributors to this book. Without their intellectual contributions, the publication of this book would not have been possible. The contributors are all leading academics and academic lawyers in the arbitration field in their respective investigated jurisdiction. Setting the arbitration systems and reforms of their investigated jurisdiction in the context of its economic, political and judicial dynamic, the book has managed to present a first-time cross-jurisdiction comparative and contextual

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Acknowledgements

study of the developing world of arbitration in the Asia Pacific and contributes to the comparative international arbitration jurisprudence from a more Eastern perspective. There are also many scholars in the community of comparative international ­arbitration and private international law in China, Asia and overseas who have kindly shared with us their thoughts about and insights into arbitration reform paths and models in the Asia Pacific. Space does not permit us to record a full list of their names here. We also thank our research assistants, Wilson Lui and Emily Chan, for their relentless assistance in editing and checking the styles throughout this book. The Hong Kong artists Wau Pongyu and Hung Fai are also acknowledged for allowing their painting Arbitration Reform I to be used as the cover for this book. Last but not the least, we wish to thank the law editors at Hart Publishing in Oxford, Roberta Bassi and Sinead Moloney, for all their kind efforts in guiding us through the ­writing and getting the manuscript to press. Anselmo Reyes and Weixia Gu Hong Kong 1 July 2017

CONTENTS

Acknowledgements���������������������������������������������������������������������������������������������������������������������v List of Editors and Contributors���������������������������������������������������������������������������������������������� ix List of Abbreviations���������������������������������������������������������������������������������������������������������������� xi

Introduction: Towards a Model of Arbitration Reform in the Asia Pacific���������������������������1 Anselmo Reyes and Weixia Gu 1. China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves������������������������������������������������������������������������������������������������17 Weixia Gu 2. Balancing Procedural and Substantive Arbitration Reforms: Advancing International Arbitration Practice in Hong Kong���������������������������������������39 Shahla Ali 3. Cautious Optimism for Arbitration Reform in Taiwan������������������������������������������������67 Nigel NT Li, Angela Y Lin and Jeffrey CF Li 4. Arbitration Reform in Japan: Reluctant Legislature and Institutional Challenges�������������������������������������������������������������������������������������������83 Nobumichi Teramura and Luke Nottage 5. Arbitration Reform in Korea: At the Threshold of a New Era������������������������������������109 Joongi Kim 6. Arbitration Reform in Malaysia: Adopting the Model Law����������������������������������������123 Lam Ko Luen 7. Making Arbitration Work in Singapore�����������������������������������������������������������������������143 Chan Leng Sun, SC 8. Philippine Arbitration Reform: Fresh Breathing Space from Congested Litigation��������������������������������������������������������������������������������������������163 Arthur P Autea 9. Arbitration in Indonesia: Largely Dependable Recognition and Enforcement���������189 Simon Butt 10. Arbitration Law and Practice in Vietnam: Fundamental Changes Over the Past 20 Years and Potential for the Future����������������������������������������������������205 Dang Xuan Hop

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11. Arbitration Reform in India: Challenges and Opportunities�������������������������������������221 Hiro Naraindas Aragaki 12. The Reform of Commercial Arbitration in Australia: Recent and Prospective Developments�������������������������������������������������������������������������251 Leon Trakman Conclusion: An Asia Pacific Model of Arbitration Reform������������������������������������������������279 Anselmo Reyes and Weixia Gu

References�������������������������������������������������������������������������������������������������������������������������������301 Index��������������������������������������������������������������������������������������������������������������������������������������331

LIST OF EDITORS AND CONTRIBUTORS

Anselmo Reyes is Professor of Legal Practice at the University of Hong Kong and an International Judge of the Singapore International Commercial Court. Weixia Gu is Associate Professor of Law at the University of Hong Kong and an Executive Council Member of the China Society of Private International Law. Her research focuses on international arbitration and private international law. Shahla Ali is an Associate Professor and Deputy Head of the Department of Law and Deputy Director of the LLM in Arbitration and Dispute Resolution in the Faculty of Law at the University of Hong Kong. She is an arbitrator with CIETAC (HK), FINRA, HKIAC (ADNDRC), SCIA and WTC Macau. Nigel NT Li is a Partner, serving as Vice-Chairman of the Executive Committee of Lee and Li, Attorneys-at-Law of Taiwan. Angela Y Lin is a Partner, serving as a member of the Executive Committee of Lee and Li, Attorneys-at-Law of Taiwan. Jeffrey CF Li is a Senior Associate at Lee and Li, Attorneys-at-Law of Taiwan and an Adjunct Lecturer of Law at the Soochow University Graduate School of Law. Luke Nottage is Professor of Comparative and Transnational Law at the University of Sydney, and founding director of the Australian Network for Japanese Law (ANJeL) and Japanese Law Links Pty Ltd. Nobumichi Teramura is a PhD Candidate at the Law Faculty of the University of New South Wales (Australia). He holds an LLB and an MA from Doshisha University in Japan, and an MA from Sheffield University in the UK. Joongi Kim is Professor of Law at Yonsei University. He has a treatise International Arbitration in Korea (Oxford University Press, 2017) and serves on the editorial boards of International Investment Law and Arbitration, Asian Journal of Comparative Law and Korean Arbitration Review. His research focuses on international arbitration, international trade and investment, corporate governance and good governance. Lam Ko Luen is a Partner and the Deputy Head of the International and Domestic Arbitration Department of Messrs. Shook Lin & Bok (Est. 1918), Kuala Lumpur, one of the largest and oldest law firm of local origin in Malaysia. Chan Leng Sun is a Senior Counsel of the Supreme Court of Singapore and the Global Head of Arbitration of Baker & McKenzie. He is President of the Singapore Institute of Arbitrators and Deputy Chairman of the Singapore International Arbitration Centre.

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List of Editors and Contributors

Arthur P Autea manages his law firm specialising on commercial arbitration and litigation. He lectures to members of the Philippine Bar on commercial arbitration in continuing legal education courses. He has published a textbook on Philippine commercial arbitration which is widely used in Philippine law schools. Simon Butt is a Professor of Indonesian Law and ARC Future Fellow at The University of Sydney Law School. He has written widely on Indonesian law, including The Constitutional Court and Democracy in Indonesia (Brill, 2015), The Indonesian Constitution: A Textual Analysis (Hart Publishing, 2012, with Tim Lindsey) and Corruption and Law in Indonesia (Routledge, 2012). Dang Xuan Hop is a partner with Allens in Vietnam, and an arbitrator at the VIAC, SIAC, HKIAC and other arbitration institutions. Hiro Naraindas Aragaki FCIArb is Professor of Law at Loyola Law School, Los Angeles, where he teaches and writes in the areas of ADR, contract law and civil procedure. He has provided training and systems design advice in Asia and Africa and served as an arbitrator and mediator since 2001.  Leon Trakman is Professor of Law and Former Dean at the University of New South Wales, a Barrister, Arbitrator and NAFTA Panellist.

LIST OF ABBREVIATIONS

The following list includes most abbreviations that are used more than twice in this book. The relevant jurisdiction (if any) is provided at the end of the explanation of each item to resolve ambiguities. AA ACA ACICA ACL ADR ADR Act of 2004  AGR AIDC AIPA AL APRAG BAC BANI CAA CAA CAA CCIAA CEAA CFA CFI CIAC CIArb CIETAC CMAC CREAA DoJ EO 1008 FDI FTA GAC GDP HKAO HKIAC HKIArb HKMAAL IAA

Arbitration Act, Singapore Arbitration and Conciliation Act, India Australian Centre of International Commercial Arbitration Australian Consumer Law Alternative dispute resolution Alternative Dispute Resolution Act of 2004 (RA 9285), Philippines Act Governing Relations between the People of the Taiwan Area and the Mainland Area Australian International Dispute Centre Arbitration Industry Promotion Act, Korea Arbitration Law, China Asian Pacific Regional Arbitration Group Beijing Arbitration Commission Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia) China Arbitration Association Chinese Arbitration Association, Taipei Commercial Arbitration Act, Australia Chinese Construction Industry Arbitration Association Chinese Estate Arbitration Association Court of Final Appeal, Hong Kong Court of First Instance, Hong Kong Construction Industry Arbitration Commission, Philippines Chartered Institute of Arbitrators China International Economic and Trade Arbitration Commission China Maritime Arbitration Commission Chinese Real Estate Arbitration Association Department of Justice, Hong Kong Construction Industry Arbitration Law, Phillippines Foreign direct investment Free Trade Agreement Guangzhou Arbitration Commission Gross domestic product Hong Kong Arbitration Ordinance Hong Kong International Arbitration Centre Hong Kong Institute of Arbitrators Hong Kong Mediation Accreditation Association Limited International Arbitration Act 1974 (Cth), Australia

xii  IAA IBP ICA ICC ICDR ICSID ICSID Convention  JAA JCAA JFBA JIPAC KCAB KLRCA KOCIA LCA LCI LCIA LCPPNAP LRR METI MIArb MLIT Model Law; or UNCITRAL Model Law New York Convention OCA PCA PDRCI RA 876 ROLI SAC SADR SCI SCIETAC/SCIA SCMA SIAC SIArb SICC SIETAC/ SHIETAC/SHCIA SIMC SMC SPC TCAA TICPI

List of Abbreviations International Arbitration Act, Singapore Integrated Bar of Philippines International Commercial Arbitration International Chamber of Commerce International Centre for Dispute Resolution International Centre for Settlement of Investment Disputes Convention on the Settlement of Investment Disputes between States and Nationals of Other States Japan Association of Arbitrators Japanese Commercial Arbitration Association Japan Federation of Bar Associations Japan Intellectual Property Arbitration Center Korean Commercial Arbitration Board Kuala Lumpur Regional Centre for Arbitration Korean Council for International Arbitration 2010 Law on Commercial Arbitration, Vietnam Law Commission of India London Court of International Arbitration Law Concerning Public Peremptory Notice and Arbitration Procedure, Japan Laws and Regulations Regarding Hong Kong & Macao Affairs Ministry of Economy, Trade and Industry, Japan Malaysian Institute of Arbitrators Ministry of Land, Infrastructure, Transport and Tourism, Japan 1985 UNCITRAL Model Law on International Arbitration (as amended in 2006, unless otherwise specified) 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 2003 Ordinance on Commercial Arbitration, Vietnam Permanent Court of Arbitration Philippine Dispute Resolution Center Inc Republic Act No. 876 (Arbitration Law), Philippines Rule of Law Index Shanghai Arbitration Commission Special Rules of Court on Alternative Dispute Resolution, or Special ADRR Rules, Phillippines Supreme Court of India South China International Economic and Trade Arbitration Commission / Shenzhen Court of International Arbitration Singapore Chamber of Maritime Arbitration Singapore International Arbitration Centre Singapore Institute of Arbitrators Singapore International Commercial Court Shanghai International Economic and Trade Arbitration Commission / Shanghai Court of International Arbitration Singapore International Mediation Centre Singapore Mediation Centre Supreme People’s Court, the People’s Republic of China Taiwan Construction Arbitration Association Transparency International’s Corruption Perception Index

List of Abbreviations TOMAC TPP UNCITRAL VIAC WAC WEAC WIPO

Tokyo Maritime Arbitration Commission Trans-Pacific Partnership Agreement United Nations Commission on International Trade Law Vietnam International Arbitration Centre Wuhan Arbitration Commission Wenzhou Arbitration Commission World Intellectual Property Organization’s Arbitration and Mediation Centre

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Introduction: Towards a Model of Arbitration Reform in the Asia Pacific ANSELMO REYES AND WEIXIA GU

1.  Background to Arbitration in the Asia Pacific Since the turn of the twentieth century, international commercial arbitration has flourished and prospered across the Asia Pacific. The development of international arbitration as a mechanism for commercial dispute resolution has not only mirrored, but also responded to, the commercial needs of continuing economic development within Asia Pacific jurisdictions. Attracting foreign investment and boosting commercial confidence, whether in the short or long term, will typically necessitate the institution of efficient and effective dispute resolution mechanisms to handle the differences that inevitably arise as a matter of cross-border business. Given that outside investors may be wary of the impartiality of domestic courts in resolving cross-border commercial disputes, it is natural that arbitration has found itself uniquely situated in Asia Pacific jurisdictions as a preferred mode of dispute resolution, as well as a magnet for foreign investment within a given state. The steady growth of international commercial arbitration in Asia is reflected by the numbers. Since 2008, the total number of arbitrations handled by key international ­arbitration institutions in the Asia Pacific has continuously exceeded the number of cases handled by similar institutions in the West.1 The establishment of key institutions from the Korean Commercial Arbitration Board in Northeast Asia, to the Singapore International Arbitration Centre and the Kuala Lumpur Regional Centre for Arbitration in Southeast Asia, and to the Australian Centre for International Commercial Arbitration in the Pacific, coupled with the ongoing consolidation of the China International Economic and Trade Arbitration Commission in China, has raised the presence and standing of international commercial arbitration as a form of dispute resolution in the Asia Pacific. Each jurisdiction, however, has a different story to tell in terms of the trajectory of its respective arbitration reform efforts. While some jurisdictions have attained global renown in their efforts, others have trodden different paths with only modest or even minimal success.

1  Vinayak Pradhan, ‘The Continuing Growth of International Arbitration in Asia’ (2013) 79(4) The ­International Journal of Arbitration, Mediation and Dispute Management 407.

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2.  Aim of this Book The aim of this book is to present a study of the emergence of Asia Pacific jurisdictions as regional or international centres of arbitration and dispute resolution. In this vein, this initial chapter has four objectives. First, it introduces a hypothetical model for arbitration reform in the Asia Pacific. In its ensuing 12 chapters, this book will examine the process of arbitration reform in 12 Asia Pacific jurisdictions with a view to assessing the accuracy of the model as a formula for successful arbitration reform in the Asia Pacific. Second, it explains the template that the contributors to the chapters on the 12 Asia Pacific jurisdictions were requested to follow in writing their respective chapters. It does so by identifying the questions that the contributors were invited to consider and, insofar as appropriate to the course of arbitration reform in the relevant jurisdiction, to comment upon in their chapter. Third, throughout this book, focus is placed upon each jurisdiction’s reform efforts with regard to the adoption or adaptation, where applicable, of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the 1985 UNCITRAL Model Law on International Arbitration as amended in 2006 (the Model Law). As not all readers may be familiar with the Model Law and the New York Convention, a section in this chapter will summarise those instruments. Those already familiar with both instruments may safely skip it. Fourth, by way of overview, this chapter gives thumbnail sketches of the road to arbitration reform taken by the Asia Pacific jurisdictions which constitute the subject matter of the succeeding chapters.

3.  A Hypothetical Model It is commonplace today for Asia Pacific jurisdictions to market themselves as ‘arbitrationfriendly’. A jurisdiction will usually claim to have ‘reformed’ its arbitration laws and infrastructure to enable arbitral awards to be efficiently obtained or speedily enforced. Such ‘reform’ of a jurisdiction’s arbitration regime is typically motivated by the desire to attract greater foreign direct investment (FDI) with the expectation that the latter will in turn lead to the enhancement of economic growth to the betterment of all citizens. More developed countries may also see merit in promoting themselves as international, regional or sub-regional arbitration hubs, depending on the scope of their ambitions. The hope in such instances would be to secure a share of the lucrative niche market of crossborder dispute resolution. Such a strategy, if executed successfully, could boost the GDP of the jurisdiction, as a result (among other things) of the large numbers of big-spending corporate officers, external and in-house lawyers, arbitrators and experts of all sorts entering the jurisdiction from time to time to resolve disputes through arbitration or some multi-tiered combination of arbitration, litigation and mediation.

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But what exactly does ‘arbitration reform’ in the Asia Pacific entail? How does a country go about transforming or re-inventing itself into an arbitration-friendly jurisdiction or a major dispute resolution hub? A crude model might posit the following as the essential or minimum commonsense ingredients that a credible arbitration reform would require: Step 1: Acceding to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Step 2: Adopting the UNCITRAL Model Law on International Arbitration in its original 1985 version or, more preferably, in its current 2006 version (or as much of the latter as a jurisdiction feels it can adopt). Step 3: Establishing national institution(s) and international centre(s) to administer ­arbitrations and provide venues for arbitrations within the jurisdiction, as well as to ensure that the arbitration rules of the institution(s) and centre(s) keep pace (and comply) with ever-evolving international best practices. Step 4: Establishing a corps of judges familiar with arbitration practice to ensure that courts enforce arbitration agreements, do not unduly interfere with the conduct of arbitrations, and enforce arbitral awards in accordance with best practices under the Model Law and the New York Convention. Step 5: Engaging in capacity-building activities (workshops, seminars, conferences, etc) to ensure that all stakeholders (judges, in-house and external counsel, business persons) are familiar with and supportive of arbitration as a means of dispute resolution. Step 6: Constantly reviewing legislation relating to arbitration and to institutions administering arbitrations, so that the jurisdiction remains competitive with developments in the dispute resolution industry. With a view to assessing the formula just described as a standard model for arbitration reform in the Asia Pacific, this book examines what the process of reform has (or has not) entailed in a sample of 12 important states.2 The states chosen are ‘important’ from the perspective of arbitration development and/or economic development within the region.3 The states to be examined are: in North Asia (in particular Northeast Asia), (1) China, (2) Hong Kong, (3) Taiwan, (4) Japan and (5) the Republic of Korea; in South Asia

2  In this book, the expression ‘state’ is used in its private international law sense. Thus, the word can designate a country (for example, China or Australia). But it can also designate the individual states, provinces or administrative regions making up a country (for example, the Hong Kong Special Administrative Region of the People’s Republic of China or the state of New South Wales within Australia). On this basis, the United States would, in the eyes of private international lawyers, comprise 51 states, namely, 50 state jurisdictions plus the federal jurisdiction. 3  For example, Indonesia is an important jurisdiction in the Asia Pacific in terms of economic development, although the state may not be active in arbitration development. Most of the jurisdictions surveyed here are active in both aspects.

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(in particular Southeast Asia), (6) Malaysia, (7) Singapore, (8) the Philippines, (9) Indonesia, (10) Vietnam and (11) India; and in the Pacific, (12) Australia. Each of these 12 states will be discussed respectively in the following 12 chapters of this book. The book concludes with a final chapter that takes a comparative view of the reform experiences within the 12 states in the hope of answering certain sets of questions leading to a reform pattern/ model in the Asia Pacific. The first set of questions looks to the past. The concluding chapter will first consider how (if at all) the arbitration regimes in the 12 states have actually been reformed through the adoption of the Model Law and the New York Convention. Has there in fact emerged a standard Asia Pacific pattern of reform or are there as many trajectories to reform as there are jurisdictions? In the event that there is some discernible pattern, to what extent have political, legal, social, cultural, religious, geographical or other factors influenced the way in which that pattern has been adhered to (or not) in a given jurisdiction? In other words, what variations have there been and why? The second set of questions looks to the present. We consider whether, in light of the actual arbitration reform experience (or lack of such) in the 12 states, it is possible to draw up a list of ‘essential’, ‘highly recommended’, or ‘near’ ingredients that may be contemplated today by jurisdictions in their prospective reforms, in the Asia Pacific or elsewhere, wishing to become successful sub-regional, regional or international arbitration centers. Mirroring the hypothetical model, a preliminary list of ingredients might include the following as essential ingredients: (1) adoption of the Model Law and the New York ­Convention; (2) establishment of at least one national body (institution) to administer arbitrations; (3) an arbitration-friendly (or pro-arbitration) judiciary staffed with judges familiar with best practices in application of the Model Law and the New York Convention; (4) establishment of an arbitration community, that is, a sufficient number of arbitrators, lawyers, business persons and academics who are familiar with arbitration as a means of commercial dispute resolution; (5) a sufficient volume of existing or anticipated commercial activity to make use of (and justify the expense involved in establishing) a modern arbitration infrastructure within the jurisdiction; and (6) an openness to the introduction of further arbitration reform or innovation so as to keep ‘one step ahead’ of competing jurisdictions. Examining the preliminary list, one might wonder whether there has been a glaring omission in such a list of ‘essential’ ingredients to arbitration reform. One might ask whether adherence to the rule of law in civil society might properly be regarded as an essential, if not the primary, ingredient to successful arbitration reform? However, nothing has been mentioned explicitly about the inclusion of such a requirement in the initial list of ingredients or, for that matter, in the hypothetical model described above. In light of the experiences in the 12 states, the concluding chapter will need to grapple with whether it is truly a self-evident proposition that arbitration reform requires adherence to the rule of law. It might be argued, for instance, that it is precisely when a judiciary is viewed as corrupt or ineffective that a population is more likely to resort to arbitration as a means of dispute resolution, if only to bypass an ineffective or distrusted court system. Sensing that encouraging arbitration offers a way of assuring foreign investors that they can safely and securely invest in a country despite the shortcomings of the local judiciary, a government might then promote commercial arbitration and set up a special court for

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that purpose to forestall having to tackle the thorny political conundrums of reforming the entirety of a corrupt or ineffectual domestic judiciary. It will have been noticed that, rightly or wrongly, some of the 12 states examined here have held (or continue to hold) reputations as places where corruption is endemic and the foundations of rule of law are less certain. By juxtaposing the path towards arbitration reform in those jurisdictions with the trajectories in jurisdictions with greater rule of law traditions, we hope to test the proposition that adherence to the rule of law is most certainly an ‘essential’ or ‘highly recommended’ ingredient to successful arbitration reform. The final set of questions looks to the future. First, due to the development of arbitration as an important service industry, an Asia Pacific market for the resolution of commercial disputes through arbitration has been emerging. Asia Pacific jurisdictions now compete with each other to attract foreign investment by offering the best commercial arbitration services. Thus, for example, arbitral institutions in many countries have been regularly updating their arbitration rules to make them more market-oriented and thereby more attractive to foreign investors from all over the world. In the light of the foregoing, how should individual Asia Pacific jurisdictions pitch themselves to compete in the arbitration market (1) among each other and (2) with more established counterparts in leading Western jurisdictions (especially, London, New York, Paris, Geneva and Stockholm)? Second, there exists a debate between ‘localised globalism versus globalised localism’ in the reception of the Model Law. The Model Law provides access to the international arbitration market. But while the Model Law (whether the original 1985 version, or the 2006 amended version) is essentially a single text, the practicalities of its adoption in different jurisdictions may not be entirely the same. Reception of the Model Law generally may incorporate certain jurisdiction-specific local practices and usages (‘localised ­globalism’). Has this been the case in the Asia Pacific? Alternatively, have Asia Pacific ­countries felt free to ‘pick and choose’ from among the provisions of the Model Law and to incorporate only those selected features deemed appropriate for their arbitration law (‘globalised localism’)? Whichever style of reform has been followed in the Asia Pacific, it is necessary to consider the implications of the same for the future. Third, we consider whether judicial and institutional reforms play important roles in the arbitration reform pattern in the Asia Pacific region, whether they themselves play complementary roles, or whether they develop independently of each other. To put the query more bluntly, we ask whether a pro-arbitration judiciary is necessary if institutional reform is to be successful. What are the implications of any symbiosis (or lack of it) for the path(s) of future arbitration reform? In short, this book aims to provide readers with the following three deliverables: 1. A summary of arbitration reform trajectories in 12 Asia Pacific states; 2. The identification of an Asia Pacific model for arbitration reform; and, 3. A forecast of likely arbitration reform initiatives in the future, with a view to keeping Asia Pacific jurisdictions competitive, when compared to more established arbitration jurisdictions in the West.

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4.  A Standard Chapter A unique feature of this book is that all contributors were asked to follow a standard template in their individual chapters. This standardised format was designed to make it easy for readers to engage in a comparison of the paths to reform taken by the 12 jurisdictions that form the subject of this book. At the same time, the template was not intended to be so detailed as to amount to a micro-management of how each contributor was to write his or her own chapter. The template was not meant artificially to force contributors to assemble the unique features of a country’s attempts at arbitration reform within an overly rigid framework.4 The standard format may be gleaned by glancing at the Table of Contents. In short, the account of arbitration reform in each chapter has the following headings and sub-headings, with sub-sub-headings and other divisions left to the discretion of individual authors: 1. Introduction 2. Background 2.1 Legislative and Regulatory Framework 2.2 Institutional Framework 2.3 Judicial Framework 3. Reform 3.1 Legislative and Regulatory Initiatives 3.2 Judicial Initiatives 3.3 Other Factors 3.4 What Drives Reform? 3.4.1 Legislative, Judicial and Institutional Elements 3.4.2 Top-down versus Bottom-up Reform 3.4.3 Special Considerations 4. The Future 4.1 Legislative, Judicial and Institutional Reform 4.2 Enhancing Competitiveness, Independence and Professionalism 5. Conclusion The format is largely self-explanatory. Nonetheless, it may assist briefly to set out the questions that each contributor was invited to reflect upon in the context of arbitration reform (or the lack of it) within the state which he or she was elucidating. Section 1 gives a brief overview of arbitration reform within the jurisdiction by way of an ‘Introduction’.

4  The chapter on India is the one exception to the standardised format. The author of that chapter (Professor Hiro Aragaki) was of the view that the recent legislative reforms to India’s arbitration laws were a response to judicial initiatives and other developments there, so that logically in the India chapter ss 3.2 (‘Judicial Initiatives’) and 3.3 (‘Other Factors’) of the standard template should precede s 3.1 (‘Legislative and Regulatory Framework’). Professor Aragaki also proposed to add the words ‘The Competitive Arbitration Market’ to the s 3.3 title ‘Other Factors’, in order to make it clear what the developments discussed by him in that section were hoping to bring about in India.

Introduction

 7

Section 2 outlines by way of ‘Background’ the distinctive features of the arbitration system in the relevant state on three levels. The first level (Section 2.1) deals with the ­‘Legislative and Regulatory Framework’ of the jurisdiction. In particular, the follow questions are considered: has the country adopted the Model Law (in whole or part) in its 1985 or 2006 version? If so, how? If not, why not? More particularly, what are the principal laws and regulations governing arbitration in the jurisdiction? As the result of such laws and regulations, is the arbitration regime in the state single or dual track? In other words, is there a single regimen governing international and domestic arbitration or are there different rules for such arbitrations? The second level (Section 2.2) looks at the ‘Institutional Framework’ for arbitration within a state. In particular, the following questions are considered: are institutional and ad hoc arbitrations allowed? Has the jurisdiction established one or more international or domestic arbitration institutions? What roles and inter-relationship(s) do these institutions play in promoting the arbitration service and arbitration market? The third level (Section 2.3) looks at the ‘Judicial Framework’ within a state. In particular, the following questions are considered: what attitude do the courts take towards arbitration? What (if any) problems are routinely encountered in the recognition and enforcement of domestic and foreign arbitral awards? Section 3 covers the process of ‘Reform’. Section 3.1 sets out the specific ‘Legislative and Regulatory Initiatives’ that governments have taken to promote arbitration in the state. Each contributor is invited to assess the extent to which such steps have or have not been effective and to explain why. Section 3.2 examines the ‘Judicial Initiatives’ undertaken within jurisdictions more closely. How have judiciaries striven (if at all) to project themselves as pro-arbitration? Have such judicial initiatives proved successful? Section 3.3 then examines ‘Other Factors’ that have led (or not) to an opening up of the market for arbitration services within a state. For example, what sort of training is now available for would-be arbitrators, counsel in arbitrations and judges hearing arbitrationrelated cases? To what extent (if at all) has such training been useful in advancing the use of arbitration? Section 3.4 is meant to view the entirety of the picture and ask ‘What Drives Reform’ within the jurisdiction. Is it, for instance, a combination of ‘Legislative, Judicial and Institutional Elements’ (Section 3.4.1) or does some single factor govern all? In light of that, S­ ection 3.4.2 suggests whether change has largely been ‘Top-down versus Bottomup Reform,’ that is, whether the impetus for reform has been driven or imposed by the ­government (‘top-down’), from below by the private sector (‘bottom-up’) pressing the government for change, or both. Section 3.4.3 then identifies ‘Special Considerations’ for reform within a country not sufficiently acknowledged in previous sections. Such influential factors may be a state’s common or civil law system, strong or weak rule of law tradition or governmental system (federal or unitary), or circumstances that arise because of a country’s ideological, religious, cultural, social, historical, political or geographical contexts. Section 4 analyses the likely prospects of future or further reform. Section 4.1 looks into the potential for ‘Legislative, Judicial and Institutional Reform’ while Section 4.2 suggests what may (or may not) be done by way of ‘Enhancing Competitiveness, Independence and Professionalism’ within a jurisdiction.

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Each chapter sums up with a short ‘Conclusion’ (Section 5) wherein contributors were invited to note ‘essential’ and ‘near’ ingredients that have enabled, are enabling, or will enable a jurisdiction to move towards becoming a sub-regional, regional or international arbitration hub. In short, the ‘Conclusion’ considers what has been accomplished by way of reform and what remains to be done.

5.  A Convention and a Model Law 5.1.  The New York Convention The New York Convention provides a means for the recognition and enforcement in a contracting state of an arbitral award made in another contracting state. The text of the Convention is in five languages (Chinese, English, French, Russian and Spanish), each of equal authenticity.5 The Secretary-General of the United Nations is the depositary for the Convention.6 The Convention is one of the most successful multilateral instruments ever promulgated. It was promulgated on 10 June 1958, at which time just 10 countries acted as signatories. Today, on the eve of its sixtieth anniversary, there are 157 parties to the Convention, taking account of Angola’s recent accession on 6 March 2017.7 The Convention is short, being encompassed in only 16 articles. The mechanism for recognition and enforcement of arbitral awards which it establishes is likewise straightforward. Article 1(1) provides for the recognition and enforcement of ‘arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal’. Article 1(1) permits a country to make two types of declarations when becoming party to the instrument. A state ‘may on the basis of reciprocity declare that it will apply the Convention to … awards made only in the territory of another Contracting State’. A state may further declare that the Convention will only be applied to ‘differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the [relevant state]’. Apart from Article 1, the key provisions of the Convention are in Articles 2 to 6. Those impose two obligations on a contracting state. First, Article 2 requires a contracting state to recognise arbitration agreements in writing. The phrase ‘agreement in writing’ is broadly defined in Article 2(2) to include ‘an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams’. At the time of the promulgation of the Convention, electronic communications such as ‘email’ communications did not exist. But it will be noted that the definition of ‘agreement in writing’ in Article 2(2) is not exhaustive. Thus, if only by analogy with the reference to ‘telegrams’, it

5  6 

7 

Convention, Art 16(1). Convention, Art 9(2). The Convention came into effect in Angola on 4 June 2017.

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 9

should be the case that agreements to arbitrate concluded by an exchange of emails should also be recognised by a state party to the Convention.8 Article 2(3) spells out the substantive contents of the obligation to recognise a written arbitration agreement. Where there is such a written agreement, the court of a contracting state seized of an action covered by the arbitration agreement ‘shall, at the request of one of the parties, refer the parties to arbitration’. The court may only refuse to refer the parties to arbitration where an alleged arbitration agreement is ‘null and void, inoperative or incapable of being performed’. Second, Article 3 requires a contracting state to ‘recognize arbitral awards as binding’ and, subject to the remaining articles of the Convention, ‘enforce them in accordance with the rules of procedure of the territory where the award is relied upon’. In so doing, there must not be any discrimination. An enforcing state should not impose substantially more ­onerous conditions or higher fees or charges than are imposed on the recognition or enforcement of domestic arbitral awards. Next, the obligation to recognise and enforce arbitral awards is qualified by Articles 4 to 6. Article 4 identifies formal requirements that the court of an enforcing state can impose before recognising or enforcing an award. Thus, a state may ask for a ‘duly authenticated original award or … certified copy thereof ’ and for the ‘original [arbitration] agreement … or … certified copy thereof ’. The state may also request certified translations of the award or agreement into the state’s official language. Article 5 is perhaps the most famous provision of the Convention, having attracted the most interest and commentary in legal and academic circles. It particularises the limited grounds upon which an enforcing court may refuse to recognise and enforce an arbitral award. It stipulates as follows: 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in Article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

8  See ‘Recommendation Regarding the Interpretation of Article II, Paragraph 2, and Article VII, Paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Done in New York, 10 June 1958, Adopted by the United Nations Commission on International Trade Law on 7 July 2006 at Its 39th Session’.

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(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country.

Article 6 qualifies the obligation to recognise and enforce an arbitral award in Article 3 by providing that, where there is a pending application to stay or set aside an award in the state where that award was made, an enforcing court may adjourn a decision on the enforcement of the award. The enforcing court may, however, order the award debtor to provide ‘suitable security’ as a condition of adjournment. The remainder of the Convention deals with its coming into effect and the consequences thereof on pre-existing bilateral or multilateral treaties covering the same subject matter as the Convention. Of these remaining provisions, it is worth noting Article 7. Article 7 stipulates that, where it would be more advantageous to enforce an arbitral award through some other treaty arrangement among two or more states, a party is free to make use of that more advantageous mechanism. The Convention thus does not deprive a party of its rights under such alternative treaty arrangement. The success of the New York Convention in attracting contracting parties over its 60 years of existence is not difficult to justify. The instrument offers a simple mechanism for the enforcement of an arbitral award in a commercial matter in 157 jurisdictions, constituting a substantial portion of the world. No other mode of resolving disputes, whether but not limited to litigation or mediation, comes anywhere close in terms of the apparent portability of the end product of the dispute resolution mechanism. By way of comparison, the 2005 Hague Choice of Court Agreements Convention, arguably the nearest rival to the New York Convention in the international sphere, presently has 30 parties: Mexico, the states of the European Union (with the exception of Denmark), and Singapore.9 The New York Convention is undoubtedly a major factor in making arbitration as the preferred mode for resolving cross-border commercial disputes.

5.2.  The UNCITRAL Model Law The United Nations Commission on International Trade Law (UNCITRAL), a division of the General Assembly of the United Nations, adopted the Model Law on International Commercial Arbitration during its 18th session on 21 June 1985. The adoption was endorsed by the General Assembly on 11 December 1985. Revisions to the Model Law relating to the form of arbitration agreements and to interim measures were subsequently adopted during UNCITRAL’s 39th session on 7 July 2006.

9 

The United States, Ukraine, and China have signed the 2005 Hague Convention but have yet to ratify it.

Introduction

 11

These were intended to enhance the operation of the Model Law by better reflecting what were perceived to be current practices in international commercial arbitration. The General Assembly duly endorsed the revisions on 4 December 2006. The Model Law is neither a convention nor a treaty. It is a soft law instrument which countries are free to adopt in whole or in part as their needs may require. It follows that not every country will necessarily adopt the Model Law in precisely the same way. Although there is likely to be some uniformity in the way that the Model Law is implemented in different countries, there is equally likely to be variation. Chapter I contains ‘General Provisions’. These include definitions of the words ‘international’ and ‘commercial’ in the expression ‘international commercial arbitration’ (Article 1 and footnote 2 to Article 1), guidelines on how the Model Law is to be interpreted (Article 2A), rules as to the time of receipt of written communications (Article 3), and a provision on waiver of procedural irregularities in the course of an arbitration (Article 4). Of paramount importance is the stricture in Article 5 that ‘[i]n matters governed by this Law, no court shall intervene except where so provided in this Law’. Chapter II focuses on the ‘Arbitration Agreement’. Article 7 (as adopted by UNCITRAL in 2006) offers two alternative definitions of what is to constitute an ‘arbitration agreement’ within the Model Law. Essentially, Option 1 requires an arbitration agreement to be in writing (including in electronic format), while Option 2 does not. Echoing Article 3 of the New York Convention, Article 8 of the Model Law requires a court to refer the parties to arbitration where it is alleged that litigation was commenced in breach of an arbitration agreement. The court is normally obliged to do so, provided that a request to refer the matter to arbitration is made by the requesting party no later than the time of submitting its first statement on the substance of the dispute to the court. In general, the court may only refuse to refer the matter to arbitration where the arbitration agreement is ‘null and void, inoperative or incapable of being performed’. Article 9 further provides that ‘it is not incompatible with an arbitration agreement for a party to request … from a court an interim measure of protection and for a court to grant such measure’. Chapter III deals with the ‘Composition of the Arbitral Tribunal’. It includes default provisions on the number and appointment of arbitrators (Articles 10 and 11 respectively), challenges to arbitrators (Articles 11 and 12), and what happens when an arbitrator is unable to continue with an arbitration (Articles 13 and 14). Chapter IV covers the ‘Jurisdiction of the Arbitral Tribunal’. Article 16 sets out the doctrine known as ‘competence-competence’. That is the principle whereby an arbitral tribunal may rule on its own jurisdiction to hear an arbitration. This occurs where a party contends that the arbitral tribunal does not have the power or jurisdiction to hear a dispute in whole or part (because, for instance, the parties’ commercial contract was obtained through fraud or misrepresentation, or was entered into by mistake). An arbitral tribunal is entitled to rule on its own jurisdiction, because of the principle that an arbitration clause is treated as ‘separate’ from the rest of the agreement in which it may be found. Article 16 explains that ‘an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract’ with the result that ‘[a] decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause’.

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Chapter V (as adopted by UNCITRAL in 2006) concerns ‘Interim Measures and Preliminary Orders’. Article 17(2) defines ‘interim measures’ as any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:(1) Maintain or restore the status quo pending determination of the dispute; (2) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (3) Provide a means of preserving assets out of which a subsequent award may be satisfied; or, (4) Preserve evidence that may be relevant and material to the resolution of the dispute.

A party may apply to the arbitral tribunal for an interim measure. Faced with such application, the tribunal may grant the measure sought provided that the test in Article 17A is met. The latter requires a tribunal to be satisfied that: (a) Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and (b) There is a reasonable possibility that the requesting party will succeed on the merits of the claim …

A preliminary order is an ‘order directing a party not to frustrate the purpose of the interim measure requested’ (Article 17B). The regime for the making of preliminary orders is set out in Article 17C. Article 17H proceeds to deal with the recognition and enforcement of interim measures. To a certain extent, it mirrors Article V of the New York Convention. It provides that ‘an interim measure issued by an arbitral tribunal shall be recognized as binding and … enforced upon application to the competent court, irrespective of the country in which it was issued’. By Article 17I, a court may only refuse recognition or enforcement of an interim measure on limited grounds. Further, where recognition or enforcement is sought, a court should ‘not undertake a review of the substance of the interim measure’. Article 17J stresses that courts may also issue interim measures in connection with an arbitration ‘irrespective of whether their place is in the territory of this State’. A court is bound to exercise such power ‘in accordance with its own procedures in consideration of the specific features of international arbitration’. Chapter V deals with the ‘Conduct of Arbitrations’. It includes provisions relating to equal treatment of the parties such that ‘each party shall be given a full opportunity of presenting [its] case’ (Article 18), the determination of the rules of procedure, place and language of arbitration (Articles 19, 20 and 22 respectively), the commencement of an arbitration (Article 21), the filing of pleadings (Article 23), the conduct of oral or written proceedings (Article 24), what happens when a party is in default of some conduct (Article 25), the use of experts (Article 26), and applications for court assistance (Article 27). Chapter VI concerns the ‘Making of Awards and Termination of Proceedings’. Among other matters, it deals with the settlement of arbitration proceedings (Article 30). Chapter VII sets out the means of ‘Recourse against Award’. A party may apply to the court of the place of arbitration to set aside an award (Article 34). The grounds for setting aside are similar to those in Article 5(1) of the New York Convention.

Introduction

 13

Finally, Chapter VIII focuses on the ‘Recognition and Enforcement of Awards’. The provisions in this chapter (Articles 35 and 36) are similar to Articles 4, 5(1) and 5(2) of the New York Convention. In an Explanatory Note to the 2006 Model Law, UNCITRAL points out that the Model Law ‘has come to represent the accepted international legislative standard for a modern arbitration law’. It argues that, when a jurisdiction adopts the Model Law, then ‘the smooth functioning of … arbitral proceedings is enhanced’. That is because the Model Law is ‘easily recognizable, meets the specific needs of international commercial arbitration and provides an international standard based on solutions acceptable to parties from different legal systems’.

6.  An Overview This section selects a salient feature in relation to arbitration reform in each of the 12 jurisdictions under investigation by this book. China is a vast nation in which the Chinese government has traditionally maintained close control over governance and the economy. Despite this, since market reforms stemming from the 1980s, the Chinese economy has increasingly introduced and embraced many of the free market principles and elements found in traditional capitalist e­ conomies. As ad hoc arbitrations are not permitted in China, all arbitrations (including international commercial arbitrations with a Chinese seat) must be administered by Chinese government-authorised arbitral institutions. In recent decades, China has found much success in its development of international commercial arbitration institutions. The China International Economic and Trade Arbitration Commission is the best-known example of China’s regional presence in the international arbitration market, with much of its success attributable to commercial demand and its commitment to continually developing arbitration rules for effective commercial use. Other leading city-based arbitration institutions have flourished in China in the past decade, with the Beijing Arbitration Commission and Shenzhen Court of International Arbitration developing as flagships in the national and regional market. However, one might ask what measures remain necessary in order to convince would-be users of arbitrations, both in China and abroad, that the quality of Chinese arbitration is as good as its regional and/or international competitors. Moreover, as China has embarked on her new round of outbound economical development strategy (such as the Belt and Road Initiative), how shall the arbitration system and community (laws, ­institutions, courts, professionals) in China respond to the country’s ongoing expansive market need? The Hong Kong Special Administrative Region is a semi-autonomous territory of China. Under the ‘One Country, Two Systems’ principle, Hong Kong enjoys a capitalist economy and a high degree of autonomy. Further, while Mainland China follows the civil law ­tradition, Hong Kong as a former British colony, applies the common law system. Hong Kong markets itself as an international dispute resolution hub, especially in relation to commercial or financial disputes. Ad hoc arbitrations are possible, as is institutional ­arbitration, especially under the Hong Kong International Arbitration Centre. An important question in

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evaluating the success or otherwise of arbitration reform in Hong Kong must be the extent to which the Territory is perceived as a credible and competitive venue for international commercial arbitrations that will continue to operate free from cross-border interference by the Chinese government and in light of the development of competing international arbitration centres in China and the Asia Pacific. Taiwan, officially known as the Republic of China, is regarded by the Chinese government as an integral part of China. It is not recognised by most countries as an independent sovereign state. In such circumstances, while free to adopt all or part of the Model Law into its arbitration regulations, Taiwan cannot accede to the New York Convention. The best that Taiwan can do is to apply the principles found in the New York Convention as a part of its laws. In the light of the above, to what extent has Taiwan managed to attract international commercial arbitration business, by signalling that it adheres at least de facto to the Model Law and the spirit of the New York Convention? In economic terms, Japan is a highly-developed country and Japanese businesses and enterprises enjoy a worldwide presence and reputation. Paradoxically, however, arbitration is not a popular way of resolving cross-border commercial disputes in Japan. This is despite the fact that Japan is a Model Law jurisdiction, is a party to the New York Convention, and has a judiciary that is supportive of arbitration. What then accounts for the lack of interest in international commercial arbitration in Japan? Proximally close to Japan, the Republic of Korea (more often referred to as ‘South Korea’) is known as a ‘tiger’ economy of Asia. In terms of law, it follows the civil law tradition. A Model Law jurisdiction and a party to the New York Convention, South Korea has recently revised its laws to make them even more arbitration-friendly. The Korean Commercial Arbitration Board has also had a strong presence in the arbitration market, particularly with respect to commercial disputes involving Korean businesses. Within Asia, South Korea primarily competes with Hong Kong, Singapore and Malaysia to draw in business as an international arbitration centre. What, if anything, is its strategy for seeing off the strong competition from its Asian rivals? Malaysia is, like Hong Kong and Singapore, a common law jurisdiction, although it is unique in that it is constituted of a majority Muslim population. It applies the Model Law and is a party to the New York Convention. Its government has lately been embroiled in a series of political scandals which have led many to view its politicians (including top politicians) as corrupt. How has Malaysia tried to distinguish itself from Hong Kong and Singapore as a venue for international commercial arbitration in the common law world in Asia, and to what extent have perceptions of corruption within the government hindered Malaysia’s attempts to position itself as a regional or international arbitration centre? Singapore is a city-state in which the People’s Action Party has dominated since its inception. Because of its multi-cultural and multi-racial population, the Singaporean government places heavy stress on maintaining the country’s political and economic stability through strong and innovative leadership. Nonetheless, Singapore having few (if any) natural resources of its own, its economy depends to a large extent on providing services (including dispute resolution services) to businesses from abroad. Incentivised by its unique service-reliant economy, Singapore must continually enhance its competitiveness as an international arbitration centre in order not to lose out to Hong Kong, Malaysia, China or South Korea. As such, how does it keep itself at the cutting edge of arbitration?

Introduction

 15

The Philippines operates under a mixed civil and common law system. Although it was one of the 10 initial signatories of the New York Convention, international commercial arbitration has been slow to develop within the jurisdiction. Why is this? To what extent is such delayed development due to the Philippines’ reputation as a country where corruption and cronyism, including within the judiciary, is widespread? Indonesia has a large population (it is the fourth most populous country in the world) and is strong in economic development and commercial transactions these years (the largest economy in Southeast Asia). Indonesia is frequently regarded as a nation where it is difficult to enforce an arbitration award, despite Indonesia being a party to the New York Convention. Is this perception justified? Are the government and judiciary in Indonesia supportive or not of arbitration? How can the quick economic development and delayed arbitration development in the country reconciled? India, like China, is a huge country, the seventh largest in the world. It was the seventh state to ratify the New York Convention and early on adopted the Model Law. Despite this, international commercial arbitration has developed only slowly in India. Why is this? The perception has been that, until recently, Indian courts have been too prone to interfere in the arbitral process and to refuse to recognise or enforce arbitral awards. This is even before one factors in other impediments, such as long delays in the hearing of cases by the courts, suspected corruption among judges, and a lack of judges and lawyers knowledgeable about arbitration. Further, in contrast to China where all arbitration is administered, in India almost all arbitrations have been (and continue to be) ad hoc. There is (and continues to be) an absence of established arbitration institutions, as well as professionals specialising in arbitration. Nonetheless, in the last few years, the Indian judiciary has shown signs of becoming more arbitration-friendly. Building on those initiatives, on 1 January 2016 the Indian Parliament passed the Arbitration and Conciliation ­(Amendment) Act of 2015, with the intention of streamlining the process of arbitration in India. Thus, although there is cause to be cautiously optimistic, the degree to which these judicial and legislative changes will actually lead to India becoming a pro-arbitration jurisdiction remains to be seen. Vietnam has similarly been regarded as a jurisdiction where it is difficult to enforce foreign arbitral awards. For instance, a number of International Cotton Association awards against Vietnamese businesses have been refused enforcement by the Vietnamese courts on what seem to be relatively trivial grounds. As a result, there have been complaints by foreign governments that Vietnam is not meeting its international obligations under the New York Convention. Vietnam also risks being blackballed by the International Cotton Association, which may inflict a heavy blow to the Vietnam economy which is reliant on the export of cotton clothing products. More recently, the Ministry of Justice of Vietnam in conjunction with the Supreme People’s Court and the Supreme People’s Procuratory has sought to improve Vietnam’s track record in relation to the recognition and enforcement of foreign arbitral awards. What is the prognosis for such reform attempts? Finally, Australia is a federal jurisdiction that adheres at both federal and state levels to the common law. It is geographically distant from the major finance centres of Asia, Europe and the United States. How has Australia sought to deal with international commercial arbitration at both the federal and state levels? Have attempts at enhancing arbitration on both levels been complementary or have they worked against each other? Does Australia’s

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geographical situation restrict the extent to which it can promote itself (whether at a federal or state level) as an international arbitration centre?

7.  A Developing World It is worth reflecting briefly at the close of this Introduction on the title of this book. The ‘developing world’ of arbitration evidently captures two notions. First, arbitration reform is still a work in progress in many jurisdictions within the Asia Pacific, even within developed countries such as Australia and Japan. Second, many jurisdictions in the Asia Pacific (such as China, Malaysia, the Philippines, Indonesia, Vietnam, and India) may still be classified as developing economies.10 They are looking to the development of arbitration (especially international commercial arbitration) in their jurisdictions to attract foreign direct investment. It is these jurisdictions that would benefit from a study of arbitration reform (or the lack of it) in economically more developed jurisdictions (such as Hong Kong, Taiwan, Singapore, Japan, South Korea and Australia), so as to learn from their successful strategies and to avoid imitating their failures. But there is a third notion that the title of the book seeks to convey. That is a link between the development of arbitration and the economic well-being of the society as a whole. One might ask, at the end of the day, what does it matter from a global perspective whether arbitration reform succeeds or not in a given jurisdiction? The answer is perhaps that the greater the number of jurisdictions that manage successfully to reform their arbitration regimes, the greater the vitality of the market and economy there will be within and between jurisdictions insofar as the availability of services for dispute resolution (especially commercial dispute resolution) is concerned. The competition that results from greater availability should bring down the cost of (and enhance) arbitration services across the board as a means of alternative dispute resolution. That should benefit everyone, but in the main, the business community. Where there is commerce, there will inevitably be commercial disputes. By bringing down the cost (including time cost) in resolving such disagreements, more resources are freed up to be spent on improving the efficiency of commercial market and the welfare of rule of law. It is to this global ideal that ultimately this book wishes to contribute. It is premised on an assumption that there is a strong correlation between arbitration reform and economic growth, although the case should not be over-stated. Obviously, there are many other factors that will contribute to a jurisdiction’s economic growth. Arbitration reform is only one of the factors, but it is an important one. Based on such premises, successful arbitration reform is something to which each jurisdiction should and can aspire and endeavour to achieve. The question is how.

10  The classification of developed and developing economies has been assessed by the criteria of GDP per capita. The GDP per capita figures of the 12 Asia Pacific jurisdictions under investigation have been compiled in the last column of Table 1, in the Conclusion chapter of the book.

1 China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves WEIXIA GU*

1. Introduction Since 1978, China’s drive towards economic modernisation and marketisation in its policy of ‘reform and opening up’ has led to increased foreign trade, investment, and as a natural corollary, commercial disputes. Arbitration, the preferred means of settling business disputes in China, plays a significant role in providing foreign cooperative partners with the confidence and reassurance that are necessary to encourage trade and investment. China’s Arbitration Law, promulgated in 1994 (effective in 1995) forms the cornerstone of the modern Chinese arbitration regulatory framework. However, there has been little ­legislative improvement afterwards towards meeting the changing needs of the past two decades. Instead, top-down judicial efforts by China’s Supreme People’s Court and bottom-up institutional initiatives by Chinese arbitration commissions have played their role in further refining and internationalising the Chinese arbitration system. Arbitration commissions in particular have proliferated in the years following the promulgation of the Arbitration Law, and their rising competition for independence and professionalism in recent years has pushed the formation and flourishing of the Chinese arbitration market.

2. Background ‘Arbitration with Chinese characteristics’ is a term that can be used to describe certain distinctive, and even ‘rigid’, facets characterising the Chinese arbitration system. Such features originate from the regulatory framework, as explained below. * The research leading to this chapter is financially supported by Hong Kong Government Research Grants Council General Research Fund (17617416). Tiffany Tam and Emily Chan are acknowledged for helpful research assistance. I am grateful to Professors Albert Chen, Michael Palmer, Anselmo Reyes, Tom Ginsburg, Leon Trakman, Dr Xiaochun Liu, Dr Fuyong Chen, Dr Qianhua Wang and Mr Chan Leng Sun for discussing earlier drafts of the chapter.

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2.1.  Legislative and Regulatory Framework 2.1.1.  Arbitration Law and Other Sources of Regulation 2.1.1.1.  Arbitration Law China is primarily a civil law jurisdiction, wherein statutes form the primary source of law. Arbitration is thus regulated by the Arbitration Law (AL), which was adopted in August 1994 and came into effect in September 1995.1 The AL was promulgated to remedy an outdated domestic arbitration regime, in light of the increasing popularity of commercial arbitration as a method of dispute resolution flowing from China’s legal and economic reforms of the 1980s and early 1990s.2 Applicable to all arbitrations conducted on the basis of voluntary agreements to arbitrate, the AL covers procedural and substantive rules spanning the arbitral process, from the establishment of arbitral tribunals to the enforcement of arbitral awards.3 While the Model Law formed a guiding reference for the modernisation of China’s ­arbitration regime, it was never adopted in China.4 2.1.1.2.  State Council Regulations State Council (ie the Central Government) Notices supplement the AL, providing ­regulation on matters not covered under the legislation. In particular, such notices guide the establishment of city-based local arbitration commissions, which only occurred and flourished after the promulgation of the AL. For instance, the ‘1996 Notice’5 diluted the ‘dual-track’ division of arbitration commissions in China on the basis of jurisdiction bifurcation by permitting local arbitration commissions to arbitrate foreign-related disputes previously monopolised by the China International Economic and Trade Arbitration Commission (CIETAC).6 These provisions allowed, to some extent, the rapid expansion of certain local arbitration commissions, such as the Beijing Arbitration Commission (BAC), which will be examined further. 2.1.1.3.  Judicial Interpretations In its dual position as both the highest judiciary and a de facto rule-making institution in China, the Supreme People’s Court (SPC) has sporadically supplemented the AL by issuing judicial interpretations (sifa jieshi)7 supervising the handling of specific arbitration cases 1  Arbitration Law of the People’s Republic of China (Zhonghua Renmin Gongheguo Zhongcai Fa), reported and translated in China Law and Practice, 7 November 1994, 23–27. 2  Katherine Lynch, ‘The New Arbitration Law’ (1996) 16 Hong Kong Law Journal 104. 3  See, generally, the China Arbitration Law (1994). 4  Wang Shengchang, ‘The Globalization of Economy and China’s International Arbitration’, paper delivered at the seminar ‘Globalization and Arbitration’, Beijing, jointly sponsored by the ICC and CIETAC, 15 October 2002. 5  Notice Concerning Several Issues to be Clarified for the Purpose of Implementing the PRC Arbitration Law, issued by the General Office of the State Council, June 1996. 6  Weixia Gu, ‘Arbitration in China’ in Shahla Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia 3rd edn (New York, Juris Publishing, 2013) 82. 7  Art 33 of the Organic Law of People’s Courts. However, the scope of SPC’s interpretative power is not clearly defined as between interpreting law and making law although there may be the literal distinction that legislation is the act of making a law, while interpretation is the act of process of ascertaining the meaning of existing laws.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 19 in lower level Chinese courts. These judicial interpretations commonly take the form of ‘replies’ (pifu) or ‘notices’ (tongzhi). The SPC’s interpretations on arbitration practice were consolidated in 2006 in the SPC Interpretation on Certain Issues Concerning the Application of the Arbitration Law (2006 SPC Interpretation).8 The 2006 SPC Interpretation is highly regarded, not only symbolising substantive developments in the Chinese arbitral landscape, but also serving as a harbinger of further legislative amendments to the AL. 2.1.1.4.  Arbitration Commission Rules The AL uniquely stipulates that all arbitrations must be conducted in accordance with the set of rules of a chosen arbitration commission.9 Thus, while arbitration commission rules governing arbitral proceedings do not carry force of law, they are nonetheless viewed as part of the regulatory framework of Chinese arbitration. Since 1956, CIETAC has amended its rules on eight occasions—most recently in January 201510—to reflect the international trend of enhancing flexibility in arbitration procedure. Further, CIETAC’s use of specialised arbitration rules, for instance, the Arbitration Rules for Financial Disputes, have increased its competitiveness by providing a set of arbitral rules tailored to financial disputes.11 The China Maritime Arbitration Commission (CMAC) similarly periodically revises its rules, with its most recent rules taking effect from January 2015. Alongside CIETAC and CMAC, over 200 city-based local arbitration commissions formulate and apply their own sets of arbitration rules. Among them, BAC, drawing experience from CIETAC and international arbitral institutions, has been increasingly recognised as a rising star of arbitration rule-making in China. BAC’s 2015 arbitration rules, for instance, feature arbitral procedures enhancing arbitrator professionalism and party autonomy.12 2.1.1.5.  International Agreements International agreements ratified by China also form part of the regulatory framework of Chinese arbitration. Applicable provisions of such conventions take precedence over their domestic counterparts, excepting any reservations made during accession.13 For instance, the primary source of regulation with respect to the enforcement of foreign arbitral awards is the New York Convention,14 acceded to by China in December 1986.

8  SPC Interpretation on Certain Issues Concerning the Application of the Arbitration Law, promulgated by the SPC on 23 August 2006, and took effect on 8 August 2006. 9  Arts 16 and 18 of the AL. 10  The eight occasions took place in 1988, 1994, 1995, 1998, 2000, 2005, 2012 and 2014 respectively. The CIETAC rules were most recently revised on 4 November 2014, effective as from 1 January 2015. 11  The CIETAC Financial Arbitration Rules was first adopted in 2003, and were most recently amended in 2014, effective as from 1 January 2015. 12 ‘Beijing Arbitration Commission Arbitration Rules’, available online: http://arbitrator.bjac.org.cn/en/­ Arbitration/index.html. 13  Art 142, General Principles of Civil Law. 14  The full name of the New York Convention is the Convention on the Recognition and Enforcement of ­Foreign Arbitral Awards, adopted by the United Nations in 1958.

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2.1.2.  Dual-track Mechanism The Chinese arbitration system adopts a dual-track distinction, under which different procedures and standards of judicial review apply to the domestic and foreign-related arbitration regimes respectively.15 While there is no legislative definition of the term ‘foreign-related’, Article 178 of the Several Opinions on the Implementation of the General Principles of Civil Law provides that a foreign element exists where: (a) one party or both parties to the contract are foreign entities, foreign legal persons or stateless persons; (b) the subject matter of the contract is located in a foreign country; or (c) the act which gives rise to, modifies or extinguishes the rights and obligations under the contract occurs in a foreign country.16 Further, arbitrations involving parties from Hong Kong, Macau and Taiwan are considered ‘foreign-related’. While the AL governs both domestic and foreign-related arbitrations, the latter is given advantageous treatment under the statute. Chapter VII of the AL prescribes privileges exclusively reserved for foreign-related arbitrations, such as greater autonomy permitted to foreign-related arbitration commissions in determining their organisational structure17 and relaxed qualification requirements for foreign arbitrators wishing to serve in China. The greatest disparity between the tracks lies in their respective enforcement of arbitral awards. While the grounds to exercise judicial supervision for setting aside or denial of enforcement of foreign and foreign-related awards in China are limited to procedural grounds,18 supervision for domestic awards further includes substantive matters, such as the effects of the evidence on which the award was based.19 Fortunately, recent amendments to China’s Civil Procedure Law (CPL), effective from 1 January 2013, have mitigated the different treatment accorded to domestic awards.20 For instance, ‘incorrect application of the law’ is no longer a ground for refusing enforcement,21 and the ground of ‘insufficiency of the main evidence’ was replaced by ‘fabrication’ and ‘withholding of main evidence’,22 which carry a higher burden of proof.

15  While the basic laws in China do not provide an explicit definition for the term ‘foreign-related’, inference can be sought from Art 178 of the Several Opinions on the Implementation of the General Principles of Civil Law, which provides that a foreign element will exist where: (a) One party or both parties to the contract are foreign entities, foreign legal persons or stateless persons; (b) The subject matter of the contract is located in a foreign country; or (c) The act which gives rise to, modifies or extinguishes the rights and obligations under the contract, occurs in a foreign country. Similar judicial interpretations have been issued by the SPC relating to the China Civil Procedure Law. See Art 304 of the Opinions Relating to Several Issues Arising from the Implementation of the Civil Procedure Law. 16  Similar judicial interpretations were issued by the SPC relating to the China Civil Procedure Law. See Art 304 of the Opinions Relating to Several Issues Arising from the Implementation of the Civil Procedure Law. 17  Pursuant to Art 66, there is no exact limit for the number of members for a foreign-related arbitration commission. In contrast, Art 12 limits the maximum number of members for a local arbitration commission to be 16. 18  Arts 70 and 71 of the Arbitration Law, making reference to Art 260(1) of the Civil Procedure Law. This is consistent with Art V(2) of the New York Convention and international practice. 19  Art 58 of the Arbitration Law. 20  Within the dual-track enforcement for domestic and foreign-related arbitral awards, there seems to be a further bifurcation under the domestic track itself. Art 58 of the Arbitration Law provides for grounds to ‘set aside’ (chexiao) a domestic arbitral award while Art 213 of the pre-amended Civil Procedure Law provides for grounds of ‘refusing to enforce’ (buyu zhixing) a domestic arbitral awards. The latter, which includes both evidential-related grounds and the ground of incorrect application of the law, is broader than the former. 21  Art 237 of the amended CPL (2013), para 2. 22  ibid. The two new grounds under the amended CPL are ‘the evidence on which an arbitration case is adjudicated is forged’ and ‘the opposing party withholds any evidence from the arbitral institution, which suffices to affect the fairness of the awards’.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 21 The SPC operates a ‘pre-reporting system’23 which aims to limit local protectionist influences over the enforcement of foreign or foreign-related arbitral awards.24 Under the system, lower level courts may not refuse recognition or enforcement without the SPC’s confirmation.25 Refusal or delay in handling enforcement matters of foreign-related or foreign arbitration is thus deemed exceptional. The scheme has, however, been criticised for overlooking domestic arbitration and even aggravating the dual-track inequality.26 Finally, two types of arbitration commission, domestic and foreign-related, cater to the domestic and foreign-related arbitration tracks respectively. Foreign-related arbitration cases were monopolised by CIETAC and CMAC until the dual-track jurisdiction was merged under the 1996 State Council Notice. Realistically, it remains difficult for Chinese local arbitration commissions to compete with CIETAC, which has accumulated experience and expertise in handling sophisticated international commercial arbitration matters.

2.2.  Institutional Framework In the 1990s, the AL’s promulgation led to the rapid proliferation of local arbitration ­commissions across China.27 The BAC and the Shanghai Arbitration Commission (SAC) were established in 1995. Then, 1996 and 1997 saw the establishment of the Hangzhou Arbitration Commission and the Wuhan Arbitration Commission respectively.28 In tandem with China’s urbanisation over the past two decades, rising trends in the establishment of city-based local arbitration commissions continue. In 2012 there were a total of 219 arbitration commissions in China;29 increasing to 235 in 2014;30 and further increasing to 244 in 2015.31 However, a dearth in caseload negatively impacts institutional independence and competitiveness, especially for those institutions established to meet administrative, rather than market needs.32 In particular, commissions reliant on local governments and treasuries for caseload and other finances are susceptible to administrative interference.33

23  SPC Notice on Some Issues Concerning Foreign Arbitration and Arbitration in Foreign Countries, Fa Fa (1995), No 18, SPC Notice on the Fee and Time Limit of Recognition and Enforcement of Foreign Arbitration Awards, Fa Shi (1998), No 28; and SPC Notice on Some Issues Concerning Setting Aside Arbitration Awards Related to Foreign Elements by the People’s Court, Fa Fa (1998), No 40. 24  China International Economic and Trade Arbitration Commission (ed), Symposium Essays on Economic and Trade Arbitration between the Taiwan Straits (Beijing, China Law Press, 2001) 39. 25 ibid. 26  Gu (n 6) 118. 27  Art 10(1) of the AL stipulates that arbitration commissions may be established in any Chinese city that may be divided into administrative districts. 28  See the official websites of Beijing, Shanghai, Hangzhou and Wuhan Arbitration Commissions. 29  Song Lianbin, Peng Liming, Stuart Dutson and Jean-Marc Deschandol, ‘Annual Review on Commercial Arbitration’ in Beijing Arbitration Commission Institute of Advanced Legal Studies (ed), Commercial Dispute Resolution in China: An Annual Review and Preview (LexisNexis, 2013) 2. 30  Song Lianbin, Yang Ling and Helena H C Chen, ‘Annual Review on Commercial Arbitration’ in Beijing Arbitration Commission Institute of Advanced Legal Studies (ed), Commercial Dispute Resolution in China: An Annual Review and Preview (LexisNexis, 2015) 1. 31  Song Lianbin, Fu Panfeng and Chen Xijia, ‘Annual Review of Commercial Arbitration’ Beijing Arbitration Commission Institute of Advanced Legal Studies (ed), Commercial Dispute Resolution in China: An Annual Review and Preview (LexisNexis, 2016) 1. 32  Gu Weixia, Arbitration in China: Regulation of Arbitration Agreements and Practical Issues (London, Sweet & Maxwell, 2012) 107. 33  ibid, 106–07.

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Further, arbitral commissions that reap sufficient profits from service charges undergo administrative scrutiny, even if they are not financially reliant on local governments. While the AL provides that arbitration should be conducted independently, free of external interference,34 a legislative deficiency of specific implementation rules has given rise to ancillary rules which effectively frustrate the goal of institutional ‘independence’. A 1995 State Council Notice provides that the establishment and operation of local arbitration commissions ought to be supervised by the local government’s legislative affairs office,35 conferring disproportionate influence on matters of staffing and development of the commission on the same.36 Two BAC surveys, conducted in 2006 and 2007, showed respectively that 73.9 per cent and 69.3 per cent of the personnel composition of the surveyed local arbitration commissions (2006: 98, 2007: 73) were associated with an administrative organ or local government.37 Such a situation contravenes the AL’s stipulation that legal and economic trade professions should make up no less than two thirds of the members of an arbitration commission. The independence of individual institutions thus turns on the local administrative attitude towards arbitration. Arbitrators must satisfy two sets of requirements to qualify as arbitrators. First, legislative requirements set out by Article 13 of the AL stipulate minimum conditions for becoming an arbitrator in China; that (a) an arbitrator must be a morally unimpeachable person; (b) he/she must have sufficient years of expertise in some special areas such as law, trade and economics.38 Comparative research shows that China sets relatively stringent standards for the professional qualification of arbitrators.39 Nonetheless, it should be noted that foreign arbitrators (including permanent residents of Hong Kong, Macau and Taiwan)40 are in appointment neither subject to Article 13 restrictions on ‘expertise’ and ‘established years’, nor to any specific qualification requirements.41 As with the dual-track tradition wherein favourable treatment is accorded to the foreign-related track, it has been argued that the legislative discrepancies in qualification standards among arbitrators on the different tracks are geared towards internationalisation of China’s foreign-related arbitration.42 At the institutional level, each individual arbitral commission builds upon the minimum standards set down by the AL, developing its own qualifications for arbitrator appointment. No uniform standards exist for the enlisting of arbitrators, among the hundreds of arbitration commissions across the country.

34 

Arts 8 and 14 of the AL. Notice on Further the Work of Restructuring the Arbitration Institutions, issued by the General Office of the State Council, 22 May 1995. 36  Hongsong Wang, ‘Existing Problems of the Arbitration Law and Its Reform Suggestions’ (2004) 2 Arbitration in Beijing 21. 37  Chen Fuyong, ‘Empirical Studies into Arbitration Commissions in China’ (2009) 2 Legal Studies 81–97 (陈福勇,‘我国仲裁机构现状实证研究’，载《法学研究》2009 年第2期,81–97). 38  Art 13 of the AL states that ‘expertise’ refers to at least eight years of working experience. 39  For example, to be an arbitrator in Taiwan, the candidate shall practise as a lawyer, judge or accountant for more than five years. 40  The Hong Kong-, Macau- and Taiwan-based arbitrators are considered as foreign arbitrators, and the cases involving elements from these three jurisdictions are considered as foreign-related cases. 41  Art 67 of the AL. 42  Gu (n 6) 104–05. 35 

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 23 The Chinese arbitration system operates a ‘panel arbitrator system’, whereby only arbitrators named on a panel list maintained by the arbitration commission administering the case may be appointed by parties.43 This feature has been criticised for impinging on party autonomy; further, the panel arbitration system raises questions as to the impartiality of Chinese arbitration, when viewed against the potential protectionist concerns of personal relations and networks (guanxi) pervading the operation of the close-panel arbitral ­tribunal.44 When arbitrators are drawn from internal staff of the administering commission, or governmental officials from the same communities,45 standards of impartiality may be compromised by efforts to yield an ‘amicable’ majority opinion.46 The panel arbitration system thus exacerbates issues of external influence and impartiality. The validity of awards rendered by foreign arbitration institutions seated in China remains unsettled.47 Arbitration commissions in China are statutorily subject to various organisational and constitutional requirements, as well as supervision by the China Arbitration Association—conditions unlikely to be met by foreign institutions.48 The legal status of such institutions has been judicially considered; in particular, whether awards resulting from arbitrations following the Rules of the International Chamber of Commerce Court of Arbitration (ICC arbitration) are enforceable.49 Arbitration agreements designating ICC arbitration have been declared invalid by Chinese courts (notably in Züblin International GmbH v Wuxi Woco-Tongyong Rubber Engineering Co Ltd).50 Nonetheless, recent cases have relaxed the traditional view that ‘designated arbitration institutions’ encompasses only ­Chinese arbitration commissions.51 Finally, ad hoc arbitration plays no legal role in the Chinese arbitration system, and ­arbitral awards rendered through ad hoc arbitration are unenforceable. This stems from the AL’s stipulation that arbitration agreements must designate an arbitration institution to be valid.52 Accordingly, the SPC has struck down agreements providing for ad hoc arbitration; for example, in People’s Insurance Company of China, Guangzhou v Guanghope Power.53

43  Though the panel system is not expressly provided for in the Arbitration Law, it may be inferred from Arts 11 and 13. See Gu (n 32) 124–25. 44  Gu (n 32) 131–33, 136–41. 45  ibid, 142–48. 46  ibid. See also Gu (n 6) 107. 47 ‘Conducting arbitration’ in this context means to choose China as the seat of arbitration, regardless of whether the hearings take place in China. 48  Art 15 of the AL. Ch VII of the AL further provides that foreign-related arbitration commissions must be established by the China Chamber of International Commerce. 49  See discussions on the topic ‘ICC Arbitration in China’ in the Roundtable on Arbitration and Conciliation Concerning China, ICCA Congress Series No 12, 12–14 May 2004, Beijing; compiled in Albert Jan van den Berg (ed), New Horizons in International Commercial Arbitration and Beyond: ICCA Congress Series No 12 (The Hague, Kluwer Law International, 2005). 50  Züblin International GmbH v Wuxi Woco-Tongyong Rubber Engineering Co Ltd [2006] Xi Min San Zhong Zi No 1 (Wuxi IPC ruling, 19 July 2006), cited in Nadia Darwazeh and Friven Yeoh, ‘Recognition and Enforcement of Awards under the New York Convention: China and Hong Kong Perspectives’ (2008) 25(6) Journal of International Arbitration 841–42. 51  The query as to whether ICC arbitration seated in China can produce valid and enforceable award in China has been revisited by some recent judgments. See discussions below in s 3.1.2. 52  Arts 16 and 18 of the AL. 53  People’s Insurance Company of China, Guangzhou v Guanghope Power et al [2003] Min Si Zhong Zi No 29.

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2.3.  Judicial Framework The role of the courts in the Chinese arbitration system ought not be disregarded. As aforementioned, courts—in particular, the SPC—issue judicial interpretations, which form an important source of arbitration regulation in China. The courts play a ‘supportive’ role towards arbitration,54 as they possess the sole power to grant and enforce interim measures of protection to assist arbitral proceedings in China, including property and evidence preservation orders on party and arbitral tribunal’s request.55 Additionally, courts play a ‘supervisory’ role, exercising final checks over jurisdiction and enforcement through rulings on validity of arbitration clauses and arbitral awards.56

3. Reform In the last 10 years, reforms of the Chinese arbitration system have occurred mainly through two channels: (a) judicial efforts; and (b) the formation and complication of the Chinese arbitration market.

3.1.  Legislative and Regulatory Initiatives As aforementioned, the Model Law has never been adopted in China, although the 1985 version of the Model Law served as a guiding reference during the drafting stage of the AL in 1994. However, the AL’s present inability to cope with practical needs has stalled the development of the Chinese arbitration system. While appeals to reform the AL’s regulatory defects through legislation have been strong, no timetable for the AL’s revision yet exists.57

3.2.  Judicial Initiatives 3.2.1.  Judicial Interpretation on Arbitration Law in 2006 One most notable judicial initiative on arbitration is the issuance of the 2006 Interpretation Concerning the Implementation of the Arbitration Law (the SPC Interpretation). This is the most recent, comprehensive and systematic attempt by the SPC in codifying its past opinions on the grey areas of practice of Chinese arbitration unaddressed in the AL.58

54 For example, Jingzhou Tao, Arbitration Law and Practice in China 2nd edn (The Hague, Kluwer Law ­International, 2008) [98]–[99]. 55  Art 68 of the AL. 56  Arts 20 and 26 of the AL. 57  The SPC Judicial Interpretation on Arbitration was promulgated in 2006, embarking on a nation-wide appeal for the legislative reform of the Arbitration Law in China (see s 3.2.1 below). Unfortunately, thus far, there have just been updates in the 2013 Civil Procedure Law in respect of the judicial review over arbitral awards as discussed above. 58  For a detailed overview of the 2006 SPC Interpretation, see Gu (n 32) 74–83.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 25 Under the 2006 SPC Interpretation, drafting pathologies involving ‘ambiguous and multiple arbitration commissions’ are no longer fatal to the validity of arbitration agreements, but are now remediable and enforceable.59 It is worth noting that prior to the publication of the 2006 SPC Interpretation, more liberal interpretative techniques had been proposed in its draft provisions (SPC Draft ­Provisions).60 Its most ‘liberal’ Article 27 provided that ad hoc arbitration agreements may be valid and enforceable if both parties to the agreement are nationals of Member States of the 1958 New York Convention, and neither country prohibits the practice of ad hoc ­arbitration.61 However, the SPC Draft Provisions were not endorsed in the 2006 SPC Interpretation, abandoning ad hoc arbitration at the crossroads of the SPC-led arbitration reform. The status of foreign institutional arbitration seated in China was similarly not addressed in the SPC interpretative document, but has been considered by lower level courts.

3.2.2. Most Recent Judgments Concerning Foreign Institutional Arbitration Seated in China Significant judicial developments revolve around whether parties may validly designate foreign arbitration institutions seated in China. As mentioned previously, arbitration agreements designating foreign arbitration institutions seated in China have been treated as invalid and resulting awards have been unenforceable, due to the traditional construction of ‘designated arbitration commissions’ as being limited to Chinese arbitration institutions.62 Two recent cases have called this assumption into question. In April 2009, Duferco SA v Ningbo Art & Craft Import & Export Corp, saw the controversial confirmation and enforcement of an arbitral award following the ICC Arbitration Rules seated in Beijing.63 While the case was ultimately concluded on the basis of the respondent’s deemed waiver of his right to challenge the validity of the arbitral agreement in a timely manner,64 the court crucially stated that it was a ‘non-domestic award’ under the New York Convention and as such, should be recognised and enforced on that basis.65 However, the ruling may have been ­different, had the objection to the validity of the agreement been raised in time. The issue of arbitral awards rendered by foreign institutional arbitration seated in China resurfaced in March 2013 in Longlide Packaging Co Ltd v BP Agnati SRL.66 In Longlide,

59 

2006 SPC Interpretation, Arts 1 to 9. to Several Issues on the Application of the China Arbitration Law (Draft Provisions for ­Opinion Solicitation), issued by SPC on 22 July 2004. 61  ibid, Art 27. 62  See discussions above in s 2.2.1. 63  Duferco SA v Ningbo Art & Craft Import & Export Corp [2008] Yong Zhong Jian Zi No 4, judgment by the Ningbo Intermediate People’s Court on 22 April 2009 (浙江省宁波市中级人民法院  (2008) 甬仲监字第4 号民事裁定书). 64  There is a timing requirement spelled out by the SPC when interpreting Art 13 of the AL, that a court shall not accept a party’s application to nullify an arbitration agreement where the party failed to raise its objection prior to the first hearing in the arbitration proceeding. 65  Such ruling has been described as a ‘helpful step in the right direction’ in Freshfields Bruckhaus Deringer LLP, ‘First reported case of a China ICC award being enforced in China’, 30 October 2009, available online: www. lexology.com/library/detail.aspx?g=e8c9319e-376c-4e73-90e1-c26b5cf3af74. 66  Longlide Packaging Co Ltd v BP Agnati SRL [2013] Min Si Ta Zi No 13, judgment by the Anhui Higher ­People’s Court on 25 March 2013 (安徽省高级人民法院 (2013) 民四他字第13号). 60  Interpretations

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the disputed clause provided that disputes should be submitted to the ICC Court of Arbitration, designating Shanghai as the place of arbitration. The validity of the agreement was disputed on three bases: first, that the ICC Court of Arbitration is not a ‘designated arbitration institution’ in China; second, that allowing it to arbitrate a case seated in China would violate public policy; and third, that any award resulting from such arbitration should be considered a domestic award, rendering the New York Convention inapplicable.67 The SPC upheld the arbitration agreement with respect to the first issue; the ICC Court of ­Arbitration, despite being a foreign arbitration institution, was considered a valid ‘designated arbitration institution’.68 The issues concerning the administration of arbitration by foreign institutions seated in China remained unaddressed. Taking the two cases together, the judiciary appears increasingly liberal on foreign institutional arbitration seated in China. From initial refusal in Züblin in 2006,69 to categorisation as ‘non-domestic arbitration’ in Duferco in 2009, to acceptance as giving rise to a valid arbitration agreement in 2013, the judiciary has broadened the institutional requirement of the AL such that it is not exclusively restricted to Chinese domestic arbitration commissions. However, the highest Chinese judiciary has yet to express a clear stance on the official legality of foreign institutional arbitration in China. Further, the application of the New York Convention is limited to recognition and enforcement of arbitral awards from a ‘foreign’ state.70 While China made a ‘reciprocity’ reservation in its accession to the Convention,71 it does not affect the requirement that an enforceable award in China under the Convention has to be entirely ‘foreign’.72 The SPC has failed to address in the Longlide case whether ICC arbitral awards rendered in China are considered ‘non-domestic’ or ‘entirely foreign’ awards and hence, the proper application of the Convention.

3.2.3. Enforcement of Foreign Arbitral Awards under the New York Convention—Other Leading Cases Finally, with respect to the interpretation of ‘public policy’ as a ground of denial of recognition and enforcement of foreign arbitral awards under the Convention,73 recent cases illustrate the generally ‘pro-arbitration’ stance taken by the Chinese judiciary.74 In 2013, the SPC in Castel Electronics Ptd Ltd defined violations of ‘public policy’ to include

67 ibid.

68  Reply of the SPC concerning the Request for Instructions on Application for Confirming the Validity of an Arbitration Agreement in the Case of Anhui Long Li De Packaging and Printing Co, Ltd v BP Agnati SRL [2013] SPC Civil Division IV No 13, 25 March 2013. 69  See discussions above in s 2.2.1. 70  The New York Convention provides that ‘The member state will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting State.’ 71  See n 19. 72  According to Circular of Supreme People’s Court on Implementing Convention on the Recognition and Enforcement of Foreign Arbitral Awards Entered by China, Art 1 provides that ‘In accordance with the reciprocity reservation statement made by China when entering the Convention, this Convention shall apply to the recognition and enforcement of an arbitral award made in the territory of another contracting State.’ 73  Art V(2)(b), New York Convention. 74  From 2000 to 2012, just one award concerning ‘public policy’ issues under Art V(2)(b) of the New York Convention was denied enforcement and recognition, which is the Jinan Yongning case in 2008. See discussions below.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 27 threats to national sovereignty, the legal system, and social or public interests.75 The SPC’s 2014 review of ‘public policy’ cases has aided in clarification as to the substantive contents of cases contravening public policy. For instance, in Fujian Zongheng Media Express Technology v Starr Investments Cayman II Inc, the SPC ruled out contravention of mandatory administrative regulations—in the particular case, infringement of foreign currency regulations—as a necessary violation of Chinese public policy.76 The SPC’s 2009 decision in Hemofarm DD et al v Jinan Yongning Pharmaceutical holds the distinction of being the only case in which a ‘public policy’ argument has succeeded in barring recognition and enforcement of a foreign award in China.77 In Jinan Yongning, an ICC award was denied on the newly delineated grounds that its enforcement would violate ‘judicial sovereignty’—thus confirming ‘judicial sovereignty’ as a component of China’s ‘public policy’. The SPC ruled that as the leasing dispute, property preservation and associated bankruptcy of the joint venture giving rise to the ICC arbitration were not covered by the parties’ arbitration clause, the ICC tribunal had overstepped its jurisdiction, which rightfully belonged to the independent jurisdiction of the Chinese courts.78 However, Jinan Yongning’s decision contrasts with the Castel case, under which the ‘public policy’ argument was rejected. In Castel, a disagreement between a foreign arbitration institution and a Chinese Intermediate People’s Court on the validity of an arbitration agreement did not amount to a violation of the ‘judicial sovereignty’, and thus China’s public policy.79 Taken together, Jinan Yongning and Castel shed light on the scenarios in which jurisdictional conflicts might become ‘public policy’ issues in turning down a foreign arbitral award in China under the Convention.

3.3.  Other Factors In addition to judicial support of arbitration, the latest development in the Chinese arbitration system has been pushed by the wave of rising competitions among different Chinese arbitration commissions, referred to here as the ‘competitive arbitration market’. As outlined earlier, the landscape of the Chinese arbitration market is mainly formed by the following three forces. First, the AL’s promulgation led to the rapid proliferation of citybased local arbitration commissions across China competing caseload, taking the shape of a Chinese arbitration market. To date, there are 244 such kinds of local arbitration commissions. Second, despite the jurisdictional merging under the 1996 State Council Notice, CIETAC, as the most established arbitration institution in China, has continued to dominate the foreign-related arbitration market, until it was challenged by the dramatic CIETAC ‘split incident’ in 2013. Third, local arbitration commissions are increasingly proactive and

75  Reply of the SPC to Application of Castel Electronics Pty Ltd for Recognition and Enforcement of a Foreign Arbitral Award [2013] Min Si Ta Zi No 46. 76  Starr Investments Cayman II Inc (‘Starr’) v Fujian Zongheng MediaExpress Technology Inc, Fujian Fenzhong Media Inc, Zheng Cheng (‘Fujian Zongheng’) [2014] Rong Zhi Jian Zi No 51, (Fuzhou IPC ruling, 5 November 2014). 77  Reply of the SPC Concerning the Request for Refusal to Recognize and Enforce the Arbitral Award of the International Court of Arbitration of ICC [2009] Min Si Ta Zi No 11. 78 ibid. 79  See n 75.

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competitive in recent years. They regularly and continually update their arbitration rules and present innovative marketing initiatives, which have made substantial contributions in driving reform of the Chinese arbitration market. The second and third forces make the Chinese arbitration market more complicated and diversified.

3.3.1.  CIETAC’s Fragmentation 3.3.1.1.  CIETAC and its Sub-commissions in Shenzhen and Shanghai The key actors in the CIETAC split were the CIETAC South-China sub-commission located in Shenzhen, and the Shanghai sub-commission located in Shanghai. The sub-commissions were established against the backdrop of China’s market economy whereby Shenzhen was designated the first Special Economic Zone (jingji tequ) in China and Shanghai was the ­Chinese city with the largest portion of foreign investment in the 1980s. Both cities thus had an urgent need to set up specialised institutions catering to the resolution of ­Sino-foreign commercial disputes. The sub-commissions were established in 1983 and 1988, following respective requests by the Shenzhen and Shanghai municipal governments, through the assistance of CIETAC’s organiser, the China Council for Promotion of International Trade (CCPIT) attached to the State Council.80 The CIETAC sub-commissions were historically managed under their respective local governments and as such, financially independent from CIETAC; their establishment and designation as ‘sub-commissions’ were largely professional labels.81 Nonetheless, CIETAC attempted to strengthen its influence by appointing secretary-generals and deputy ­secretary-generals to the sub-commissions, as well as compulsory application of its Rules from 2002 to 2012.82 In addition, CIETAC and the two sub-commissions were natural competitors in the arbitration market for arbitration fees.83 This rivalry peaked in 2012, when CIETAC revised its Rules excluding jurisdiction of the sub-commissions. 3.3.1.2.  The Split Incident On 3 February 2012, CIETAC promulgated its revised Arbitration Rules (the 2012 Rules), with effect from 3 May 2012. The taking into effect of the 2012 Rules was followed by announcements from the Shenzhen and Shanghai sub-commissions claiming independence from CIETAC (the CIETAC split).84 The split was likely triggered by CIETAC’s 2012

80  CIETAC South China sub-commission was set up in 1984 and CIETAC Shanghai sub-commission was set up in 1990. CIETAC South China sub-commission bore the name of CIETAC Shenzhen office at its establishment. It was upgraded to CIETAC Shenzhen sub-commission in 1989 and had its name changed to the current one in 2004. For their history of establishment, see Gao Fei, ‘Research on the Legal Issues of the Disputes Between CIETAC Shanghai and Huanan Two Sub-commissions and CIETAC (3)—Reasons and Solution of the Illegal Independence of CIETAC Shanghai and Huanan Sub-commissions’ (2013) 11(2) Present Day Law Science 3–9 (高菲,‘贸仲委上海,华南两分后与贸仲委之争的法律问题研究（三）：贸仲委上海,华南两分会违法独 立的原因与解决’，载《时代法学》2013 年第2期,3–9). 81  ibid, 6–7. 82 ibid. 83 ibid. 84  See, for example, Chen Meng, ‘Is CIETAC Breaking Apart? An Analysis of the Split in the CIETAC System’ (2013) 6(1) Contemporary Asia Arbitration Journal 107–32.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 29 Rules, in particular Article 2, concerning the structure and jurisdictional power division between CIETAC’s headquarter in Beijing and its two sub-commissions.85 Article 2 of the 2012 Rules stipulates that ‘CIETAC sub-commissions or arbitration centres are branches of CIETAC. They accept arbitration applications and administer arbitration cases with CIETAC’s authorization’.86 Cases submitted to CIETAC’s empire yield three common types of jurisdiction clauses: (1) Parties elect to submit the dispute to CIETAC in Beijing (‘Headquarter Clause’); (2) Parties elect to submit the dispute to a specified CIETAC sub-commission (‘Sub-commission Clause’); (3) Parties elect to submit the dispute to ‘CIETAC, at the place of a specified sub-commission, or where the agreement on the sub-commission is ambiguous’ (‘Mixed Clause’).87 Under the 2000 and 2005 CIETAC Rules, where a Headquarter Clause or a Mixed Clause was used, parties could submit their cases to either the CIETAC headquarter in Beijing or the Shenzhen/Shanghai sub-commissions, with the jurisdiction determined upon the claimant’s first choice.88 However, under the 2012 Rules, Headquarter Clause and Mixed Clause cases would both be taken by the CIETAC headquarter in Beijing; the sub-­commissions could only handle cases with a clearly-written Sub-commission Clause.89 Years of competition, catalysed by changes to the jurisdictional power division and its impacts on the sub-commissions’ income from case filing fees—coupled with CIETAC’s declaration of effective control over the sub-commissions—led to the announcement of independence by the sub-commissions.90 CIETAC subsequently announced termination of authorisation to the Shanghai and South-China sub-commissions for accepting and administrating any CIETAC-related cases, including cases with Sub-commission Clauses.91 The sub-commissions responded by renaming themselves, respectively, the South China International Economic and Trade Arbitration Commission (SCIETAC) in October 2012 and the Shanghai International Economic and Trade Arbitration Commission (SIETAC) in April 2013.92 In May 2013, SIETAC and SCIETAC each announced a set of new arbitration rules, stating that they would no longer accept cases with the Headquarter Clause, but would as usual accept cases with the Sub-commission Clause.93

85 

Art 2 is titled ‘The Structure and Duties’. Art 2, Para 3, 2012 CIETAC Rules. 87  Art 2, Para 6, 2012 CIETAC Rules. 88  Art 2, Para 8, 2005 CIETAC Rules, and Art 12, 2000 CIETAC Rules. 89  Art 2, Para 6, 2012 CIETAC Rules. 90  See report by China’s leading economic news media, Yicai.com, on the ‘CIETAC split episode’: ‘Shewai zhongcai nao ‘fenzhi’: Zhengyi beihou shenfen chengmi’ (‘涉外仲裁闹’分治’：争议背后身份成谜’), Yicai.com, 4 May 2012, available online: www.yicai.com/news/1691426.html. 91 China International Economic and Trade Arbitration Commission, ‘Zhongguo guoji jingji maoyi zhongcai weiyuanhui guanyu yueding you Zhongguo Guoji Jingji Maoyi Zhongcai Weiyuanhui Shanghai Fenhui, Zhongguo Guoji Jingji Maoyi Zhongcai Weiyuanhui Huanan Fenhui zhongcai de anjian de guanli gonggao’ (‘中国国 际经济贸易仲裁委员会关于约定由中国国际经济贸易仲裁委员会上海分会,中国国际经济贸易仲裁委员会华南分会仲裁的案件的管理公告’), 1 August 2012, available online: http://cn.cietac.org/notes/notes094.shtml. 92  SIETAC and SCIETAC also use the new name of as Shanghai International Arbitration Centre (SIAC) and Shenzhen Court of International Arbitration (SCIA) respectively. See reports by Yicai.com on the aftermath of the ‘CIETAC split episode’: ‘Huanan Guozhong, Shanghai Maozhong: Duli zhongcai jigou bucunzai shouquan zhishuo’ (‘华南国仲,上海贸仲：独立仲裁机构不存在授权之说’), Yicai.com, 31 January 2013, available online: www.yicai.com/news/2463616.html; ‘Shanghai Maozhong gengming: Xiayue qiyong xinguize xinmingce’ (‘上海贸仲更名: 下月启用新规则新名册’), Yicai.com, 12 April 2013, available online: www.yicai.com/ news/2621445.html. 93 ibid. 86 

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3.3.1.3. Analysis An immediate issue was whether previous agreements with Sub-commission Clauses, which had been accepted by the sub-commissions prior to the split, remained valid. Judicial challenges on grounds that the original sub-commissions had no jurisdiction to arbitrate following CIETAC’s announcement on 1 August 2012 were largely refused, for the maintenance of stability in the arbitration regime. The uncertainty lingered until the SPC issued its official stance on 4 September 2013 (the 2013 Notice).94 The 2013 Notice requested all cases arising out of the jurisdictional dispute to be reported to the SPC and stated that such cases could only be decided after a reply from the SPC was obtained. At least two cases followed the SPC’s 2013 Notice. The first concerned the effect of an award following an arbitration agreement electing ‘CIETAC Shanghai Sub-commission’. On 31 December 2014, the Shanghai No 2 Intermediate P ­ eople’s Court upheld the effectiveness of the arbitration; since the Shanghai Sub-commission had its name changed to SIETAC, the case would be deemed to have been accepted by SIETAC.95 Similarly, on 13 January 2015, the Beijing No 2 Intermediate People’s Court confirmed the jurisdiction of SCIETAC.96 Both judgments were confirmed by the SPC. The 2013 SPC Notice, however, fell short of articulating the principle by which the appropriate forum would be determined for arbitration pursuant to an affected clause. On 15 July 2015, the SPC issued a further judicial interpretation on the matter in the form of a joint reply to the Shanghai Higher People’s Court, the Jiangsu Higher People’s Court and the Guangdong Higher People’s Court (the 2015 Reply).97 The 2015 Reply offers guidance as to which institution should exercise jurisdiction and under what circumstances. This reply, effective on 17 July 2015, splits the timeline into three time periods. 1. Prior to the renaming of the sub-commission as a result of the split (the ‘Pre-renaming Period’); 2. On the date or after the renaming but prior to the effective date of the 2015 Reply (the ‘Transition Period’); and 3. After the effective date (the ‘New Period’). SIETAC and SCIETAC would have jurisdiction over arbitration agreements submitted to them made during the Pre-renaming Period, as was the case previously.98 However, CIETAC held jurisdiction over all arbitration agreements entered into during the Transitional and New Periods.99 By so prescribing, the SPC aimed to mitigate the side effects of the CIETAC

94  SPC Notice on Certain Issues Relating to Correct Handling of Judicial Review of Arbitration Matters Fa [2013] No 194 《最高人民法院关于正确审理仲裁司法审查案件有关问题的通知》 ( ). 95  (2012) Hu Er Zhong Min Reng (Zhong Ban) Zi No 5 (沪二中民认（仲协）字第5号民事裁定书). 96  (2014) Jing Er Zhong Te Zi No 08088 (京二中特字第08088号民事裁定书). The Beijing Court recognised that CIETAC South-China Sub-commission was established in 1984 in accordance with law and had its name changed to SCIETAC; and that the parties in the case had made a clear designation of the arbitration institution. Therefore, the arbitration application shall be made to SCIETAC in accordance with law. 97 ‘Zuigaoyuan jiu maozhongwei Huanan fenhui, Shanghai fenhui tiaokuan anjian de guanxia ji caijue de sifa jiandu shensha wenti zuochu pifu’ (‘最高院就贸仲委华南分会,上海分会条款案件的管辖及裁决的司法 监督审查问题作出批复’), CIETAC, 17 July 2015, available online: http://cn.cietac.org/NewsFiles/NewsDetail. asp?NewsID=1532. 98  ibid. Also see Art 1, Para 1, of the 2015 SPC Reply. 99  Art 1, Paras 2 and 3, of the 2015 SPC Reply.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 31 split and to maintain stability and clarity in the arbitration market.100 Thus, the SPC guidelines confirm the jurisdiction of SIETAC and SCIETAC, and the jurisdictional battle following the CIETAC split has finally been resolved. The CIETAC split indicates that the unrivalled position and historical near-monopoly of the foreign-related arbitration market held by CIETAC in the Chinese arbitration system is susceptible to challenge. The declarations of independence by SCIETAC and SIETAC have been bolstered by their respective promulgations of new arbitration rules seeking to match international standards. In addition, the utilisation of unique geographic advantages by SCIETAC and SIETAC—located as they are in the Shanghai and Guangdong Free Trade Zone respectively—have created still fiercer competition for CIETAC. SCIETAC in particular has fully capitalised on its geographic proximity to Hong Kong and Macau; of 34 foreign arbitration awards enforced by Hong Kong courts in 2014, five were awards rendered by SCIETAC, being the largest portion of foreign awards delivered by one individual institution outside Hong Kong.101 This dynamic of arbitration commissions using their niches to thrive and compete has extended to local arbitration commissions, as discussed below.

3.3.2.  Rising Competition among Local Arbitration Commissions The expansion, maturation and increasingly competitive nature of the market for local arbitration commissions may be attributed to several factors. These include the proliferation of local arbitration commissions following the promulgation of the 1994 AL, the blurring of the dual-track jurisdiction following the 1996 State Council Notice, the desire to attract foreign caseload in the ‘shadow’ of CIETAC, as well as the continuing efforts to improve institutional independence, integrity and competitiveness. Regular updates by local arbitration commissions of their arbitration rules serves to enhance their market competitiveness, with features threefold. First, to attract foreignrelated caseload, local commissions are incentivised to bring their rules in line with international standards, with particular focus on the transparency and efficiency of arbitration processes, as well as greater respect accorded to procedural autonomy and flexibility. For instance, the most recently updated BAC Arbitration Rules in 2015 specifically includes a Chapter (Chapter VIII) on ‘Special Provisions for International Commercial Arbitration’, introducing rules with regard to interim measures of protection102 and emergency ­arbitrators,103 as well as specifying increased scope and flexibility of procedural ­measures.104 Similar efforts have occurred in local commissions in other economically developed Chinese cities such as Guangzhou.105

100  For example, comments by foreign law firms: for example, Norton Rose Fulbright, ‘China Arbitration: new Judicial Guidance on the CIETAC Split’, August 2015, available online: www.nortonrosefulbright.com/knowledge/ publications/131227/china-arbitration-new-judicial-guidance-on-the-cietac-split. 101  ‘Huanan Guozhong ju Xianggang fayuan zhixing neidi zhongcai caijue shuliang zhi shou’ (‘华南国仲居香港法院执行内地仲裁裁决数量之首’), 22 January 2015, available online: www.sccietac.org/ web/news/notice_detail/1517.html. 102  Art 62 of the 2015 BAC Rules. 103  Art 63 of the 2015 BAC Rules. 104  Art 35 of the 2015 BAC Rules. 105  Guangzhou Arbitration Commission (GAC) also started the process of amending its arbitration rules in 2015 for the enhancement of parties’ procedural autonomy and flexibility.

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Second, to enhance their competitive edges, local commissions seek to nurture a higher degree of professionalism. Privileged by its location in Beijing, BAC is renowned in its recruitment of talents in law, economics, technology and trade, such that many of its arbitrators are renowned scholars and leading professionals in the field both in China and globally.106 Further, BAC has maintained a tradition of high elimination rate of its arbitrators who have not participated in any cases in the past couple of years.107 In 2013, 267 out of the 391 BAC panel arbitrators were involved in handling arbitration cases; just one out of the 57 newly-appointed arbitrators in that year failed to handle any case.108 Finally, BAC is the only institution in China which imposes strict ethical restrictions on its arbitrators acting as counsel in other cases submitted to BAC.109 This prohibition seeks to ensure the ethics and integrity of BAC arbitrators to offset the negative influence of personal relations and networks (guanxi) existing delicately within the operation of arbitral tribunals in China.110 Third, local arbitration commissions proactively capitalise on their best local features to attract caseload in the competitive arbitration market. In June 2015, the Guangzhou Arbitration Commission (GAC)—located in Guangdong province—published its Internet Arbitration Rules to promote online arbitration as its unique selling point.111 In Hubei province, the Wuhan Arbitration Commission (WAC) boasts successful mediation (settlement) rate for arbitration cases as high as 97.13 per cent from 2002 to 2012, with an arbitration caseload consistently ranked highest among all Chinese arbitration institutions in that decade.112 Given plentiful local financial activity (and corresponding financial disputes), the Wenzhou Arbitration Commission (WEAC) in Zhejiang province has focused its efforts on promoting financial arbitration services.113 The newly promulgated WEAC Financial Arbitration Rules, taking effect in May 2015, feature flexibility in application of financial laws, norms, customs and rules in the financial profession, as well as principles of equity and fairness in the financial market, all as admissible governing regulations in arbitrating financial disputes at WEAC.114 Thus, ever intensified competition among local commissions in the Chinese arbitration market is pushing the system towards qualitative advancement.

106  BAC’s current Chairman is Professor Liang Huixing, a most impactful jurist in civil and commercial law in today’s China. See ‘Jingwai zhongcai jigou jinzhu Zhongguo shichang jiaju jingzheng, zhuanjia yu feixingzhenghua’ (‘境外仲裁机构进驻中国市场加剧竞争，专家吁非行政化’), Fazhi ribao (《法制日报》), 29 September 2015, available online: www.chinanews.com/cj/2015/09-29/7549384.shtml. 107  ‘Beizhong shizhounian gongzuo zongjie’ (‘北仲十周年工作总结’), available online: www.bjac.org.cn/page/ gybh/sznzj.html. 108  ‘Beizhong 2013 nian gongzuo zongjie’ (‘北仲 2013 年工作总结’), available online: www.bjac.org.cn/page/ gybh/2013zj.html. 109 ‘Beizhong zhongcaiyuan shouze’ (‘北仲仲裁员守则’), available online: www.bjac.org.cn/page/zc/zcygf. html. 110  See discussions above in s 2.2.3. 111 See the 2015 Guangzhou Internet Arbitration Rules (广州仲裁委员会网络仲裁规则 2015), available online: www.gzac.org/WEB_CN/AboutInfo.aspx?AboutType=4&KeyID=100b1ae3-9f15-4bfc-bf59-a90273778fa5. 112  See the news report, ‘Wuhan Zhongcaiwei shouanshu lianxu shinian weiju quanguo diyi’ (‘武汉仲裁委受案数连续十年位居全国第一’), Changjiang Daily (《长江日报》), 7 February 2013, available online: http://news.ifeng.com/gundong/detail_2013_02/07/22024260_0.shtml. 113 See the 2015 Wenzhou Financial Arbitration Rules (温州仲裁委员会金融仲裁规则 2015), available online: www.wzac.org/News_Detail.aspx?CateID=18&ID=397. 114  ibid, Art 12.

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3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements In the absence of legislative development, judicial interpretations and arbitral judgments have plugged the gaps of the AL, clarifying issues uncertain in arbitral practice. Simultaneously, the rising competition among Chinese arbitration commissions represents a push towards independence, professionalism and internationalisation of the Chinese arbitration landscape. Both judicial and institutional developments are commendable, in their tendency to address defects of different aspects in the Chinese arbitration system. As mentioned previously, the SPC serves a dual function as the highest court in China, as well as a de facto rule-making power-holder through the issuance of judicial interpretations. In both capacities, the SPC brings certainty to legal issues where existing legislations fail to provide clear or satisfactory solutions. In its interpretative function, the 2006 SPC Interpretation clarified what amounts to an ‘unclear yet curable designation of arbitration commissions’ under Articles 16 and 18 of the AL. In adjudication, the Longlide and Duferco judgments gave effect to the potential of foreign institutional arbitration seated in China, an issue legislatively unaddressed but much debated in arbitral practice. The judiciary’s power to clarify and supplement the legislation is significant to the reform of the arbitration system in China, where laws often lag behind the pace of economic development and practical needs. Accordingly, the judiciary and the SPC has shouldered much of the burden of legal reform of the Chinese arbitration system in the past decade. Unlike the judiciary, arbitration commissions are ‘private institutions’ (民间机构 ­minjian jigou), or have as their objective to be private institutions (民间性 minjianxing). The driving force behind reform initiatives spearheaded by such commissions lies in their intent to enhance institutional competitiveness, independence and self-sufficiency vis-à-vis other commissions. On one hand, competition exists among Chinese city-based local arbitration commissions, particularly with respect to economically better developed cities. On the other hand, city-based arbitration commissions—including the ­former CIETAC sub-­commissions—have grown to rival the traditional giant, CIETAC. Local arbitration commissions have pro-actively amended their arbitration rules on their local advantages. Similarly, actions undertaken by SIETAC and SCIETAC illustrate how previous CIETAC partners strive to compete for a larger share of their legacies in the arbitration market. Institutional initiatives thus improve the arbitration regime in favour of quality and competitiveness, and eventually, to reform the Chinese arbitration system for qualitative development.115

3.4.2.  Top-down versus Bottom-up Reform A distinction between the judicial and institutional reform initiatives is the way in which they influence stakeholders of the arbitration system, the former being top-down while the latter bottom-up. 115  The Chinese arbitration regime has been challenged as over-developed in terms of number of arbitration institutions. The establishment of over 240 arbitration commissions spreading Chinese cities has been criticised as catering to administrative needs rather than real market demand. See discussions in s 2.2.2.

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A top-down approach has a wide and direct scope of application, as jurisprudence rendered by the SPC is binding (or highly influential)116 on arbitration practices on the similar types of issues in the future. In contrast, bottom-up changes such as those pursued by an individual arbitration commission are prima facie limited to that specific institution. An arbitration rule amendment by BAC, for instance, is applicable only to BAC itself—with only limited and indirect impact on external arbitral practice. However, bottom-up initiatives are no less important in the reform of the Chinese arbitration system. As the forerunners of Chinese arbitral practice, spearheading commissions are by nature sensitive to the market needs of both domestic and international arbitration businesses and users, and have the flexibility and capacity to respond to needs more quickly than either the legislature or the judiciary. Top-down legislative revision of the 1994 AL by the central legislature is anticipated as the next direction for reform of the Chinese arbitration system, given the limitations to the extent to which the SPC may push the boundaries of arbitration practice. In Longlide, the SPC attracted criticism after failing to respond to the issue of the scope and application of the New York Convention in China in controversial cases.117 It remains unclear whether arbitral awards rendered by foreign institutional arbitrations seated in China are considered ‘non-domestic’ awards in China, and whether such awards are enforceable by Chinese courts pursuant to the New York Convention. The reluctance of the SPC to address these issues may stem from a suspicion of judicial activism where the legislation is silent, and where the consequences would be significant; legal recognition of the outcome flowing from foreign institutional arbitration seated in China would have a sizeable impact on the freedom and openness of arbitration and legal markets by the Chinese government. Thus, while the SPC inclines towards recognising the growing phenomena in arbitral practice and towards granting the parties more autonomy in drafting, it is cautious not to bring reforms too swiftly and radically.

3.4.3.  Special Considerations Rather than the influence of civil law legal traditions or unitary legal jurisdictions, the most prevalent attributes in the development path of Chinese arbitration are the fast-developing economy and a comparatively weaker rule of law situation resulting from its historically rooted administrative-governance system.118 Chinese arbitration commissions (in particular, city-based local commissions), long tolerating administrative controls by local governments, have been anticipating legislative

116  China follows the civil law jurisdiction where case judgments do not carry force of law (stare decisis rule) as in common law jurisdictions. But it has been a general practice in China that SPC judgments are highly influential (or highly persuasive) on subsequent rulings of the same (or similar) types of issues as lower courts would be very reluctant to dis-follow the SPC precedent due to the system of appeal. 117  Longlide (n 66). See also discussions above in s 3.1.2. 118  For example, among the wave of arbitration reform and development in Asia Pacific jurisdictions, Australia owes the major attribute of reform as inhered in the influence of the common law legal tradition and strong rule of law tradition. Australia owes its success of arbitration reform (in particular, the amendment of the International Arbitration Act in 2010) to be in response to the federal system of jurisdiction. See Leon Trakman, ‘Australia’s Contribution to International Commercial Arbitration in Asia’, presented in the conference The Developing World of Arbitration: A Comparative Study of the Arbitration Reform in China and Asia Pacific, University of Hong Kong, Hong Kong, 27 October 2015 (document on file with the author).

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 35 reform to embrace the real ‘private and market’ nature of their institutional foundation and development.119 However, as there has been no timetable set in the national legislative agenda for revision of the AL, certain frontline arbitration commissions have partaken in institutional strengthening and applied their best efforts to modernising their rules. While arbitration commission rules do not carry force of law and do not remedy deficiencies in the legal framework, based upon China’s institutional arbitration system, they promote arbitral practice, facilitate legislative progress and imply development trends. During the interim period and before the revision of the AL, a significant attribute of China’s arbitration reform is the mixture of the SPC-led, top-down judicial developments and commission-driven, bottom-up institutional efforts. In particular, due to the rapidly developing economy and corresponding increase in dispute resolution demand, marketdriven bottom-up institutional initiatives have become a persuasive force for arbitration development motivating top-down reforms, either from the judiciary or the legislature. The judicial efforts at the central level, and the institutional efforts at the local level collectively, should elicit a positive response from the state legislature—ie revision to the AL. As in Longlide, without legislative recognition, reform efforts, whether top-down or bottom-up, judicial or institutional, are ‘transitional’ and ‘informal’, incapable of inducing systematic breakthroughs.

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform Legislative reform must address both external alignment with international arbitration norms, and internal consistency among different sources of arbitral regulations in China. The Chinese legislature should take advantage of the 2006 amended version of the Model Law,120 which is widely considered a reflection of international best arbitration practices and the adoption of which is deemed a primary gate to access the international commercial market.121 The author believes that, much as what has happened in the intellectual property regime, Chinese arbitration legislation also holds the potential to reach the international level.122 Internally, the Chinese legislature should review, for consistency, the manifold sources of arbitration regulations. Inconsistencies abound among the AL and other arbitral regulations in China. Further, given the merging of the dual-track jurisdiction system

119 

See discussions above in s 2.2.2. Model Law was adopted in June 1985, and comprehensively amended in July 2006; see the full version of the 2006 amendment, available online: www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_ Ebook.pdf. 121  Australia is one of the first to adopt the 2006 amendments to the Model Law, as a reflection of embracing international best practice. See Doug Jones, Commercial Arbitration in Australian 2nd edn, (Australia, Thomson Reuters, 2012); Richard Garnett and Luke Nottage, International Arbitration in Australia (Australia, Federation Press, 2010). 122  The most recently revised China Copyright Law (revised in 2010), Patent Law (revised in 2008), and Trademark Law (revised in 2013) are all very advanced legislations and they have been aligned with various international conventions on the protection of intellectual property rights. 120  The

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by the 1996 State Council Notice, the concept of ‘foreign-related arbitration commission’ should be discarded to curb practical confusion. Only the concept of ‘foreign-related arbitration’123 would be retained, and bifurcations maintained to the extent of different treatment of judicial review over arbitral awards resulting from the two types of disputes. Another ‘essential’ ingredient to a successful arbitration reform is a pro-arbitration judiciary, which is critical to ensure the proper direction of legislative reform. Over the past decade, the SPC has, besides issuing the impressive and consolidated Interpretation on the Arbitration Law in 2006, been supportive to arbitration in concrete practice. In the 2013 case on foreign institutional arbitration seated in China, Longlide, as well as in fixing the jurisdictional mess post the 2015 CIETAC split episode, the SPC has exhibited judiciary leniency, exerting efforts to give effect to arbitration agreements as much as possible. ­Chinese lower level judiciaries are expected to emulate SPC’s pro-arbitration jurisprudence and to well implement it in day-to-day practice.

4.2.  Enhancing Competitiveness, Independence and Professionalism Measures to achieve institutional independence and competitiveness of Chinese arbitration commissions are ‘near’ ingredients of relevance to China as an institution-arbitration-­ dominated jurisdiction. Institutional reform aims to comprehensively restructure the players of the arbitration market and by doing so, Chinese arbitration commissions survive, develop and thrive on basis of market demand rather than administrative needs. To eliminate external intervention and to achieve independence and self-sufficiency, arbitration commissions must be decoupled from the influence of local governments and powerholders. The personnel composition within a commission must consist of legal professionals rather than representatives of administrative departments. On financial matters, commissions should rely solely on arbitration fees for operation and development. Selfsufficiency not only establishes the institutional independence of local arbitration commissions, but edges them towards quality development under market competition. Local governments should be prohibited from forcing local enterprises to use local arbitration commissions under a localisation sentiment. In this regard, BAC is a shining example of restructuring in terms of integrity and quality, winning rising fame in professionalism within the larger arbitration market. However, BAC’s success has neither been easy; nor will its path be easily reproduced by other arbitration commissions without sufficient market demand. Without demand, well-intended institutional reform endeavours are doomed to fail—a real possibility given that many commissions were established to meet administrative rather than actual needs. The competition within the Chinese arbitration market is an ever-intensifying, yet inevitable trend, wherein only the fittest arbitral service providers may thrive. It is thus proposed that less developed local commissions which have very little caseload to support their operation be eliminated from the market. In association with the modernisation of Chinese arbitration commissions, the gradual evolution towards arbitrator professionalism in China should be treated as another ‘near’ ingredient and an integral part of the success of the reform.

123 

In accordance with judicial interpretations of both General Principles of Civil Law and Civil Procedure Law.

China’s Arbitration Modernisation Under Judicial Efforts and Marketisation Waves 37 First, arbitrators must have high professional ability and moral integrity; and second, China must establish an environment in which arbitrators may work impartially. While the AL has established professional requirements no less stringent than other jurisdictions, accreditation is even more difficult for having been controlled by individual arbitration commissions. Changes in the accreditation scheme are needed to incentivise arbitral talents. The China Arbitration Association (CAA) would be a most appropriate self-regulating authority for the qualification and accreditation of arbitrators, given its mandate to coordinate all arbitration commissions in China.124 Further experience may be drawn from international arbitrator self-regulatory bodies such as the Chartered Institute of Arbitrators (CIArb) with respect to examining and training for Chinese and foreign nationals to become accredited and remain competent.125 For a supportive environment for arbitrators to work professionally and impartially, one deciding factor is whether the arbitration commission itself is independent from administrative and other interference. It requires a strong set of arbitration rules, both professional and ethical, to regulate and supervise the practice of arbitrators to act impartially. The rising fame of BAC in arbitrator professionalism is particularly built on its success in achieving institutional independence in the first place and BAC’s experience is researchwise. With CAA taking the lead in accreditation, and individual arbitration commissions ensuring institutional independence and competitiveness, it is expected that arbitrator professionalism will be established in China in the not too distant future.

5. Conclusion The arbitration arrangements established by China stand out as distinctive among major trading nations in the world—in theory, law, institutions, practice and moreover, reform patterns and development discourse—as a function of its unique history and socio-economic context. While China’s AL introduced substantial changes to the arbitration landscape in the nation, the road to arbitration modernisation has not always been smooth. As a developing rule of law jurisdiction, the administrative-governance arbitral system originally practised in China is incompatible with international norms emphasising autonomy and independence; indeed, her regulatory system for arbitration remains scattered and in need of development. Today, the ‘essential’ ingredient for reform of China’s arbitration regime is a willingness to revamp the fundamental regulatory framework as encapsulated in the AL. Faced with deepening marketisation and developing rule of law in China, the current ‘Chinese characteristically localised’ framework of the AL must evolve to remain abreast of such developments. Legislative reform benchmarked against the 2006 Model Law standards should take place in China’s arbitral regime soon. As argued, an apparent lack of official legislative support has left the judicial and institutional initiatives with many uncertainties. China

124 

Art 15, para 2 of AL. CIArb is a world recognised self-regulatory institutional leader in providing accreditation and training to arbitrators and mediators. The institute is accessible at www.ciarb.org. 125 

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may lose its competitiveness in the international arbitration market due to slow progress in macro-legislative development, despite her strong vigour in economic competitiveness. Fortunately, the situation is not without dynamic developments in ‘near’ ingredients. Reform has been driven from both bottom-up and top-down perspectives, with judicial and institutional initiatives combined as major driving forces of development. At the topdown level, the consolidated 2006 SPC Interpretation brought much-needed certainty to a defective regulatory framework. SPC’s judicial efforts are honing a pro-arbitration Chinese judiciary, as well as aligning Chinese arbitration norms and practices with international standards. From the bottom-up perspective, the Chinese arbitration market has been formed and flourished. Intensifying competitions amongst city-based arbitration commissions and between them and CIETAC have formed another important force of arbitration reform in China promoting institutional independence, integrity, professionalism and competitiveness of the Chinese arbitration market players, ie the arbitration commissions. The formation of a modern and liberal arbitration environment is critical to China’s trade and investment interests. Given China’s rapidly expanding economic prominence and ever closer cooperation with the world’s enterprises, both at home and abroad, the number of international disagreements involving Chinese entities is expected to continue to grow. In view of the lack of competence of Chinese courts and the reluctance of Chinese firms to put their fate in the hands of foreign courts, arbitration remains the best choice. The Chinese government should take the development of China becoming a favourable international arbitration forum as a serious commitment and make it a continuous endeavour.

2 Balancing Procedural and Substantive Arbitration Reforms: Advancing International Arbitration Practice in Hong Kong SHAHLA ALI*

1. Introduction This chapter examines how the UNCITRAL Model Law on International Arbitration (the Model Law) has affected arbitration practice in Hong Kong. It also examines measures taken in the region to promote the use of arbitration including training programmes and legislative reforms. It concludes by examining challenges in the implementation of the Model Law and efforts at reform.

2. Background 2.1.  Legislative and Regulatory Framework The Hong Kong Arbitration Ordinance (HKAO) which came into force on 1 June 20111 is the law governing arbitrations in Hong Kong. The HKAO is largely based on the Model Law and takes into account the amendments made in the 2006 version except for the ­recognition and enforcement of interim relief. It contains attractive features that are considered to be user-friendly, such as guarantees of fairness, speed and minimal court intervention, as well as respect for parties’ autonomy. The HKAO adopted a total of 34 articles of the Model Law following a similar pattern: the provisions begin by stating in the first subsection ‘Article [X] of the UNCITRAL Model

* The author thanks the Government of Hong Kong’s University Grants Committee for its kind support through its GRF Grant (HKU 17603215). Special thanks to Florence Tse, Kate Chan, Andreas Wehousky and Renatta Ng for their research assistance. 1  Cap 609.

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Law, the text of which is set out below, has effect’ followed by a verbatim reproduction of the Model Law provision.2 Amendments or modifications, if any, are contained in ensuing subsections.3 The HKAO provides in Schedule 1 in 112 sections for a unified regime for both international as well as domestic arbitrations. This unique feature of the HKAO is a strong contrast to Hong Kong’s previous arbitration law,4 where the Model Law (1985 version) was applicable to international and the English Arbitration Act 1950 to domestic arbitrations.5 However, the HKAO itself provides for exceptions to this unified regime in Schedule 2. This contains seven provisions taken from the old regime regulating domestic arbitrations.6 Parties can ‘opt-in’ to these provisions in whole or part and thereby exclude the respective provisions of Schedule 1.7 More significantly, unless the parties agree to the contrary,8 Schedule 2 applies in its entirety to a domestic arbitration agreement entered into before or within a period of six years after the commencement of the HKAO.9 Schedule 2 likewise applies automatically in construction sub-contracting cases.10 Besides the HKAO, other sources have to be kept in mind when examining the legal framework for arbitration in Hong Kong. Hong Kong, as a part of the People’s Republic of China (PRC),11 is a signatory to the New York Convention.12 Since Mainland China has declared a reciprocity as well as a commercial reservation according to Article I(3) of the New York Convention, these reservations also apply to Hong Kong.13 Special attention must also be paid to the fact that in Mainland China arbitration awards from Hong Kong are not considered as ‘foreign’ in the sense of Article 1(1) of the New York Convention. Likewise, Mainland China awards are not considered foreign awards in Hong Kong. Hence, Hong Kong awards cannot be enforced in the Mainland as foreign awards pursuant to the New York Convention and vice versa. This has led to a number of awards from Hong Kong not being enforced in Mainland China and vice versa.14 In order to c­ircumvent this undesirable result and to provide for an easy enforcement

2 

See ss 9–12, 19–21, 23–28, 34–42, 47–54 and 64–69, HKAO. See for example ss 10, 19–20, 23–24 and 26, HKAO; in detail, see discussions below in s 3. 4  Old HKAO (Cap 341). 5  Christopher To and Damon So, Butterworths Hong Kong Arbitration Law Handbook (Hong Kong, LexisNexis Butterworths, 2012) 1–2. 6 David Sandborg, ‘Arbitration in Hong Kong’ in Shahla F Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia 3rd edn (Huntington, Juris, 2013) 152–53. 7  s 99, HKAO. 8  s 102, HKAO. 9  s 100, HKAO. 10  s 101, HKAO. 11  Since Hong Kong and Macao are part of the PRC, the author will use the term ‘Mainland China’ to refer to the PRC excluding Macao and Hong Kong. 12  Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). 13  See remark h at www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html. Art I(3) of the New York Convention states: ‘When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.’ 14  Wei Sun and Melanie Willems, Arbitration in China (Alphen aan den Rijn, Kluwer Law International, 2015) para 2.3. 3 

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mechanism ­similar to the New York Convention,15 Hong Kong and Mainland China concluded the ‘Arrangement Concerning Mutual Recognition and Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region’. By the same token, in order to ensure the enforceability of Macao awards in Hong Kong and vice versa, Hong Kong and Macao concluded the ‘Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards Between the Hong Kong Special Administrative Region and the Macao Special Administrative Region’. As for investment disputes, Mainland China, and thereby Hong Kong, is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Particularly relevant for ad hoc arbitrations is the Host Country Agreement that Mainland China and the Permanent Court of Arbitration concluded on 4 January 2015. This agreement enables Hong Kong to serve as a place for ad hoc arbitrations under the regime of the Permanent Court of Arbitration.16 Lastly, Hong Kong, being a common law jurisdiction, places great importance on case law. Judgments from the United Kingdom often provide guidance for Hong Kong courts.17

2.2.  Institutional Framework Both institutional and ad hoc arbitration are allowed in Hong Kong,18 unlike in M ­ ainland China.19 A number of arbitration institutions have offices in Hong Kong. While the ­International Chamber of Commerce (ICC) has established a secretariat in Hong Kong and an office in Mainland China, it cannot administer arbitrations through its Mainland China office. The establishment of offices by overseas arbitration and commercial institutions in Hong Kong include the International Court of Arbitration of the ICC (in November 2008), the China International Economic and Trade Arbitration Commission (CIETAC) (in ­September 2012), and the China Maritime Arbitration Commission (CMAC) Hong Kong Arbitration Center (in November 2014). In addition, the Hague Conference on ­Private International Law opened a regional office in Hong Kong in December 2012. The Hong Kong International Arbitration Centre (HKIAC), founded in September 1985, is amongst the most established centres in the region.20 HKIAC administers arbitrations under its own rules and procedures as well as under the UNCITRAL Arbitration Rules (Rules). HKIAC’s 2013 Administered Arbitration Rules are considered by some to be amongst the most modern and comprehensive set of rules in the market.21 Indicators of

15 Tao Jingzhou, Arbitration Law and Practice in China 3rd edn (Alphen aan den Rijn, Kluwer Law International, 2012) para 615. 16  See www.doj.gov.hk/lawdoc/bilateral/aeio_7e.pdf. 17  John Choong and Michael J Moser, ‘Hong Kong SAR’ in Michael J Moser and John Choong (eds), Asia ­Arbitration Handbook (Oxford, Oxford University Press, 2011) para 4.10. 18  Peter S Caldwell, ‘Hong Kong’ in Richard Chernick, Daniel M Kolkey and Barbara Reeves (eds), Practitioner’s Handbook on International Arbitration and Mediation 3rd edn (Huntington, JurisNet, 2012) §3.03; see s 19, HKAO. 19  Gu Weixia, ‘Arbitration in China’ in Ali and Ginsburg (n 6) 88–90. 20  Department of Justice, ‘Arbitration—The International Arbitration Centre for the Asia Pacific’, available online: www.doj.gov.hk/eng/public/arbitration.html. 21 Ronnie King, ‘New Arbitration Rules for HKIAC’, available online: www.ashurst.com/publication-item. aspx?id_Content=9317.

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HKIAC’s status as Hong Kong’s foremost arbitration institution are HKIAC’s caseload and its functions. In 2014, HKIAC managed a total of 252 arbitration disputes.22 In comparison, although the ICC handled almost 800 disputes worldwide in 2014, only about 20 per cent of them were seated in Asia (which includes other popular seats like Singapore).23 CIETAC’s Hong Kong sub-commission only opened in 201224 and has not yet published any case statistics.25 Remarkably, under the HKAO, HKIAC performs functions that in other jurisdictions are reserved for courts.26 HKIAC has the power to decide on the number of arbitrators in case the parties have not reached an agreement in this regard27 and HKIAC is the appointment authority for arbitrators28 and for mediators29 where the parties cannot agree. The unique position of the HKIAC in Hong Kong can be explained historically. At the beginning of the 1980s, the Law Reform Commission of Hong Kong concluded that one of the impediments to Hong Kong’s reputation as a leading jurisdiction for arbitration was the lack of a central body that facilitated arbitrations and provided support services. In response, a group of leading business people and professionals founded the HKIAC and the Hong Kong Government initially provided funding for the Centre.30 HKIAC continues to make concerted efforts toward maintaining its leading position amongst global arbitral institutions by upholding its competence and independence. HKIAC’s governing body is the HKIAC Council, which is comprised of 28 leading figures of the Hong Kong and international arbitration community. Because these arbitrators are highly experienced and skilful,31 they contribute to the competence of the centre as a whole. HKIAC also maintains a panel of arbitrators that consists of senior arbitrators and a list of younger practitioners with a solid background in arbitration.32 The arbitrators from the panel and the list must adhere to the duties imposed on them by the parties and the law as well as to ethical duties. Otherwise, HKIAC can, on its own or upon a complaint by the parties, remove the arbitrator from the panel or list.33 As for HKIAC’s independence, while it has received significant financial support from the Hong Kong Government, it nevertheless is independent and free from any external influence.34 Regardless of the importance of arbitration institutions in Hong Kong, ad hoc arbitration is in comparison still very popular. For example, the 2014 case statistics of HKIAC

22 

See www.hkiac.org/en/hkiac/statistics. www.iccwbo.org/Products-and-Services/Arbitration-and-ADR/Arbitration/Introduction-to-ICCArbitration/Statistics/. 24  See www.cietachk.org/portal/mainPage.do?pagePath=\en_US\news. 25  See, for a general overview of CIETAC statistics until 2015, www.cietac.org/index.php?m=Page&a=index& id=40&l=en. 26  See, for example, Art 18(2) and Art 19, English Arbitration Act (1996); Art 5, US Federal Arbitration Act; Art 179 para 2, Swiss Private International Law. 27  s 23(3), HKAO. 28  s 24(2) and (3), HKAO. 29  s 32(1), HKAO. 30  Chiann Bao, ‘Hong Kong International Arbitration Centre and its Rules’ in Geoffrey Ma and Denis Brock (eds), Arbitration in Hong Kong—A Practical Guide, 3rd edn (Hong Kong, Sweet & Maxwell, 2014) para 7.001. 31  ibid, para 7.003. 32  ibid, para 7.015. 33  See www.hkiac.org/en/arbitration/arbitrators. 34  Bao (n 30) para 7.001. 23 See

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show that HKIAC only fully administered 44 per cent of arbitration cases; the remaining 56 per cent were ad hoc arbitrations supported by the HKIAC.35 In 2015, HKIAC only fully administered 43 per cent of arbitration cases.36 The popularity of ad hoc arbitration can be explained by the fact that the HKIAC established its first set of institutional rules in 2008 and thus for many years had only been assisting with ad hoc arbitrations, many of which were conducted under UNCITRAL Arbitration Rules.37 Apart from HKIAC’s efforts to maintain a pool of highly capable, independent and impartial arbitrators, Hong Kong in general follows an arbitrator system that is liberal but quality-conscious at the same time. In cases of non-Hong Kong residents acting as arbitrators in Hong Kong, a work visa is required, as this falls within the category of ‘enter[ing] for employment as professionals’.38 The earnings from conducting the arbitration will be taxable under Part 3 of the Inland Revenue Ordinance (Cap 112) (IRO).39 The HKAO enables anyone to act as arbitrator without imposing particular nationality or legal training requirements and also permits anyone to act as counsel in an arbitration even though he/she may not be qualified as a Hong Kong lawyer.40 However, an arbitrator must disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence.41 If there exist such circumstances or if the arbitrator does not possess the qualifications agreed to by the parties, the arbitrator can be challenged.42 Moreover, when making a default appointment of an arbitrator, HKIAC must assess the arbitrator’s qualifications and his or her independence and impartiality.43 Last, there are several organisations that provide training for arbitrators in Hong Kong including the HKIAC; Arbitration LLM Programmes at the University of Hong Kong and City University; the Hong Kong Institute of Arbitrators; and the Chartered Institute of Arbitrators (East Asia Branch), to enhance the skills of Hong Kong arbitrators.44

2.3.  Judicial Framework As case law in favour of arbitration is abundant in Hong Kong, its courts are generally viewed as having a pro-arbitration attitude.45 This can be seen by minimalist intervention on the part of the courts during the arbitration process.46 Likewise, the Hong Kong courts generally recognise and enforce arbitral awards.47

35 

See www.hkiac.org/about-us/statistics.

36 ibid. 37 

Choong and Moser (n 17) paras 4.23–4.25. See http://220.241.190.1/en/facilities-a-services/support-services/visa-applications. 39  See Pt 3, IRO. 40  See s 24(1), HKAO. 41  s 25(1), HKAO. 42  s 25(2), HKAO. 43  Rules 7(1)(b) and (d), Arbitration (Appointment of Arbitrators and Mediators and Decision on Number of Arbitrators) Rules (Cap 609C). 44  Sandborg (n 6) 158–60. 45  Timothy Hill and Mark Lin, ‘Role of the Court’ in Ma and Brock (n 30) paras 18.001–18.005; for a detailed discussion of case law confirming this statement, see s 3.2. 46  Kun Fan, ‘The New Arbitration Ordinance in Hong Kong’ (2012) 29 Journal of International Arbitration 720. 47  Caldwell (n 18) §3. 38 

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However, the general pro-enforcement attitude does not mean that awards are not subject to some degree of scrutiny during the recognition and enforcement process. This can be explained in the context of the four different categories of awards recognised under the HKAO. The first category of awards are awards made in a country that is a signatory to the New York Convention48 (convention awards).49 The enforcement regime for these awards under the HKAO is exactly as foreseen in the New York Convention. The grounds for refusal of enforcement of these awards adhere to grounds set out under the New York Convention,50 the procedure is efficient51 and the formal requirements for obtaining the enforcement are very limited.52 The second and third category are awards made in Mainland China (Mainland awards)53 and awards made in Macau (Macau awards).54 In principle, the enforcement of these awards works in the same way as with convention awards, because the grounds for refusal, recognition procedures and formal requirements are identical.55 Yet, due to the enforcement arrangements with Mainland China and Macao, a request for enforcement has to comply with additional procedural steps contained in these arrangements.56 The fourth category includes all remaining awards, including awards made in non-New York Convention countries as well as in Hong Kong (non-convention and Hong Kong awards).57 The first problem in connection with these awards is that the aforementioned pro-enforcement attitude only extends towards convention, Mainland China and Macau awards,58 but not necessarily towards non-convention awards.59 Furthermore, the HKAO provides that a Hong Kong court can refuse recognition of non-convention awards ‘for any other reason the court considers just to do so’.60 This provision vests the court with wide discretion to refuse the enforcement of an award.61 In the event of such non-enforcement, a party may also bring an action at common law to enforce an arbitral award by way of a writ followed by an application for summary judgment.62 By contrast, the grounds for refusing enforcement of convention, Mainland and Macau awards are limited and the court has little discretion to refuse enforcement.63

48 

However, this excludes Mainland China; see To and So (n 5) para 92.01. ss 87–91, HKAO. See s 89, HKAO and Art V, NYC. 51  See s 87(1), HKAO; Denis Brock and Laura Feldman, ‘Recognition and Enforcement of the Arbitral Award’ in Ma and Brock (n 30) para 19.027. 52  See s 88, HKAO. 53  ss 92–98, HKAO. 54  ss 98A–98D, HKAO. 55  See ss 87–91, 92–98 and 98A–98D, HKAO. 56  Brock and Feldman (n 51) paras 19.045–19.049 and para 19.063. 57  ss 82–86, HKAO. 58  Brock and Feldman (n 51) paras 19.028, 19.042 and 19.063. 59  ibid, para 19.037. 60  s 86(2)(c), HKAO. 61 John Choong and Romesh J Weeramantry, The Hong Kong Arbitration Ordinance: Commentary and ­Annotations 2nd edn (Hong Kong, Sweet & Maxwell, 2015) para 86.11. 62 See Xiamen Xingjingdi Group Ltd v Eton Properties Ltd [2008] 4 HKLRD 972 at paras 47 and 63, affirmed on appeal: [2009] 4 HKLRD 353; Re Petrochina International (Hong Kong) Corp Ltd [2011] 4 HKLRD 604. 63  Choong and Moser (n 17) para 4.393. 49  50 

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3. Reform 3.1.  Legislative and Regulatory Initiatives The Model Law served as an important template for the new HKAO updated in 2011. Evidence for this includes the many verbatim references to Model Law provisions in the HKAO64 as well as the statements of the Hong Kong Institute of Arbitrators and the Department of Justice confirming the significance and advantages of the Model Law for Hong Kong during the drafting process of the HKAO.65 However, it would be a fallacy to assume that the HKAO is a mere copy of the Model Law. Even though the HKAO made verbatim references to 34 Model Law provisions, the HKAO complements or modifies 14 of them. Two examples of modifications are illustrated below. While the Model Law provides for three arbitrators in case the parties cannot decide on the number of arbitrators,66 the HKAO leaves the determination of this number to HKIAC.67 This modification was already embodied in the old HKAO and the drafters of the new HKAO decided to retain this provision because they considered that a determination by HKIAC would lead to more flexible solutions rather than a fixed rule providing for three arbitrators.68 Another noticeable change of the Model Law is section 46(3)(b) of the HKAO, which provides that the parties need a ‘reasonable opportunity’ to present their case. The Model Law however states in Article 18(3)(b) that the parties shall have a ‘full opportunity’ to present their case. The reason for deviating from the Model Law by adopting a lower standard in the HKAO was that the drafters feared that unsuccessful parties may try to challenge a given award because that party did not have a ‘full’ opportunity to present its case. Notwithstanding this concern, some scholars have questioned the difference between these two standards in practice.69 Apart from making modifications or supplements of otherwise verbatim references to the Model Law, the HKAO has sometimes introduced provisions that cover the same ­subject matter as the Model Law, but do not make any reference to the Model Law. One such example is the aforementioned provisions for the enforcement of different categories of awards.70 In light of the fact that the grounds for refusal of enforcement of awards under the Model Law and the New York Convention are identical and that the New York

64 

See discussions above in s 2.1. Hong Kong Institute of Arbitrators, ‘Report of Committee on Hong Kong Arbitration Law’, 30 April 2003, available online: www.legco.gov.hk/yr08-09/english/bc/bc59/papers/bc590728cb2-2261-3-e.pdf; Department of Justice, ‘Consultation Paper: Reform of the Law of Arbitration in Hong Kong and Draft Arbitration Bill’, December 2007, available online: www.doj.gov.hk/eng/public/pdf/2007/arbitration.pdf. 66  Art 10 para 2, Model Law. 67  s 23(3), HKAO. 68  Choong and Weeramantry (n 61) paras 23.08–23.09. 69  See, for a detailed discussion, Choong and Moser (n 17) para 4.172; Choong and Weeramantry (n 61) para 46.16; for the Model Law provisions, Howard M Holtzmann, Joseph E Neuhaus, Edda Kristjánsdóttir and Thomas W Walsh, A Guide to the 2006 Amendments to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Alphen aan den Rijn, Kluwer Law International, 2015), 549–552. 70  See s 2.3. 65 

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­ onvention grounds for refusal are also applicable to Mainland and Macau awards, the C differences between the enforcement regime of the HKAO (excluding the enforcement arrangements) and the Model Law for convention, Mainland and Macao awards are less significant than they might appear at first glance. The HKAO in some instances will engage in gap-filing on issues for which the Model Law is silent as part of a broad approach to promote Hong Kong as a place for arbitration.71 For example, the HKAO places greater emphasis on confidentiality than the Model Law, as seen in section 16 of the HKAO. It provides that proceedings out of or in connection with a given arbitration are to be heard in closed-court proceedings unless one of several limited exceptions apply. Likewise, sections 17 and 18 of the HKAO restrict the reporting of court proceeding and the disclosure of information related to such proceedings.72 Another instance in which the HKAO elaborates on areas not addressed in the Model Law includes sections 32 and 33, in which the HKAO provides for the option of med-arb. While some have raised concerns over arbitrator independence given the dual role of acting as both a mediator and arbitrator,73 the HKAO tackles this issue by stating that an arbitrator may also act as mediator without affecting his or her independence if all parties give their consent in writing.74 The HKAO enables parties to avail themselves of med-arb without any concerns as to the validity of an award.

3.2.  Judicial Initiatives The pro-arbitration and pro-enforcement attitude of the Hong Kong courts has been among the key factors contributing to Hong Kong’s reputation as a favourable arbitration venue.75 The following sections provide some examples of this arbitration-friendly court practice. In order to maintain minimal intervention by the courts, the Court of Final Appeal (CFA) laid down a cautious approach in Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111, that all courts would closely scrutinise all public policy claims. But at the same time the CFA placed a high threshold of requiring the alleged infringement to be ‘contrary to the fundamental conceptions of morality and justice of Hong Kong’ (per Sir Anthony Mason at [139]). Even though the Court of First Instance (CFI) set aside part of an arbitral award on the basis of serious breach of due process in China Property Development (Holdings) Ltd v Mandecly Ltd [2015] HKCFI 493 (HCCT 53/2010), the CFI maintained a cautious approach and emphasised that the role of the court is to consider the structural integrity of the arbitration proceedings and not to address the substantive merits of the case or the correctness of the Award on matters of law or fact.

71  Lee Tin Yan, ‘Introductory Note to the New Arbitration Ordinance of the Hong Kong Special Administrative Region’ (2012) 51 International Legal Materials 134. 72  Gary B Born, International Commercial Arbitration 2nd edn (Alphen aan den Rijn, Kluwer Law International, 2014) 88–99. 73  Sun and Willems (n 14) paras 21.1 and 21.5. 74  s 33(1), HKAO. 75  Caldwell (n 18) §4.

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The Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2012] 4 HKLRD 569 case reaffirms the Court’s approach toward maintaining Hong Kong’s status as an arbitrationfriendly jurisdiction and illustrates the principle that arbitral awards should be set aside in only the rarest of circumstances, where the tribunal’s conduct has been egregious. The court held that in order to establish a breach, it must be shown that the tribunal’s conduct was of a ‘serious’ or even ‘egregious’ nature. In turn, it placed a heavy emphasis on the wide, discretionary case management powers of the arbitral tribunal, which are a cornerstone of international arbitration. This demonstrates that the Hong Kong courts will be slow to interfere with the procedural decisions of arbitral tribunals. The Court accepted in obiter that the Court has discretion not to set aside awards even where a breach is established, if it is satisfied that the result could not have been different. The Court also held that the burden is on the party wishing to set aside an award to show that it had been, or might have been, prejudiced by the conduct of the tribunal. This shows the strong support of the judiciary for arbitration. In Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627, the Court of Appeal stressed and reapplied the usual strict policy of only allowing the refusal of enforcement of arbitral awards in exceptional circumstances. Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi [2015] 2 HKLRD 866 exemplifies the support of Hong Kong courts in upholding anti-suit injunctions supporting the continuation of arbitral proceedings. In this particular case, the parties had concluded an agreement that provided for arbitration in Hong Kong for all disputes arising out of a shipping contract. After Kroman had initiated litigation in Turkey, Ever sought an anti-suit injunction in Hong Kong in order to make Kroman comply with its duty to arbitrate. The judge granted the injunction without reservation and justified it amongst other factors with the fact that Ever had sought the injunction without delay and that the litigation proceedings were not too far advanced.76 Likewise, support of arbitral proceedings can be found in the Hong Kong domestic context. In Schindler Lifts (Hong Kong) Ltd v Sui Chong Construction and Engineering Co Ltd [2014] HKDC 1348 (DCCJ 2784/2014), the parties had entered into a construction contract containing an arbitration clause. Schindler filed two separate actions against Sui Chong in a Hong Kong court and Sui Chong only responded to the first of the two.­ Schindler then sought a consolidation of the proceedings arguing inter alia that the arbitration agreement had been waived. Sui Chong on the other hand applied for a stay of both proceedings in favour of arbitration. The judge granted a mandatory stay for both proceedings and even indicated his willingness to grant a discretionary stay in case the requirements of a mandatory stay were not met.77 As for the recognition and enforcement of awards, Hong Kong courts have established 10 principles that serve as a liberal standard for enforcement decisions in Hong Kong. These principles are:78 1. The courts should facilitate the arbitral process and assist with the enforcement of arbitral awards. 76 

See especially para 39. Also see [2015] 1 HKLRD C1, especially paras 64–70. 78  For a complete list: KB v S [2016] 2 HKC 325; For some of the specific principles: P v S [2015] HKCFI 1457 (HCCT 39/2014); Pang Wai Hak v Hua Yunjian (transliteration) [2012] 4 HKLRD 113; Shandong Hongri 77 

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  2. The courts should interfere in the arbitration only as expressly provided for in the HKAO.   3. Subject to safeguards necessary in the public interest, the parties should be free to agree on how their dispute should be resolved.   4. Enforcement of arbitral awards should be ‘almost a matter of administrative procedure’ and the courts should be ‘as mechanistic as possible’.   5. The party resisting enforcement must show a real risk of prejudice and that its rights have been materially violated.   6. The conduct complained of ‘must be serious, even egregious’.   7. The court must not look into the merits of the case.   8. If a party fails to promptly object to a violation of its rights, the party might be prevented by considerations of estoppel and good faith from resisting enforcement.   9. Even if there are sufficient grounds to refuse enforcement of an arbitral award, the court has discretion and may still enforce the award. 10. The parties have a duty of good faith. It is not entirely clear whether these apply to all categories of awards since most of these principles have been established in connection with the enforcement of convention and Mainland awards. However, there is no compelling evidence that the courts would systematically exclude the application of these principles to non-convention and Hong Kong awards. In addition to the general enforcement practice outlined above, recent decisions have further strengthened Hong Kong’s image as an arbitration-friendly jurisdiction. One prominent example is the judgment of A v R [2009] 3 HKLRD 389. In A v R, the Hong Kong High Court was asked to decide on an application to resist enforcement. It dismissed the application and even awarded the successful party indemnity costs. In elucidating the reasons for dismissal, the judge stated that, ‘[a]pplications by a party to appeal against or set aside an award or for an Order refusing enforcement should be exceptional events.’79 While some authors criticised the decision for contradicting established principles for awarding indemnity costs,80 the decision nevertheless demonstrates Hong Kong’s arbitration-friendly approach. Later judgments have adopted the reasoning in that case.81

3.3.  Other Factors Several arbitration institutions co-exist in Hong Kong, given that there are no restrictions on the establishment of foreign arbitration institutions. A relatively recent entrant to the Hong Kong arbitration market is the ICC, whose Hong Kong secretariat was the second

Acron Chemicaljoint Stock Co Ltd v PetroChina International (Hong Kong) Corp Ltd [2011] 4 HKLRD 604; Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2013] HKCFA 13 (FAMV 18/2012); Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111. 79 

A v R, at para 68. David Kwok, ‘Pro-enforcement Bias by Hong Kong Courts. The Use of Indemnity Costs’ (2015) 32 Journal of International Arbitration 684–86. 81  See for example Pacific China Holdings Ltd v Grand Pacific Holdings Ltd (n 78). 80 

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secretariat established after its Paris headquarters.82 The HKAO does not provide any additional grounds for refusing the enforcement of an award rendered under the auspices of institutions other than the HKIAC. As several arbitration centres co-exist in Hong Kong, each is continually exploring ways to distinguish itself and thus attract a greater share of the arbitration market. For example, CIETAC recently amended its rules in order to accommodate the needs of parties that choose arbitration under the administration of CIETAC’s Hong Kong sub-commission.83 Apart from competition between arbitration service providers, other dispute resolution providers continually seek means of attracting a greater share of cases. Mediation as a form of alternative dispute resolution enjoys a sound reputation in Hong Kong. There are a number of established mediation service providers in Hong Kong including the Hong Kong Mediation Accreditation Association Limited (HKMAAL), the Hong Kong Mediation Centre and the Hong Kong Mediation Council. Furthermore, several arbitration institutions including the HKIAC also provide mediation services.84 In addition to internal aspirations for greater market share among various arbitration and mediation service providers in Hong Kong, the arbitration community in Hong Kong as a whole consistently seeks to distinguish itself against other regional arbitral institutions including those found in Singapore. Singapore has made considerable efforts in promoting itself as a key arbitration venue in Asia. A recent example is the establishment of the Singapore International Commercial Court, which is expected to further boost Singapore’s reputation as a dispute resolution hub.85 At the same time, arbitral institutions and trade bodies in Hong Kong continue to explore ways to expand Hong Kong’s reputation as a leading arbitration centre.

3.4.  What Drives Reform? This section sets out the key distinguishing features of arbitration reform and development discourse in Hong Kong.

3.4.1.  Legislative, Judicial and Institutional Elements 3.4.1.1.  Period 1: Colonial Era The development of arbitration in Hong Kong can be traced to the British colonial era. The first Arbitration Ordinance in Hong Kong was enacted in 1844, which gave the Governor a wide discretion to refer all civil actions and suits to arbitration.86 In 1855, the Civil Administration of Justice (Amendment) Ordinance 1855 (No. 6 of 1855) was enacted,

82 

Sandborg (n 6) 159. Katherine Jo, ‘CIETAC Raises its Game’ (2014) 20 China Law & Practice 2. See www.hkiac.org/en/mediation. 85  Pasha L Hsieh, ‘Liberalizing Trade in Legal Services under Asia-Pacific FTAs: The ASEAN Case’ (2015) 18 Journal of International Economic Law 168. 86 J Choong and JR Weeramantry, The Hong Kong Arbitration Ordinance: Commentary and Annotations (Hong Kong, Sweet & Maxwell, 2011) 3. 83  84 

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which recognised the importance of arbitration in Hong Kong for the first time.87 Later, in 1963, considered by many to be a milestone in the history of arbitration in Hong Kong, the Arbitration Ordinance (Cap 341) was enacted. This Act was largely a replica of the UK Arbitration Act 1950 and adopted a unitary arbitration law regime for both domestic and international arbitrations.88 In 1975, the Arbitration (Amendment) Ordinance (No 85 of 1975) was enacted to incorporate the New York Convention, which came into effect in 1977.89 This was because the UK ratified the New York Convention and declared that its application covered its ­colonies.90 In 1981, the Law Reform Commission of Hong Kong (LRCHK) released its ‘Report on Commercial Arbitration’.91 The report suggested that lack of arbitration facilities and a shortage of experienced arbitrators were the main reasons for the low arbitration usage rates in the region.92 For instance, the number of arbitrations taking in place in Hong Kong from 1978 to 1980 was less than 20 cases per year.93 The Arbitration (Amendment) Ordinance (No 10 of 1982) was enacted in the same year to reflect the recommendations made in the report, including judicial review of awards, determination of a preliminary point of review by the High Court, consolidation of arbitrations and dismissal of claims for want of prosecution.94 In 1985, the UNCITRAL adopted the Model Law. In order to better align itself with international arbitral standards, the LRCHK made a further recommendation of adopting the Model Law in Hong Kong in 1987.95 At the request of the Chief Justice and the Attorney General,96 the recommendation was implemented through the enactment of the Arbitration (Amendment) Ordinance (No 2 of 1989) with minor modifications and the amended ordinance took effect in 1990.97 The 1989 amendments created separate regimes for domestic and international arbitrations in Hong Kong. Domestic arbitrations were to be governed by the Arbitration Ordinance (Cap 341) largely based on the UK Arbitration Act of 1950. For international arbitrations, the Model Law was the main governing legislation, with provisions allowing parties to opt-in or out of the international regime and into the domestic regime, and vice versa. Such arrangement thus provided greater party autonomy. In 1996, arbitration law in Hong Kong underwent further changes in the light of the appointment of the Committee on Arbitration Law by the HKIAC (1996 HKIAC Committee), the Chief Justice and the Attorney General. The primary objective of the 1996 HKIAC Committee was to harmonise the procedures for domestic and international arbitrations under the Arbitration Ordinance amended in 1996, so that the full Model Law regime could

87  MJ Moser and TYW Cheng, Hong Kong Arbitration: A User’s Guide 2nd edn (Hong Kong, CCH Hong Kong, 2008) 49. 88  Stephen Mau, ‘The Legislative History of the New Hong Kong Arbitration Ordinance (Legislative C ­ omment)’ (2012) 28(6) Construction Law Journal 28 482–506. 89 ibid. 90 ibid. 91 ibid. 92  Choong and Weeramantry (n 86), 17. 93 ibid. 94  Stephen Mau, ‘The Proposed New Arbitration Law of Hong Kong’ (2010) 26(5) Construction Law Journal 379–96. 95  Mau (n 88). 96  n 92. 97  Mau (n 88).

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be applied to both domestic and international arbitrations.98 The Arbitration (Amendment) Ordinance (No 75 of 1996) was then enacted to introduce a number of important provisions to serve such purpose, including minimising court intervention in arbitration proceedings, granting greater party autonomy and vesting more express powers in arbitral tribunals.99 The Arbitration (Amendment) Ordinance (No 75 of 1996)100 empowered the HKIAC established earlier in 1985 as the default authority for appointing arbitrators in substitution of the High Court.101 3.4.1.2.  Period 2: 1997–2009 The 1997 handover of Hong Kong to the People’s Republic of China raised new arbitral issues including whether Hong Kong awards should be treated as ‘domestic’ awards in China given Hong Kong’s status as a Special Administrative Region of the PRC.102 It also appeared that the New York Convention would not apply to the reciprocal enforcement of Mainland China and Hong Kong awards,103 as illustrated in the case of Ng Fung Hong Ltd v ABC in 1998.104 In that case, it was held that an arbitral award made in the PRC was no longer enforceable in Hong Kong, either by means of the New York Convention or under the repealed Arbitration Ordinance. The decision sparked retaliation by the PRC People’s Courts, which refused to enforce arbitral awards rendered in Hong Kong.105 This issue was finally resolved when the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between Mainland and the Hong Kong Special Administrative Region was signed on 21 June 1999.106 Further reforms took place with the amendment and enactment of the Arbitration (Amendment) Ordinance (No 2 of 2000). The amendments sought to clarify the summary procedure for enforcement of certain awards, orders and directions made either in or outside Hong Kong.107 Under this reform, Hong Kong Courts had the power to summarily enforce awards published in other jurisdictions which were not covered by the New York Convention nor the Arrangement with the Mainland mentioned above. In 2003, the Hong Kong Institute of Arbitrators in cooperation with the HKIAC established the Committee on Hong Kong Arbitration Law (the 2003 Committee), which was supported by the Secretary for Justice.108 The main task of the 2003 Committee was largely to continue the work of the 1996 HKIAC Committee. The 2003 Committee made two ­general recommendations in its report, namely: (1) the adoption of the Model Law in both domestic and international arbitrations carried out in Hong Kong and (2) the inclusion of

98 

Moser and Cheng (n 87) 57. Mau (n 94). 100  Moser and Cheng (n 87) 51. 101 ibid. 102  MJ Moser and TYW Cheng, Hong Kong Arbitration: A User’s Guide 3rd edn (Hong Kong, CCH Hong Kong, 2014) 55. 103 ibid. 104  [1998] 1 HKLRD 155. 105  Moser and Cheng (n 102). 106  ibid, 56. 107 ibid. 108  Choong and Weeramantry (n 86) 18. 99 

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an express statement in the new arbitration ordinance that the Model Law shall have force of law in Hong Kong in all cases.109 In 2007, the Department of Justice (DoJ) released a consultation paper, with the support of the Legislative Council Panel on Administration of Justice and Legal Services. It also prepared a ‘consultation draft Arbitration Bill’ (Arbitration Bill 2007). The principal objectives of the bill were to provide closer adherence to the Model Law; to establish Hong Kong as a Model Law jurisdiction; and to reinforce Hong Kong as a leading regional centre for legal services and dispute resolution.110 The Arbitration Bill 2007 was later revised by the DoJ several times before it was enacted as the new Arbitration Ordinance (Cap 609). During this period, while the DoJ led most major arbitral reforms in Hong Kong, Hong Kong’s arbitration institutions began to take greater initiative in facilitating regional arbitration reforms, a step welcomed by the DoJ. 3.4.1.3.  Period 3: New Arbitration Ordinance (2010–Present) The new Arbitration Ordinance (Cap 609), which took effect on 1 June 2011, was viewed by many as a major advancement for Hong Kong’s arbitration law and practice. Under the new regime, the Model Law applies to both domestic and international arbitrations. Several benefits have been associated with this unitary arbitral system. First, parties can avoid uncertainty as to whether one or another regime should apply in a given ­arbitration case,111 Hong Kong’s attractiveness as an international arbitration venue has been enhanced, and judicial intervention has been minimised. Apart from the unification regime for domestic and international arbitrations, other important changes were introduced under the new Arbitration Ordinance (Cap 609) including the codification of the duty of confidentiality and the specification on the arbitral tribunals’ powers to grant interim measures and preliminary orders.112 Yet, it is important to note that the new Arbitration Ordinance only provides a g­ eneral legal framework for arbitrations conducted in Hong Kong. More detailed arbitration procedures are outlined in the HKIAC Administered Arbitration Rules, which prevail over the default provisions in the new Arbitration Ordinance.113 In order to continue to provide a more hospitable legal framework for arbitration practice in Hong Kong, further amendments were made to the new Arbitration Ordinance (Cap 609). In 2013, HKIAC adopted new Administrative Arbitration Rules (2013 Rules) in order to enhance efficiency and provide users with greater flexibility and autonomy. The aim of the updated Rules was to help Hong Kong better align itself with modern practices and strengthen its attractiveness as an international arbitration centre. Key changes are summarised below.

109 

ibid, 19.

110 ibid. 111 

ibid, 5. Moser and Cheng (n 102) 59. 113  Choong and Weeramantry (n 86) 8. 112 

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3.4.1.3.1. New Procedures for the Appointment of an Emergency Arbitrator for Urgent Interim Relief The HKIAC introduced an emergency arbitrator procedure, which can be found in Schedule 4 of the 2013 Rules. The procedure enables parties to seek emergency relief prior to the constitution of the arbitral tribunal.114 Clause 16 of Schedule 4 of the 2013 Rules states that any emergency decision shall have the same effect as an interim measure and shall be binding on the parties when rendered. Under Clause 19, any emergency decision will cease to have binding effect if (a) the emergency arbitrator or the arbitral tribunal so decides; (b) the arbitral tribunal renders a final award, unless it expressly decide otherwise; or (c) if the arbitral tribunal is not constituted within 90 days from the date of the emergency decision. For the timetable of the emergency arbitrator procedures, Clause 5 of Schedule 4 of the 2013 Rules states that the HKIAC shall appoint an emergency arbitrator within two days after receipt of both the application and the application deposit. 3.4.1.3.2.  Joinder of Additional Parties The power of the arbitral tribunal to issue joinders was introduced under the 2013 Rules. Rule 27.1 states that the arbitral tribunal has the power to allow an additional party to be joined to the arbitration provided that the additional party is bound by an arbitration agreement. Compared to the 2008 HKIAC Administrative Arbitration Rules which only permit an existing party to the arbitration to apply for the joining of a third party, Article 27.6 of the 2013 Rules provides that a third party wishing to be joined as an additional party to the arbitration can submit a request for joinder to the HKIAC. Article 27.11 of the 2013 Rules states that where an additional party is joined to the ­arbitration before the date on which the arbitral tribunal is confirmed, all parties to the arbitration are deemed to have waived their right to designate an arbitrator, and the HKIAC may revoke the appointment of any arbitrators already designated. The HKIAC shall have the power to appoint the arbitral tribunal in these circumstances. 3.4.1.3.3.  Consolidation of Arbitrations The 2013 Rules also provide for the consolidation of arbitrations with the aim of enhancing the speed and efficiency of the arbitration process. Article 28.1 of the 2013 Rules states that the HKIAC has the power to consolidate two or more arbitrations at the request of a party and after consulting with the parties and any confirmed arbitrators if (a) the parties agree to consolidate; or (b) all of the claims in the arbitrations are made under the same arbitration agreement; or (c) the claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are related to the same transaction or series of transactions, and the HKIAC finds the arbitration agreements to be compatible.

114  Schedule 4(1), ‘Hong Kong International Arbitration Centre 2013 Administered Arbitration Rules’, available online: www.hkiac.org/sites/default/files/ck_filebrowser/PDF/arbitration/2013_hkiac_rules.pdf.

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The Arbitration (Amendment) Bill 2015 was gazetted on 21 January 2015 with the aim of removing some legal uncertainties relating to the opt-in mechanism providing for domestic arbitration under Part 11 of the Ordinance. The amendments aim to clarify that parties opting for domestic arbitration are free to decide on the number of arbitrators, whilst retaining their right to seek the Court’s assistance on the matters set out in sections 2 to 7 of Schedule 2. The bill was introduced to the Legislative Council in February 2015 and was passed in July 2015.115 Hong Kong courts have long adopted a pro-arbitration approach as described above, which has significantly contributed to arbitral development in Hong Kong. Two important recent cases, Shanghai Fusheng Soya-Food Co Ltd v Pulmuone Holdings Co Ltd [2014] HKCFI 894 (HCCT 48/2012) and China International Fund Limited v Dennis Lau & Ng Chun Man Architects & Engineers (HK) Limited v Secretary for Justice [2015] 4 HKLRD 609, generally demonstrate Hong Kong’s pro-arbitration enforcement stance. In the Shanghai Fusheng case, the Court of First Instance declined to set aside an arbitral award rendered in Hong Kong and interpreted the public policy objection narrowly. The CFI noted that ‘contrary to public policy’ should be narrowly construed in the context of setting aside or refusing enforcement of an arbitral award under the Arbitration Ordinance (Cap 609) and the Model Law. ‘Public policy’ must not be seen as a catch-all provision to be used whenever convenient. It is limited in scope and is to be sparingly applied.116 Rather, it is in the interests of public policy to uphold an agreement made between parties to submit their dispute to arbitration, and to enforce an arbitral award which is binding on the parties and enforceable under and in accordance with international Conventions.117 Similarly, the China International Fund case118 demonstrates the Hong Kong court’s support for arbitration by affirming that the right to appeal in arbitration cases is limited. Once parties agree to arbitrate, they choose to submit their dispute to a final and binding process. The Court found that to hold otherwise would lead to lengthy proceedings and seriously undermine the philosophy of arbitration. Important exceptions to the generally pro-arbitration stance in Hong Kong were outlined most recently in the Court of Appeal’s consideration of the China Property Development (Holdings) Ltd v Mandecly Ltd [2016] HKCA 207 (CACV 92/2015) case. While the Court of Appeal upheld the CFI’s decision, it highlighted that ‘some irregularities may be so fundamental and the structural integrity of the arbitration proceeding is so seriously damaged that the Court will have no hesitation in setting aside the award.’119 This may signal that the Court will be scrutinising awards more carefully in the future to ensure due process is observed.

115  The Legislative Council of the Hong Kong SAR, ‘Paper for the House Committee meeting on 10 April 2015, Report of the Bills Committee on the Arbitration (Amendment) Bill 2015’, 8 April 2015, available online: www.legco.gov.hk/yr14-15/english/hc/papers/hc20150410cb4-717-e.pdf. 116  See para 14 of Shanghai Fusheng. 117 ibid. 118  See para 52 of China International Fund. 119  See para 8.21 of China Property Development v Mandecly.

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3.4.2.  Top-down versus Bottom-up Reform This section examines the nature of the arbitral reform process in Hong Kong, that is whether reforms are generally taken from a top-down approach such as through legislative reform, or if reforms arise through bottom-up initiatives on the part of arbitral institutions. From Section 3.4.1 above, it can be seen that most major arbitral reforms, such as the passage of the new Arbitration Ordinance (Cap 609) have been taken in the form of top-down legislation setting out the evolving framework for arbitration in Hong Kong. ­Nevertheless, such reforms have largely been initiated by members of Hong Kong’s business and financial community in order to maintain Hong Kong’s position as a leading global financial centre. Hong Kong arbitration institutions have begun to take a more active role in the development of arbitration in Hong Kong. For example, the HKIAC reviewed and revised its Administered Arbitration Rules in 2008 and 2013. The HKIAC also updated its Procedures for the Administration of International Arbitration in 2005 and 2015. It also conducted reviews for domestic arbitration in 1993, 2012 and 2014.

3.4.3.  Special Considerations This section examines the context within which arbitration reform has taken place in Hong Kong. This includes an analysis of its rule of law tradition and the important role of the judiciary. 3.4.3.1.  Strong Rule of Law Tradition Rule of law and judicial independence are deep-rooted in Hong Kong’s legal system. According to the World Economic Forum Global Competitiveness Report 2015–2016, Hong Kong is ranked number four in the category of ‘Judicial Independence’. Under the ‘One Country Two Systems’ policy, Hong Kong maintains a common law jurisdiction. 3.4.3.2.  Judiciary’s Pro-arbitration Approach and High Enforceability of Arbitral Awards As can be seen in Section 3.4.1 above, several cases demonstrate the willingness on the part of Hong Kong courts to support the integrity of arbitral awards and agreements. Moreover, as a signatory to the New York Convention and the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between Mainland and the Hong Kong Special Administrative Region, parties are well positioned to enforce arbitral awards rendered in Hong Kong before Chinese courts or within the over 140 Member States that have signed on to the New York Convention. According to the enforcement statistics published by the HKIAC, there were 26 arbitral award enforcement applications filed in Hong Kong courts in 2013, none of which were refused.120 It is possible that being a common law jurisdiction supports Hong Kong’s

120  HKIAC, ‘HKIAC—Enforcement of Awards in Hong Kong: 2013’, available online: www.hkiac.org/about-us/ statistics/enforcement-awards/enforcement-awards-hong-kong-2013.

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­ ro-arbitration practice since it has been observed that ‘a common law legal system means p that the law can evolve more quickly than statute-based law in order to adapt to current practices and behaviour as demanded in a modern society.’121 It is also possible that being a small jurisdiction means that courts are able to ‘assign arbitration cases to specialist judges, who are able to deal with cases efficiently.’122

4.  The Future The following section examines future prospects for arbitral reform in Hong Kong.

4.1.  Legislative, Judicial and Institutional Reform 4.1.1.  Third Party Funding for Arbitration The question of third party funding for arbitration is currently being examined in Hong Kong. Under such a funding scheme, a third party funder could pay a funded party’s legal and arbitration costs in return for a percentage of the arbitral award or any other financial benefits recoverable through the arbitration.123 In October 2015, the Third Party Funding for Arbitration Sub-committee of the LRCHK (hereafter Sub-­committee) published a consultation paper concerning third party funding for arbitrations in Hong Kong.124 The consultation period recently ended in January 2016. 4.1.1.1.  The Current Position of Third Party Funding in Hong Kong Under the common law doctrines of maintenance and champerty, third party funding of litigation is prohibited in Hong Kong. In March 2014, the Hong Kong government considered the issue of whether to abolish the common law offences of maintenance and champerty but decided that such offences should be preserved for the time being.125 Although the restrictions on third party funding within the context of litigation continue, the status of third party funding for arbitration is unclear as can be seen in the CFA’s decision of Unruh v Seeberger (2007) 10 HKCFAR 31.126 4.1.1.2.  Recommendations made by the Sub-committee The Sub-committee on third party funding has made a number of recommendations regarding the potential scope and application of third party funding for arbitration 121  See the Law Society of the England and Wales, ‘England and Wales: The jurisdiction of choice’, available online: www.eversheds.com/documents/LawSocietyEnglandAndWalesJurisdictionOfChoice.pdf. 122 ibid. 123 The Law Reform Commission of Hong Kong Third Party Funding for Arbitration Sub-committee, ‘Consultation Paper Third Party Funding for Arbitration’, October 2015, available online: www.hkreform.gov.hk/ en/docs/tpf_e.pdf, 9. 124 ibid. 125  Simon McConnell, ‘Hong Kong—Third Party Funding’, 16 November 2015, available online: www.conventuslaw.com/report/hong-kong-third-party-funding/. 126  Moser and Cheng (n 102), 4.

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proceedings. First, the Sub-committee concluded that the Arbitration Ordinance (Cap 609) should be amended to permit third party funding for arbitrations taking place in Hong Kong, subject to compliance by third party funders with appropriate ethical and financial standards. The Sub-committee has noted that such reform would be consistent with the principles laid out in Unruh v Seeberger, in which the CFA held that an arbitration agreement was legally valid and enforceable for an arbitration taking place in a jurisdiction where third party funding was permitted. The Sub-committee believes that such a reform will have several benefits. First, it will further enhance Hong Kong’s status as an international arbitration centre. Second, it will allow parties with a strong case but limited means an opportunity to pursue claims through arbitration.127 Third, it can help to offset some of the judicial burden associated with a growing number of commercial cases brought to the Hong Kong courts.128 However, such reform is not immune from risks. First, questions exist as to whether the third party funding of arbitration will promote unnecessary arbitration. Second, it is unclear the extent to which the third party funder will control the arbitration or share of proceeds.129 Third, a possibility exists that the funded party may breach the provisions of confidentiality if he or she has to disclose confidential information to the third party funder.130 Fourth, the opposing party’s arbitration strategy may be affected by the knowledge of the existence of the third party funding.131 Issues of conflicts of interests may also arise for counsel if the third party funder provides financial assistance to the same law firm, albeit for different clients. Arbitrators may face a similar problem of upholding impartiality if the same arbitrator is appointed for different arbitrations by several parties funded by the same funder.132 To address the aforementioned concerns about the potential abuse of third party funding for arbitrations, the second recommendation made by the Sub-committee is that ethical and financial safeguards should be developed in order to facilitate the reform on third party funding for arbitrations. The Sub-committee has invited the submissions to address the following related ethical issues:133 1. Whether the development and supervision of applicable ethical and financial standards should be undertaken by a newly-established or existing statutory or governmental body or a self-regulatory body. 2. How the applicable ethical or financial standards should address matters including capital adequacy, conflicts of interest, confidentiality and privilege, the extent of extraterritorial application, control of the arbitration by the third party funder, disclosure of third party funding to the Tribunal and other parties to the arbitration, grounds for termination of third party funding, complaint procedures and enforcement.

127 

ibid, 13. ibid, 112–13. 129  Freshfields Bruckhaus Deringer LLP, ‘Hong Kong Law Reform Commission issues Consultation Paper recommending that Third Party Funding be permitted for arbitrations’, 18 October 2015, available online: http:// knowledge.freshfields.com/en/global/r/1306/hong_kong_law_reform_commission_issues_consultation_paper. 130  Moser and Cheng (n 102) 125. 131  ibid, 126. 132 ibid. 133  ibid, 133–35. 128 

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3. Whether or not a third party funder should be directly liable for adverse costs orders in a matter it has funded; and if the answer is ‘yes’, how such liability could be imposed as a matter of Hong Kong law, and for the purposes of recognition and enforcement under the New York Convention. 4. Whether there is a need to amend the HKAO to provide for the Tribunal’s power to order third party funders to provide security for costs; and if the answer is ‘yes’, the basis for such power as a matter of Hong Kong law, and for the purposes of recognition and enforcement under the New York Convention.

4.1.2.  Expedited Arbitration The length of time for arbitral proceedings in Hong Kong can and does range from months to years depending on the arbitral rules adopted by the parties.134 Two measures are in place to expedite the arbitration process, namely, expedited arbitration and appointment of emergency arbitrator procedures. The aim of these measures is to increase the effectiveness of arbitration as the preferred means of dispute resolution.135 4.1.2.1.  Introduction of Expedited Arbitration The HKIAC’s revised Rules, which came into effect on 1 November 2013 (hereinafter HKIAC Rules), established expedited arbitration procedures. The rules state that parties may apply for their case to be heard under an expedited procedure where (i) the amount in dispute representing the aggregate of any claim and counterclaim does not exceed HKD 25,000,000 (about USD 3 million), (ii) both parties agree or (iii) in situations of exceptional urgency.136 The effect of a case being administered under an Expedited Procedure is provided for under Article 41.2 of the HKIAC Rules. Procedurally, the HKIAC Secretariat may shorten the time limits for the appointment of arbitrators, and the award is to be made within six months from the date that the HKIAC Secretariat transmits the file to the arbitral tribunal. Only one arbitrator is appointed, unless the arbitration agreement provides for three arbitrators. If so, the HKIAC will invite parties to agree to refer the case to a sole arbitrator. Notably, the Tribunal will decide the dispute on the basis of documentary evidence only unless it decides that it is necessary to hold one or more oral hearings.137 4.1.2.1.1.  Challenge 1: Flexibility of Eligibility of Expedited Arbitration Some have advised re-examining the level of flexibility afforded arbitral institutions in determining eligibility for expedited procedures. For example, the China International Economic and Trade Arbitration Commission Arbitration Rules (CIETAC) adopts a more

134 Glenn Haley, Arbitration Guide of the IBA Arbitration Committee (London, The International Bar Association, 2012) 2. 135  Chan Leng Sun and Tan Weiyi, ‘Making Arbitration Effective: Expedited Procedures, Emergency Arbitrators and Interim Relief ’ (2013) 6(2) Contemporary Asia Arbitration Journal 349–71. 136  HKIAC Rules, Rule 41.1. 137  ibid, Rule 41.2(e).

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flexible approach by imposing no quantum requirements for determining whether the Summary Procedure applies. Rather, a variety of factors may determine the application of the expedited procedures. For example, a case with a monetary value of the claim exceeding the threshold stipulated by the institution’s rules but involving issues that are fairly straightforward can be effectively resolved through the expedited procedure.138 4.1.2.1.2.  Challenge 2: Relatively Longer Proceedings The prescribed time for an award is six months, compared with three months adopted by CAA and CIETAC.139 While in general, six months can not necessarily be regarded as ‘lengthy’ given the amount of time required to seriously defend a case, nevertheless in comparison with other regional tribunals such as CAA and CIETAC, there may be scope to explore the further expedition of proceedings. 4.1.2.2.  Appointment of Emergency Arbitrators Procedures (EAP) The main objective of EAP is to cater to the need for urgent interim relief in circumstances where parties cannot wait for the constitution of an arbitral tribunal.140 Under the HKIAC Rules, parties can apply for emergency relief either at the time of filing a notice of arbitration or at any time following it. The HKIAC will appoint an emergency arbitrator within two days of receipt of the application, and decisions are to be made within 15 days of the emergency arbitrator’s appointment. 4.1.2.2.1.  Challenge 1: Long Processing Time The pre-arbitral procedure is not available in Hong Kong until the filing of a Notice of Arbitration. In contrast, ICC’s Emergency Arbitrator Procedure is available to any party immediately, even before a Request of Arbitration is filed, although the party must also file a Request for Arbitration within 10 days.141 In order to avoid this challenge, parties may file a short Notice of Arbitration along with the request for Emergency Arbitration. 4.1.2.2.2.  Challenge 2: Ex-parte Applications are not Permitted The 2006 amendments to Model Law provides that a party may make an ex-parte application for an interim measure where there is a risk that the opposing party will frustrate the purpose of the measure. However, the HKIAC Rules precludes ex-parte applications so that the emergency arbitrator can ensure that each party has a reasonable opportunity to be heard.142

4.2.  Enhancing Competitiveness, Independence and Professionalism Arbitrators in Hong Kong continue to refine and gain skills through continuing educational opportunities provided both by arbitration institutions and universities in the region.

138 

Chan and Tan (n 135) 358. ibid, 357. 140  ibid, 361. 141  ibid, 363. 142 ibid. 139 

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4.2.1.  Arbitration Institutions Continuing Professional Development (CPD) is required by HKIAC for arbitrators wishing to remain on its Panel or List. In order to maintain high quality arbitration expertise, those who are qualified for inclusion are required to maintain their knowledge and experience and keep up to date with developments in the law affecting arbitration. Various conferences and lectures on international arbitration are regularly held by different arbitration institutions, such as HKIAC and HKMAC.143 Mandatory CPD is useful in maintaining, deepening and extending the professional competence and technical knowledge of the arbitration profession. However, Hong Kong lacks short term executive level training for arbitrators, such as the Singapore International Arbitration Academy (SIAA).144 There are a number of arbitration institutions in Hong Kong dedicated to providing education and training for arbitrators in Hong Kong. Some examples are provided as follows: 1. The Hong Kong International Arbitration Centre established in 1985, is the default appointing authority for arbitration in Hong Kong.145 The HKIAC offers internship programmes through which students can learn more about arbitration in Hong Kong and obtain hands-on experience. The HKIAC Council also established ‘HK45’, which is a group of arbitration professionals who are under 45 years of age. One of its missions is to provide opportunities for professional development.146 For instance, HK45 holds HKIAC Arbitration Supper Clubs regularly, which entails informal dinner and discussion of arbitration related issues among leading arbitrators, lawyers and representatives of the HKIAC. HKIAC and HK45 also provide arbitration skills workshops, symposiums and seminars to promote knowledge exchange.147 2. Hong Kong Institute of Arbitrators (HKIArb) is a Hong Kong company limited by guarantee established in 1996. Its main objectives include providing training and developing appropriate standards of conduct for arbitrators in Hong Kong. It also works with other arbitration organisations in China and within the Asia region.148 Similar to the HKIAC, the HKIArb organises regular seminars and conferences to facilitate the discussion of arbitration trends among professionals. 3. Chartered Institute of Arbitrators (CIArb)—The East Asia Branch was founded in 1972. The East Asia Branch is committed to providing education and training in relation to arbitration, holding demonstration arbitrations and disseminating useful information.149 The CIArb has introduced a training pathway for individuals who

143  Hong Kong International Arbitration Centre, ‘Upcoming Events’, available online: www.hkiac.org/events/ upcoming; see also, Hong Kong Mediation and Arbitration Centre, ‘Corporate Training and Seminar’, available online: https://hkmaac.org/training/corporate.php. 144  Singapore Academy of Law, ‘Alternative Dispute Resolution’, 2015, available online: www.singaporelaw.sg/ sglaw/arbitration-adr/arbitration-adr-in-singapore. 145  Hong Kong International Arbitration Centre, ‘The Hong Kong Advantage—Arbitration’, available online: www.psdas.gov.hk/content/doc/2003-2-02/HKIAC_Booklet%20-%202003-2-02.pdf. 146  See www.hkiac.org/hk45. 147 ibid. 148  See the introduction of HKIArb at www.hkiarb.org.hk/en/introduction.php. 149  Haley (n 134).

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are interested in arbitration, where introductory courses are provided at an ‘Associate Level’, intermediate courses on domestic and international laws of obligations and civil evidence are provided at a ‘Member Level’ and advanced courses including peer interviews, award writing and procedure are provided at the ‘Fellow Level’.

4.2.2.  Local University Programmes Two local universities in Hong Kong have made substantial contributions to arbitration professional training. In 2007, the University of Hong Kong launched its cross-disciplinary Master of Laws programme (LLM) specialising in arbitration and dispute resolution. City University of Hong Kong also offers a similar LLM programme. These programmes have helped equip government officials, legal professionals, members of Hong Kong’s business and financial community, judges and judicial officers with the necessary knowledge, skills and expertise in the area of arbitration.

4.2.3.  International Conferences Hong Kong is a popular venue for hosting international arbitration conferences and events. Such forums provide a venue for arbitration professionals from multiple jurisdictions to share their views on the future development and promotion of arbitration services in the region. One example is Hong Kong Arbitration Week co-organised by the HKIAC, ICC and CIETAC. A wide range of topics are examined, including the use of med-arb in the resolution of cross-border disputes, the future of PRC Arbitration Law and Regulations, third party funding for arbitrations and cyber security in international arbitration.150 Another example is the International Congress of Maritime Arbitrations (ICMA) which is among the most important events for maritime arbitration. The Congress brings together maritime arbitrators, legal practitioners and shipping companies from around the world to exchange views.151

4.2.4.  Promotional Efforts The Department of Justice is tasked with promoting Hong Kong as a ‘Centre for International Legal and Dispute Resolution in the Asia Pacific Region’, which has been one of the new initiatives of the HK government’s policy address since 2014.152 The Advisory Committee on the Promotion of Arbitration was set up by the DoJ to further promote Hong Kong as a leading centre for international arbitration services in the Asia-Pacific region.153 The committee serves as a forum and think-tank for devising overall strategies for the promotion of arbitration services.

150  See Hong Kong Arbitration Week 2015. For the yearly Arbitration Week, see http://hkaweek.hkiac.org/en/ index.php. 151  See the International Congress of Maritime Arbitration, available online: www.icmaweb.com. 152  HKSAR Government, ‘Policy Address 2014’, 2014, 6, available online: www.policyaddress.gov.hk/2014/eng/ pdf/Agenda_Ch1.pdf. 153 HKSAR Government, ‘Government sets up Advisory Committee on Promotion of Arbitration’, 18 D ­ ecember 2014, available online: www.info.gov.hk/gia/general/201412/18/P201412180576.htm.

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Particularly, the DoJ has pursued a number of initiatives to facilitate the adoption of arbitration in Mainland-Hong Kong related transactions and deals. For example, CMAC’s Hong Kong Arbitration Centre is its first arbitration centre outside the Mainland. Being the key professional maritime arbitration institution in the Mainland, CMAC’s presence in Hong Kong further enhances Hong Kong’s role in the resolution of maritime disputes, thereby reinforcing Hong Kong’s position as a leading international arbitration centre in the Asia Pacific region.154 Furthermore, several agreements were entered into between the Hong Kong government and international Mainland organs, including the Co-operation Arrangement on Legal Services for Commercial Matters and Arbitration signed between the China Council for the Promotion of International Trade (CCPIT) and the DoJ (October 2010) and a host country agreement with the Central People’s Government and the Permanent Court of Arbitration on the conduct of PCA arbitrations (January 2015).155 In addition, overseas offices of the Hong Kong government have made efforts to promote Hong Kong as the suitable venue for international arbitration. For example, the Hong Kong Economic and Trade Office in New York collaborates with HKIAC and the New York International Arbitration Center to organise seminars in major hubs in the United States for promoting Hong Kong as Asia’s premier location for arbitration as well as ­HKIAC’s new rules.156 Even though the government has been proactive in promoting international arbitration in the past decade, the number of arbitration cases in the region has remained stable.157 The number of arbitrators increased rapidly with an average of 170 arbitration appointments by the HKIAC between 2011–2013.158 This indicates the need for greater efforts by the Hong Kong government to increase the demand for arbitration services in Hong Kong. Recently the DoJ has considered arbitration promotion strategies in Hong Kong along the following lines. 4.2.4.1.  Concentrated Promotion Efforts in Specific Industries Recently greater efforts are being exerted by the Hong Kong government on promoting the use of arbitration in specific industries. It has been recommended that more detailed and practical outreach efforts to cater to specific industries will be important. In the past three years, the DOJ has organised one promotional effort for the maritime industry which has a well-established presence in Hong Kong.159 Most promotion efforts are conducted abroad

154  Department of Justice, ‘2015 Policy Initiatives of the Department of Justice’, January 2015, 8–9, available online: www.doj.gov.hk/eng/public/pdf/2015/ajls0116e.pdf. 155  Department of Justice, ‘Mainland related projects and cooperative arrangements’, available online: www.doj. gov.hk/eng/topical/mainlandlaw.html. 156  Hong Kong Economic and Trade Office (New York), ‘Promoting Hong Kong’s Strengths as an International Dispute Resolution Center’, available online: www.hketony.gov.hk/ny/whatsnew/2014/idrcenter.htm. See also, Hong Kong Economic and Trade Office (New York), ‘Hong Kong’s arbitral strengths promoted in New York and Miami’, available online: www.hketony.gov.hk/ny/whatsnew/2014/hkaspnymia.htm. 157  HKIAC, ‘Case Statistics’, available online: www.hkiac.org/about-us/statistics. 158 ibid. 159  Department of Justice, ‘Speech by Mr Frank Poon, Solicitor General, in the 19th International Congress of Maritime Arbitrators Hong Kong’, 15 May 2015, available online: www.doj.gov.hk/eng/public/pdf/2015/ lo20150515e.pdf.

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and focus on general introductions of Hong Kong as an international hub for commercial arbitration.160 In recent years, the government has been working to promote Hong Kong as a maritime and intellectual property dispute resolution hub. It has also been promoting Hong Kong as a dispute resolution centre in relation to the Belt and Road Initiative implemented by mainland China. 4.2.4.2.  Improved Arbitration Infrastructure and Support Services Efforts to enhance the quality of arbitration services together with HKIAC and other non-governmental organisations are necessary. One area for improvement can be drawn from the experience of Singapore in the provision of IT infrastructure for arbitration. In 2000, the SIAC collaborated with the Singapore IT Dispute Resolution Advisory Committee (SITDRAC) under the Singaporean government on the selection of IT arbitrators, in anticipation of demand for such arbitrators to meet potential future IT disputes.161 Recent training efforts have been conducted by the Asian Domain Name Dispute Resolution Centre under the auspices of the HKIAC to continually improve the quality of IT and domain name dispute resolution service in Hong Kong.162

5. Conclusion Arbitration reform in Hong Kong may be described as a form of ‘localised globalism’ in its reception of the Model Law. Given the ‘flexible structure of the international arbitration system based on a Model Rule framework which allows countries to opt in or out of particular provisions, procedural variation can coexist with a relatively high level of substantive legal uniformity across regions.’163 Not all elements of the Model Law have been incorporated into the HKAO and some amendments have been made so as to tailor the law to the unique circumstances of Hong Kong. For example, the Model Law is intended to apply only to international commercial arbitration and has attached much importance in its definition of ‘commercial’ (which can be seen in the footnote to Article 1). However, the Law Reform Commission of Hong Kong decided to delete the term ‘commercial’, with the view that the term may limit the law’s scope by excluding certain transactions which would otherwise be considered commercial, like sale of the goods or services by a non-trading institution (eg a university).164

160  Department of Justice, ‘Speech by Mr Frank Poon, Solicitor General, in the seminar on “Hong Kong— An International Hub for Legal & Arbitration Services” in Yangon, Myanmar’, 29 August 2014, available online: www.doj.gov.hk/eng/public/pr/20140829_pr2.html. 161  Singapore International Arbitration Centre, ‘SIAC: Arbitration in the New Millennium’, 2000, available online: www.lawgazette.com.sg/2000-1/Jan00-23.htm. 162  See the website of the Asian Domain Name Dispute Resolution Centre at www.adndrc.org/mten/index.php. 163  See Shahla Ali, Resolving Disputes in the Asia Pacific Region: International Arbitration and Mediation in East Asia and the West (London, Routledge, 2011). 164  The Law Reform Commission of Hong Kong, The Adoption of the UNCITRAL Model Law in Hong Kong, para 4.12, available online: www.hkreform.gov.hk/en/docs/runcitral-e.pdf.

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The rising trend of dispute resolution cases shows an increasing willingness on the part of potential users to adopt arbitration, relative to other means of dispute resolutions, for example, 2013 records a 11 per cent increase in dispute resolution cases from 2012.165 Such a trend may be attributable to increasing awareness of the benefits of arbitration among potential users. However, if one looks at the number of arbitration cases in the past decade (see table 1), there has been a stagnant growth rate in the use of arbitration in Hong Kong. When comparing the statistics on arbitration cases with other arbitration jurisdictions in Asia, it can be seen that arbitration centres in Korea, Beijing and Singapore have experienced impressive growth rates. A possible explanation for Hong Kong’s declining numbers could be that, as a financial hub, Hong Kong industries experienced ripple effects from the financial crisis in multiple domains, including the arbitration sector, reflected in the decline in cases in 2012. Table 1:  Number of arbitration cases in various arbitral institutions Year

HKIAC

The Korean Commercial Arbitration Board

Beijing Arbitration Commission166

Singapore International Arbitration Centre

2002

320

47

891

38

2012

293

360

1,473

235

2013

260

337

1,627

259

Source: Data from HKIAC and the Asia Pacific Arbitration Review (2015).

In Hong Kong, judicial and institutional reforms have played complementary roles in the development of Hong Kong’s pro-arbitration approach. Through its line of judicial decisions, Hong Kong courts have articulated and safeguarded the distinct benefits of arbitration, such as the promotion of speed, reduction of costs and party autonomy. Ongoing reviews and amendments to the institutional arbitration rules have helped reduce rather than increase the judicialisation of the arbitration process in Hong Kong. HKIAC’s introduction of a provision concerning the consolidation of arbitrations in its 2013 Rules is an example of ongoing enhancements to further increase the speed and efficiency of arbitrations conducted in the region. The Hong Kong enforcement model has been praised as there is limited discretion by the court to refuse enforcement.167 A party could resist enforcement by relying on one of the exhaustive grounds under Article V of the New York Convention. However, the

165 

See n 157. It is important to note that BAC case numbers include both domestic and international cases. 167 Simon Greenberg, International Commercial Arbitration: An Asia-Pacific Perspective (Cambridge, Cambridge University Press, 2010) 9.134. 166 

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public policy application has proved to be difficult and uncertain, particularly in the case of enforcement of cross-border awards between Hong Kong and China. However, in recent years, increasing attempts have been made to resist enforcement on due process grounds.168 Some have commented that such a strict adherence to upholding arbitral awards or an attitude of minimal judicial intervention, attributable to the desire to support the primacy of arbitration, is taken too far.169 The high threshold set by Hong Kong courts (such as in the Keeneye case) have acted as a disincentive against frivolous claims on public policy grounds. Nonetheless, scholars have expressed concern that the bar has been set so high that parties subject to irregular awards with genuine issues of public policy are finding it difficult to avail themselves of the public policy exception to enforcement.170 Reasonable supervision by the Courts maintains the integrity of the arbitration process and in turn enhances the confidence of the commercial community.171 Regarding cross-border award enforcement, some have noted that Hong Kong standards are comparatively more relaxed than international standards.172 On the whole, arbitration reform has been conducted at a macro-level with the main objective of aligning regional law with the international standards. This has been seen most directly through the adoption of the Model Law in both domestic and international arbitrations.

168  See for example: Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627; Weixia Gu, ‘The Delicate Art of Med-Arb and its Future Institutionalization in China’ (2014) 31(2) Pacific Basin Law Journal 99, available online: http://escholarship.org/uc/item/5911549r. 169  Choong Yeow Choy and Warren P Ganesh, ‘Public Policy Considerations in Arbitral Proceedings in Selected Common Law Jurisdictions’ (2014) 44 Hong Kong Law Journal 179–206. 170  Gu Weixia and Xianchu Zhang, ‘The Keeneye Case: Rethinking the Content of Public Policy in Cross-Border Arbitration between Hong Kong and Mainland China’ (2012) 42 Hong Kong Law Journal 1012. 171  James J Spigelman, ‘International Commercial Litigation: An Asian Perspective’ (2007) 37 Hong Kong Law Journal 859–89. 172 Gu Weixia, ‘15 Years of the Handover: The Rise, Discontent, and Positive Interaction of Cross-Border Arbitration in Hong Kong with Mainland China’ (2013) 9(1) University of Pennsylvania East Asia Law Review 44, 51.

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3 Cautious Optimism for Arbitration Reform in Taiwan NIGEL NT LI, ANGELA Y LIN AND JEFFREY CF LI

1. Introduction The Chinese have a reputation for preferring out-of-court settlement of disputes,1 and, among the various alternatives to civil litigation, arbitration is one of the means for resolving civil and commercial disputes in Taiwan. This chapter will first introduce the legal system and arbitration history of Taiwan. Attention will then be drawn to current features of arbitration in Taiwan. More importantly, the Supreme Court has recently transformed the recognition and enforcement of judgments and arbitral awards made in the Mainland. It has developed a theory separating ji pan li from zhi xing li in China-related cases. Simply put, a judgment or arbitral award made in the Mainland will not give rise to res judicata (ji pan li) under the Supreme Court’s theory of separation. The Supreme Court had applied the same theory of separation to foreign arbitral awards. But, fortunately, the legislative body (the Legislative Yuan) recently passed an amendment to the Taiwanese Arbitration Act to recognise res judicata (ji pan li) and the enforceability of a foreign award. The downside of the Supreme Court’s opinion has therefore been cured by the legislature of Taiwan.

2. Background 2.1.  Legislative and Regulatory Framework Taiwan is a civil law country whose legal system is influenced by the laws of other civil law jurisdictions (such as Germany, Japan and France).2 1  See Nigel NT Li, ‘Dispute Resolution’ in Mitchell A Silk (ed), Taiwan Trade & Investment Law (Hong Kong, Oxford University Press, 1994) 645–84. 2  See, for example, Hungdah Chiu and Jyh-Pin Fa, ‘Taiwan’s Legal System And Legal Profession’ (1994) 5 Maryland Series in Contemporary Asian Studies 1 (‘Chinese law as implemented and practiced in Taiwan today … contains remnants of imperial Chinese law … while also borrowing heavily and adopting principles and concepts from civil law jurisdiction (such as Germany and Japan) as well as the United States’).

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The origin of contemporary arbitration is usually traced to two regulations under the name of kung duan (public determination), which were promulgated by the Chinese government in 1913.3 Kung duan was a process where a decision maker, typically a senior member of the local gentry or the head of a clan, heard statements from disputants and made a binding decision to resolve the dispute. The decision-maker need not invoke any official law to support his or her decision, nor did he or she rely on official law to ensure compliance by the parties. The decision-maker’s authority lay in his privileged status within the social hierarchy. The parties, when their dispute was referred to kung duan, were deemed to have implicitly pledged their obedience to the result of the process. Kung duan does not acquire its legitimacy from the consent of the parties. Kung duan was thus distinctive from western arbitration. The decision maker’s power of kung duan lay not in the historical fact that the parties made an agreement to bestow him with such power, but rather from his particular position within the social hierarchy. Kung duan resembled arbitration only in the sense that a private individual makes a binding decision to resolve a dispute, but kung duan was more a result of delegation to the local gentry or family senior of judicial authority by the state rather than an institutional design to promote party autonomy. Kung duan in imperial China was essentially a delegation of political authority. The local gentry or the head of a clan conducted kung duan in the family shrine, applying his power without the consent of the disputants. The subject matters of the disputes were often issues arising out of the failure of certain individuals to comply with a code of conduct commensurate with their personal status within the family. The Min Shih Kung Duan Jan Xing Tiao Li (A Provisional Statute for Arbitration of Civil Disputes) was promulgated in 1935, and it provides that all present and future civil matters to be settled by the parties could be resolved by arbitration.4 It was not until 1961 that a proto-typical arbitration regime akin to the Western concept of arbitration was formed. The 1961 Ordinance for Commercial Arbitration incorporated the fundamental principles of modern-day arbitration. At the time, as suggested by the title, arbitration belonged solely to the commercial world. The 1961 statute, however, failed to follow the growth of international commercial arbitration. As Taiwan’s economic and political environment continued to evolve during the 1970s and 1980s, there was a perceived need by the legislature to incorporate international standards into the domestic regime. The result was the 1982 amendment to the Statute for Commercial Arbitration. The 1982 amendment borrowed directly from the New York Convention to provide a legal basis for recognising and enforcing foreign arbitral awards, and the grounds for refusing to recognise a foreign award. The drafters, however, failed to remove those grounds already in the statute that were not permissible under the New York Convention. The next critical wave of Western impact came from the UNCITRAL Model Law, resulting in the Arbitration Act of 1998. It was then that the fundamental principle of party autonomy finally received a central place in the arbitration regime, and the Western concept

3  shang shih kung duan chu jang cheng (Charter of Business Arbitration Center) and shang shih kung duan chu ban shih see jer (Enforcement Rules of Business Arbitration Center). 4  Provisional Statute for Civil Arbitration, para 1.

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of arbitration took root in Taiwan. Although the Arbitration Act of 1998 was largely patterned after the Model Law, it was not a facsimile of it. For instance, the Arbitration Act classifies arbitration as either ‘foreign’ or ‘domestic’, like the New York Convention, while the Model Law sees arbitration as either ‘international’ or ‘domestic’. An arbitral award rendered outside Taiwan or rendered pursuant to foreign laws within Taiwan is defined as a ‘foreign arbitral award’ under the Arbitration Act.5

2.2.  Institutional Framework Institutional arbitration in Taiwan may be conducted by international arbitration centres such as the International Chamber of Commerce (ICC), or by local arbitration institutions such as the Chinese Arbitration Association, Taipei (the CAA).6 A local arbitration institution under the Arbitration Act should be approved by the competent authority and legally registered.7 Since its inception in 1955, the CAA has handled numerous cases, mostly construction, securities and international trade disputes. The CAA has promulgated its own ‘Enforcement Rules’ for arbitration. In a typical year, the CAA receives approximately 150 to 200 requests for arbitration. With its own permanent facilities and a full-time support staff, the CAA is capable of accommodating major international arbitration. The CAA plays a role akin to that of many arbitration centres, providing administrative support without interfering with the function of the arbitral tribunal. The CAA does not appoint arbitrators unless it is specifically authorised by the parties or required by the law to do so, and the appointment will be made by a Nomination Committee (consisting of Directors of the CAA and representatives from either academia or industry) to ensure impartiality. The CAA keeps a roster of arbitrators, but the parties to a CAA arbitration have the option of appointing someone not on the roster. Although there are no reliable statistics, ad hoc arbitration is considered rare in Taiwan, since the common perception of this type of arbitration is that the proceeding is relatively burdensome to the parties. According to the Arbitration Act, a person who possesses any of the following qualifications may be an arbitrator:8 1. One who has been a judge or public prosecutor. 2. One who has practised for more than five years as a lawyer, accountant, architect, engineer or in any other commerce-related profession. 3. One who has been an arbitrator of a domestic or foreign arbitration institution. 4. One who has taught as an assistant professor or a higher position in a domestic or foreign university or college certified or recognised by the Ministry of Education.

5 

See Art 47 of the Arbitration Act. known as the Commercial Arbitration Association of the Republic of China, the CAA is one of the local arbitration centres in Taiwan. Its current name was adopted in 1996, in response to the passage of the Arbitration Act, which allows arbitration of disputes that may be settled in accordance with the law. To provide the public with fast and affordable alternative dispute resolution services, the Association has established a mediation centre and a dispute review board. See the website of the CAA: www.arbitration.org.tw/caa01.php. 7  See Art 3(1) of the Rules on Arbitration Institutions, Mediation Procedures and Fees. 8  See Art 6 of the Arbitration Act. 6  Formerly

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5. One who has been a specialist in a particular field or profession and has practised for more than five years. An arbitrator must pass an arbitration institution’s examination and be registered with the institution.9 Foreigners are permitted to conduct arbitration in Taiwan, for which they are required to obtain a work visa. But in reality, most foreign arbitration practitioners work in Taiwan without a work visa. Foreign arbitrators in Taiwan are required to pay tax for the arbitrators’ fees that they receive, and the arbitration institution will deduct the tax payable from the arbitrators’ fees.

2.3.  Judicial Framework In Taiwan, there are three different courts with different jurisdiction: the civil court, the criminal court and the administrative court. The courts are divided into three levels and three instances, the district court, the court of appeals (High Court), and the Supreme Court, in ascending order. The Intellectual Property Court (IPC), established in July 2008, is dedicated to hearing intellectual property-related civil, criminal and administrative cases. Above the jurisdictional courts is the Constitutional Court, whose function is to interpret the Constitution and unify interpretation of laws and regulations. The Constitutional Court consists of 15 Grand Justices, and its interpretation has binding effect over the nation. Supreme Court rulings that are thought by the Supreme Court to have great value in the development of jurisprudence are selected as precedents. Further, the Supreme Court from time to time passes resolutions to resolve legal issues commonly seen in court cases. Precedents and resolutions have binding force upon lower courts, while other court judgments do not. An ad hoc arbitration award carries the risk of not being recognised and enforced by the Taiwanese courts. The Supreme Court in a 2014 case defined institutional arbitration as a proceeding in which the arbitral tribunal is constituted under an arbitration institution’s management and supervision, and in which the procedural rules of the arbitration institution are observed.10 On the other hand, the Court characterised ad hoc arbitration as a proceeding in which the arbitrators and their selection method were not agreed or in which natural persons were selected as arbitrators by the parties.11 Though the Court indicated that institutional and ad hoc arbitrations are recognised and the parties’ agreement to either proceeding was valid,12 the Court emphasised that if the parties select as the arbitrator an arbitration institution or group which is not registered and recognised in Taiwan, it should be deemed an arbitration agreement in which the arbitrator has not been selected, according to Paragraph 2, Article 5 [of the Arbitration Act]. This kind of arbitration is not institutional arbitration under the Arbitration Act.13

The Court further found the arbitral award produced through ad hoc arbitration would not constitute res judicata insofar as it was sought to confirm the same as a final court judgment. 9 

See Art 19 of the Rules on Arbitration Institutions, Mediation Procedures and Fees. Supreme Court Civil Decree 103 Tai-Kang-Tzi No 236 (2014). 11 ibid. 12  In Supreme Court Civil Decree 103 Tai-Kang-Tzi No 236 (2014), the disputed arbitration clause indicated that the parties chose UNCITRAL Rule as the arbitration procedural rule, and if the parties failed to select one arbitrator to resolve the dispute, the ICC should be resorted to. 13  See n 8. 10 

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The Supreme Court’s opinion was that if the parties chose an arbitration institution not registered in Taiwan, the arbitration would not be institutional. However, such definition of institutional is misleading and not consistent with the international trend. According to the prevailing international practice, ad hoc arbitration is arbitration that is not administered by an institution.14 In light of the classic definition of institutional arbitration, whether the institution is registered in or recognised by the local territory is irrelevant. Further, whether or not the parties agree to select an arbitration institution to appoint the arbitrator cannot be a determining factor. The Supreme Court seemed to be suggesting that though ad hoc and institutional arbitrations are valid under Taiwanese law, the former would not lead to res judicata and the enforcement of a non-institutional arbitral award may be barred by an objection suit raised by the opposing party.15 In fact, the Taiwanese High Court had already ruled that an ad hoc arbitration award should not be enforceable like a final and definitive court judgment.16 We may thus conclude that the Supreme Court was merely reiterating the courts’ position regarding recognition and enforceability of an ad hoc arbitration award. While the validity of an agreement on ad hoc arbitration is upheld in Taiwan, whether an arbitral award made by a foreign ad hoc arbitral tribunal will be recognised and enforced in Taiwan is still an unsettled issue. The foregoing may be contrasted with the position in relation to the recognition and enforcement of foreign judgments in Taiwan. A final and irrevocable foreign court judgment or decree can be recognised and enforced by a court judgment in Taiwan. Pursuant to Article 402 of Taiwan’s Code of Civil Procedure, a final and binding judgment rendered by a foreign court shall be recognised, unless one of the following circumstances applies: 1. The foreign court lacked jurisdiction pursuant to Taiwanese laws. 2. A default judgment was rendered against the defendant, except where the notice or summons for initiation of action had been legally served within a reasonable time in the foreign country or had been served through judicial assistance provided under Taiwanese law. 3. The content of the judgment or the litigation procedure are contrary to the public order or morality of Taiwan. 4. There exists no mutual recognition between the foreign country and Taiwan (ie, T ­ aiwanese judgments are not reciprocally recognised by the courts of the foreign country). Taiwanese courts would generally apply the principle of international comity in discerning whether reciprocal recognition exists.17 Existence of diplomatic ties is not an absolute factor when determining reciprocal recognition.18

14  See, for example, Gary Born, International Arbitration: Law and Practice (Wolters Kluwer Law I­ nternational, 2012) para 27-9; Margaret L Moses, The Principles and Practice of International Commercial Arbitration ­(Cambridge, Cambridge University Press, 2008) 9–10. 15  Under Art 14 of the Taiwanese Compulsory Execution Law, before the close of compulsory execution process, the party may bring an objection suit based on a substantive ground to the execution court. 16  See, for example, Taiwan High Court Civil Decree 99 Fei-Kang-Tzi No 122 (2010). 17 See, for example, Supreme Court Judgments 93 Tai-Shang-Tzi No 1943 (2004) and 100 Tai-Shang-Tzi No 2029 (2011). 18  See, for example, Taiwan High Court Civil Judgment 95 Shan-Gong-(1)-Tzi No 36 (2006).

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3. Reform 3.1.  Legislative and Regulatory Initiatives In 1998 the Taiwanese Arbitration Act was passed by the legislature, replacing its 1961 predecessor.19 Many provisions in the 1998 Arbitration Act were influenced by the Model Law.20 The drafters of the 1998 Arbitration Act proposed to bring Taiwan’s arbitration regime in line with international standards. The features of the 1998 Arbitration Act that bear the imprint of the Model Law are as follows: 1. The validity of an arbitration agreement will not be affected by the validity of the other terms of the contract. 2. The parties may agree on the place of arbitration, the arbitration procedure and the language used in the arbitration procedure. 3. The arbitral tribunal may rule on its own jurisdiction. A plea that the arbitral tribunal does not have jurisdiction should be made before making substantive representations on the dispute of the subject matter covered by the arbitral agreement. 4. The restrictions on recognition of foreign arbitral awards are relaxed.

3.2.  Judicial Initiatives The Taiwanese courts have been cautious when asked to set aside an arbitral award made in Taiwan. According to the Judicial Yuan’s statistics, only two out of 26 domestic awards were annulled by the district courts in 2014.21 The cardinal principle is that the court will not revisit the merits of a dispute and will confine its review to whether there is any statutory ground for setting aside the award.22 According to a 1992 Supreme Court judgment, an award will not be set aside even though the tribunal misapplied the law.23 In a 1984 case where the plaintiff of an annulment action challenged an award for not stating the reasons

19  ROC Arbitration Law, effective as of 24 December 1998. A few provisions of the Arbitration Law were amended in July 2002. 20 See generally Hong-lin Yu, ‘The Taiwanese Arbitration Act 1998’ (1998) 15(4) Journal of International Arbitration 107–25; Catherine Li, ‘The New Arbitration Act of Taiwan—Up to an International Level?’ (1999) 16(3) Journal of International Arbitration 127–38; CV Chen, ‘Party Autonomy and the New Arbitration Act of Taiwan, the Republic of China’ (2002) 1 CAA Arbitration Journal 1–36; and David W Su, ‘International Commercial Arbitration and the ROC Arbitration Act’ (2002) 1 CAA Arbitration Journal 103–12. 21  Among these two district court judgments, one was later confirmed by the Supreme Court; while the other one was reversed by the High Court, and is currently appealing to the Supreme Court. See the Judicial Yuan’s Year Statistics: www.judicial.gov.tw/juds/goa/goa02.htm. 22 See, for example, Shih-Lin District Court Judgment 83 Jung-Su-Tzi No 1 (1994), and Supreme Court Judgment 99 Tai-Shang-Tzi No 1007 (2010). 23  Supreme Court Judgment 81 Tai-Shang-Tzi No 2196 (1992), Taiwan High Court Judgment 86 Jung-ShangTzi No 400 (1997), and Supreme Court Judgment 93 Tai-Shang-Tzi No 1690 (2004).

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for the award, the Supreme Court rejected the challenge by suggesting that so long as there was any reason stated in the award, this requirement of reasons will be deemed to be fulfilled, regardless of whether the reasons are adequate or even consistent with one another.24 This prudent approach suggests that the courts do not unduly interfere with arbitration conducted in Taiwan. The Constitutional Court of the Judicial Yuan declared in Interpretation No 591: In order to promote the development of the arbitration system, the State should render necessary assistance and supervision … Under the UNCITRAL Model Law on International Commercial Arbitration as adopted and recommended by the United Nations in 1985, when it is a matter of the recourse to a court for setting aside an arbitral award, except where ‘the award is in conflict with the public policy of a State’ and thus concerns a substantive matter, all other grounds are considered material procedural defects … The foregoing provisions are intended to preserve the autonomy and independence of the arbitration system and to facilitate swift resolution of disputes, making it hard for the judiciary to conduct a general review of the substantive issues of an arbitral award.25

The Supreme Court also pointed out that the disputants should not appeal their cases to the courts or have the courts retry their cases, meaning the courts should not review the substantive issues determined by the arbitral awards.26

3.3.  Other Factors In addition to the CAA, there are four other arbitration institutions: the Taiwan Construction Arbitration Association (TCAA),27 the Chinese Estate Arbitration Association (CEAA),28 the Chinese Construction Industry Arbitration Association (CCIAA),29 and the Chinese Real Estate Arbitration Association (CREAA).30 Each arbitral institution operates independently and engages in healthy competition with one another. Unlike the CAA, which handles all kinds of arbitration cases, the TCAA and the CCIAA specialise in construction disputes, while the CEAA and the CREAA handle real property disputes. An arbitral award made in Taiwan while under the administration of a foreign arbitration institution will be considered a foreign award under the Arbitration Act, since such award may be an award made in the territory of the ROC in accordance with the laws of a foreign country.31

24 Supreme Court Judgment 73 Tai-Shang-Tzi No 61 (1984), Supreme Court Judgment 97 Tai-Shang-Tzi No 2477 (2008), and Supreme Court Judgment 99 Tai-Shang-Tzi No 1788 (2010). 25  See the official website of the Constitutional Court of the Judicial Yuan, Interpretation No 591: www.judicial. gov.tw/constitutionalcourt/EN/p03_01.asp?expno=591. Emphasis added. 26  See, eg, Supreme Court Judgment 100 Tai-Shang-Tzi No 671 (2011) and Supreme Court Judgment 102 Tai-Shang-Tzi No 683 (2013). 27  The official website of the TCAA is: www.tcaa.org.tw. 28  The official website of the CEAA is: www.creaa-wks.org.tw/homeweb/index.php. 29  The official website of the CCIAA is: www.cciaa.org.tw/Default.aspx. 30  The official website of the CREAA is: www.creaa-wks.org.tw/homeweb/index.php. 31  Art 47 of the Arbitration Act.

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3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements 3.4.1.1.  A Real Efficient and Time-saving Arbitration Process Under the 1998 Arbitration Act, unless agreed otherwise by the parties, arbitration proceedings must conclude and an award be made within six months of the formation of the arbitral tribunal, subject to an optional extension of three months by the tribunal.32 The legislative intent of Article 21 is to make arbitration an efficient and speedy process.33 The tribunal’s failure to observe this deadline will not jeopardise the legality of the ultimate award. But a party is permitted to forego arbitration and commence or resume litigation after the deadline, and the arbitration will be deemed terminated once either party commences or resumes litigation.34 It may therefore be fair to conclude that arbitration in Taiwan, as compared with regional arbitration in other jurisdictions, is a more efficient and time-saving process, which fulfils parties’ expectations of a swift resolution mechanism. 3.4.1.2.  Less Costly The considerable cost of modern arbitration has drawn criticism from commentators.35 The ICC is commonly recognised as a comparatively more expensive arbitration centre among the world’s arbitration institutions.36 Arbitration institutions in Taiwan like the CAA charge a fee which covers both the arbitrators’ remuneration and their own administrative work. The fee scheme is regulated by the government and based on an ad valorem system, calculated in accordance with a sliding scale based on the amount in dispute. The scale starts from a fixed sum of 3,000 New Taiwan Dollars (approximately US$ 88 at the current rate of exchange) when the amount in dispute is under 60,000 New Taiwan Dollars (approximately US$ 1,765 at the current rate of exchange) to 0.5 per cent of any amount exceeding 9,600,000 New Taiwan Dollars (approximately US$ 282,353 at the current rate of exchange).37 40 to 60 per cent of the fee will be paid to the arbitrators as their compensation, regardless of how much time they spend in performing their duties. In addition, the institution’s ‘out-of-pocket’ expenses will be reimbursed by the parties. The claimant must pay the arbitration fee, along with a modest deposit for administrative expenses, when filing its Request for Arbitration. All the foregoing fees should be borne by the losing party, and the tribunal will make a ruling on

32  Art 21 of the Arbitration Act states the ‘arbitral tribunal shall render an arbitral award within six months of commencement of the arbitration,’ and ‘the arbitral tribunal may extend this period by an additional three months if the circumstances so require.’ 33  See Ministry of Justice Letter Fa-Lu-Juei-Tzi No 0930017621(2004). 34  See Art 21(3) of the Arbitration Act. 35  See, for example, Jennifer Brown, ‘New ICC rules of arbitration aim to cut costs and time’, Legal Feeds, 23 September 2013, available online: www.canadianlawyermag.com/legalfeeds/467/new-icc-rules-of-arbitrationaim-to-cut-costs-and-time.html. 36  See Louis Flannery and Benjamin Garel, ‘Arbitration costs compared: the sequel’, Global Arbitration Review, 15 January 2013, 4 (‘This explains why the ICC is amongst the more expensive institutions.’), available online: www.noexperiencenecessarybook.com/VxpX9/arbitration-costs-compared-the-sequel-international-arbitration. html. 37  See, for example, Arts 25 and 28 of the Rules on Arbitration Institutions, Mediation Procedures and Fees.

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how the arbitration fee should be borne in the final award. Unless specifically agreed by the parties, it is not common practice for arbitral tribunals in Taiwan to award attorney’s fees to the winning party. Generally speaking, CAA arbitration is much less expensive than ICC arbitration. To enhance the quality of arbitration, when an arbitration proceeding is concluded, the CAA asks the parties and counsels to complete a questionnaire to evaluate the expertise, impartiality and professionalism of the arbitrators.38 3.4.1.3.  The Concepts of ji pan li and zhi xing li The concept of ji pan li is similar to the principle of res judicata.39 In common law, res judicata is defined as ‘a final judgment on the merits of an action precluding the parties … from re-litigating issues that were or could have been raised in that action.’40 In Taiwan, the basis of ji pan li can be found in Article 400 of the Taiwanese Code of Civil Procedure, which reads: ‘Except as otherwise provided, res judicata exists as to a claim adjudicated in a final judgment with binding effect.’ Also, Paragraph 1, Article 37 of the 1998 Arbitration Act reads: ‘The award shall, insofar as relevant, be binding on the parties and have the same force as a final judgment of a court.’ A domestic court judgment and a domestic arbitral award thus have binding force on the parties. On the other hand, zhi xing li means enforceability. It is generally considered that a ­definitive and final judgment is enforceable.41 Since a domestic arbitral award has the same binding force as a domestic court judgment, it can be enforced in Taiwan.42 3.4.1.4. The Supreme Court’s Theory of Separating ji pan li from zhi xing li in China-related Cases The Act Governing Relations between the People of the Taiwan Area and the Mainland Area (AGR) applies to the enforcement of court judgments made in the Mainland. Article 74 of the AGR reads: To the extent that an irrevocable civil ruling or judgment, or arbitral award rendered in the Mainland Area is not contrary to the public order or morality of the Taiwan Area, an application may be filed with a court for a ruling to recognize it. Where any ruling or judgment, or award recognised by a court’s ruling as referred to in the preceding paragraph requires performance, it may serve as a writ of execution. The preceding two paragraphs shall be applicable only when the civil ruling or judgment, or arbitral award rendered in the Taiwan Area is eligible for a ruling from a court of the Mainland Area to recognize it, or when it may serve as a writ of execution in the Mainland Area.

It can be deduced from this article that a final and definitive judgment rendered in the Mainland Chinese area will have both res judicata (ji pan li) and enforceability (zhi xing li) if the judgment is not in violation of the public order or morality of Taiwan.

38 

See the CAA’s official website: www.arbitration.org.tw/caa02.php. Tiffany Hung and Amber Hsu, ‘Taiwan’ in Baker and McKenzie (eds), The Baker & McKenzie International Arbitration Yearbook 2014-2015 (New York, Juris, 2014) 325. 40  Allen v McCurry 449 US 90 (1980). 41  Supreme Court Precedent 22 Kan-Tzi No 598 (1933). Art 4(1)(1) of the Compulsory Execution Law also provides a final and definitive judgment is a ground for enforcement. 42  See Art 4(1)(6) of the Taiwanese Compulsory Execution Law. 39  See

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However, in a 2007 case, the Supreme Court rendered a judgment distinguishing zhi xing li and ji pan li in respect of Mainland judgments.43 In that case, an international delivery company (the appellant) delivered the goods of a Chinese export company (the respondent) to Iraq according to the delivery contract. After the delivery, the appellant was accused of violating the contract, and the respondent sued the appellant in Shanghai. After winning the case in Shanghai courts, the respondent sought judgment enforcement from a Taiwanese court. The appellant countered that there was no violation of contract, and the respondent was abusing Article 74 of the AGR. The Supreme Court found that Article 74 of the AGR merely provides that Mainland judgments can be enforced. The Article does not specify (in contrast to Paragraph 1, Article 37 of the 1998 Arbitration Act)44 that Mainland judgments shall have the same binding effect as judgments rendered in Taiwan. Further, the Supreme Court opined that Mainland judgments are not like those made in foreign countries, Hong Kong or Macau, which would automatically be recognised without the Taiwanese court’s approval. The Supreme Court thus concluded that Mainland judgments, after approval by a Taiwanese court, would only be enforceable (zhi xing li) without being res judicata (ji pan li). The judgment leads to the result that the appellant could lodge a debtor objection suit in the Taiwan court to challenge the Mainland judgment.45 Though many commentators disagreed with the opinion in Supreme Court Judgment 96 Tai-Shang-Tzi No 2531 (2007),46 the courts subsequently subscribed to the Supreme Court’s theory of separating ji pan li from zhi xing li in Mainland judgment recognition cases.47 Under Article 74 of the AGR, a Mainland arbitral award is treated as a Mainland judgment. Therefore, given that the Supreme Court has interpreted Article 74 to mean a Mainland judgment is without res judicata, one can anticipate that a Mainland arbitral award will receive the same treatment from the Taiwan courts. In 2015, the Supreme Court, for the first time after Judgment 96 Tai-Shang-Tzi No 2531 (2007), had a chance to deal with the recognition and enforcement of a Mainland arbitral award. The respondent was a Shenzhen law firm. After it obtained a favourable arbitral award from the South China International Economic and Trade Arbitration Commission (SCIETAC) in a case regarding the payment of legal fees by a Taiwanese company, it sought to enforce the arbitral award in Taiwan. The appellant Taiwanese company lodged an objection suit. It argued that the arbitral award did not have res judicata and many clauses in the contract between the parties violated the public order of Taiwan. The Supreme Court, repeating its logic in interpreting Article 74 of the AGR, opined that AGR was unlike the Laws and Regulations Regarding Hong Kong and Macao Affairs (LRR), under which the binding force of an arbitral award made in Hong Kong or Macau is subject to the rules in the 1998 Arbitration Act.48 The Supreme Court concluded that the AGR was intended to distinguish a Mainland arbitral award from awards made in other countries in light of the

43 

Supreme Court Judgment 96 Tai-Shang-Tzi No 2531 (2007). See also Art 42 of the Laws and Regulations Regarding Hong Kong and Macao Affairs. n 13. 46  See, for example, Chang Wen-Yu, ‘The Recognition of Mainland Area’s Judgments: A Comment on the Supreme Court Judgments 96 Tai-Shang-Zi No 2531 (2007) and 97 Tai-Shang-Zi No 236 (2008)’ (2010) 178 The Taiwan Law Review 246–57; Hung Guo-Chan, ‘A Beautiful Mistake: Whether the Judgment Made in Mainland Area has Res Judicata? To Opine the Supreme Court Judgments 96 Tai-Shang-Zi No 2531 (2007)’ (2009) 167 The Taiwan Law Review 186–203. 47  See, for example, Supreme Court Judgment 97 Tai-Shang-Tzi No 236 (2008). 48  Supreme Court Judgment 104 Tai-Shang-Tzi No 33 (2015). 44  45 

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special relationship between the Mainland and Taiwan areas. The Supreme Court consequently only accorded enforceability to the Mainland arbitral award.49 On Supreme Court Judgment 104 Tai-Shang-Tzi No 33 (2015), one commentator observed: The result for the foreseeable future is that when faced with the increasingly common situation of a potential dispute with Taiwanese business partners in China whose assets are in Taiwan, practitioners should choose dispute resolution in an appropriate third jurisdiction or possibly in Taiwan itself if there is any possibility that the judgment or arbitral award must be enforced [in Taiwan].50

The structural approach applied by Supreme Court Judgment in 104 Tai-Shang-Tzi No 33 (2015) and Supreme Court Judgment 96 Tai-Shang-Tzi No 2531 (2007) is consistent. In both cases, the Supreme Court compared Article 74 of the AGR with Article 42 of the LRR. Article 42 of the LRR reads: (1) In determining the conditions for the validity, jurisdiction, and enforceability of civil judgments made in Hong Kong or Macau, Article 402 of the Code of Civil Procedure and Paragraph 1, Article 4 of the Compulsory Execution Law shall apply mutatis mutandis. (2) Article 30 through Article 34 of the Commercial Arbitration Act shall apply to the validity, petition for court recognition, and suspension of execution proceedings in cases involving civil arbitral awards made in Hong Kong or Macau.

The LRR explicitly specifies that the articles bestowing res judicata and enforceability on domestic court judgments and foreign arbitral awards under the Code of Civil Procedure and Arbitration Act can be applied to judgments and arbitral awards from Hong Kong and Macau. Since the Supreme Court found that the AGR lacks provisions similar to the LRR, the legislative intent must have been to limit the effect of a Mainland judgment or arbitral award.51 This interpretation of the Supreme Court shows clearly that a judgment or arbitral award made in Hong Kong or Macau is different from one made in the Mainland. We can call the theory applied by the Supreme Court to distinguish between ji pan li and zhi xing li in Mainland-related cases the theory of separation.

3.4.2.  Top-down versus Bottom-up Reform CAA has played an important role for proposing amendments to the Arbitration Act. The 1998 Arbitration Act was originated from the efforts by CAA, and CAA also formed a group to propose amendments to the Arbitration Act in 2012. It may therefore fairly conclude that the reform force of arbitration law in Taiwan comes from the arbitration professionals, rather than the government.

3.4.3.  Special Considerations Taiwan is a civil law country where statutory law weighs more than case law. Taiwanese courts make decisions in accordance with the statutes and stare decisis is not observed. Since 49 ibid.

50  Chen Hui-ling, ‘Enforcement of Chinese judgments and arbitral awards in Taiwan: the res judicata problem’, Winkler Partners, 6 June 2015, available online: www.winklerpartners.com/?p=6218. 51  Though in theory a judgment or arbitral award made in the Mainland is still enforceable under the AGR even though there is no res judicata, in practice a defendant can object based on substantive arguments under Taiwanese law if the right holder seeks enforcement of a final confirmed court judgment or arbitral award. In the end, the effect of recognising the enforceability of a court judgment or arbitral award made in the mainland area will be severely diminished.

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some of the courts interpret statutes literally, their decisions may deviate from the general principles or practices followed in common law jurisdictions. Although litigation is still the most popular means of dispute resolution in Taiwan, alternative dispute resolution (ADR) mechanisms such as negotiation, mediation and arbitration have gained currency in recent years. The judiciary and legislature have encouraged ADR in place of litigation. For example, Article 403 of the Code of Civil Procedure was amended in 1999 and 2007 to direct more cases to mandatory mediation. Many construction contracts and government procurement contracts now contain an arbitration agreement to allow the parties to resolve disputes through arbitration.

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform As explained above, the 1998 Arbitration Act does not classify arbitration as ‘international’ or ‘domestic’ as the UNCITRAL Model Law does. It classifies arbitration as ‘foreign’ or ‘domestic’, like the New York Convention.52 The Arbitration Act’s definition of a foreign award has spurred debate. The point of contention is ‘an award made in the territory of the ROC in accordance with the laws of a foreign country.’ ‘Laws’ in that definition could refer either to the substantive law applied by the tribunal to make the award or the procedural rules governing the arbitration proceedings.53 The first interpretation appears to be at odds with the international practice of determining the situs of an international arbitration case without regard to the substantive law applied by the tribunal. The second interpretation is also problematic, since most procedural rules of arbitration are promulgated by private institutions, such as the ICC or UNCITRAL, rather than by sovereign states, and it is not clear whether an ICC award made in Taiwan or an CAA arbitration award rendered in accordance with the UNCITRAL Rules is a ‘domestic’ or ‘foreign’ award under the Arbitration Act. Due to political reasons, Taiwan is not a signatory to the New York Convention. Nonetheless, the grounds for refusing recognition of a foreign arbitral award under the Arbitration Act are in general identical to those under Article V of the New York Convention. Taiwanese courts follow international standards and practice in determining an application for recognition and enforcement of a foreign arbitral award. An application for recognition of a foreign arbitral award will be rejected by a Taiwanese court if (a) recognition or enforcement of the arbitral award would be contrary to the public order or morality of Taiwan or (b) the dispute is not one which may be resolved by arbitration under Taiwanese law.54

52 

Art 47 of the Arbitration Act. Yu (n 24) 113–14. 54  Under Art 1 of the Arbitration Act, any present or future dispute which ‘may be settled by the parties in accordance with the law’ is arbitrable. This definition would encompass almost all disputes of a civil nature, whether involving torts, contracts, or quasi-contracts. The validity of IP rights, nonetheless, is an exception as discussed below. 53 

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The court may also issue a dismissal order with respect to an application for recognition of a foreign arbitral award if the country where the arbitral award was made or whose laws govern the arbitral award does not recognise the arbitral awards of Taiwan.55 The opposing party may request that the court reject an application for recognition of a foreign arbitral award if: 1. The arbitration agreement is invalid as a result of the incapacity of a party according to the law chosen by the parties to govern the arbitration agreement; 2. the arbitration agreement is null and void according to the law chosen by the parties to govern the arbitration agreement or, in the absence of choice of law, the law of the country where the arbitral award was made; 3. a party is not given proper notice of the appointment of an arbitrator or of any other matter required in the arbitral proceedings, or any other situations which give rise to lack of due process;56 4. the arbitral award is not relevant to the subject matter of the dispute covered by the arbitral agreement or exceeds the scope of the arbitration agreement, unless the offending portion can be severed from and will not affect the remainder of the arbitral award; 5. the composition of the arbitral tribunal or the arbitration procedure contravenes the arbitration agreement or, failing specific agreement thereon, the law of the place of the arbitration; or 6. the arbitral award is not yet binding upon the parties or has been suspended or annulled by a competent court.57 A 1986 Supreme Court decree indicates that the court’s discretion should be exercised cautiously, so that the reciprocity requirement will not become a barrier for enforcement of foreign arbitral awards in Taiwan.58 The decree reminded Taiwanese judges that the reciprocity condition is not to be construed as requiring the foreign country in question to recognise an award made in Taiwan before a Taiwanese court may recognise an award made in that country. It appears that the reciprocity threshold is not difficult to meet. It has been held that the reciprocity requirement under Article 49 of the Arbitration Act does not specifically require the state where the award is made to first recognise Taiwanese arbitral awards. A party may argue that the requirement of reciprocity is considered to have been met when the arbitration law of the subject state does not clearly reject the recognition of Taiwanese awards. Before 2014, major jurisdictions whose awards have been recognised by Taiwanese courts include Mainland China, Hong Kong, the United States (including New York and California), the United Kingdom, Korea, France, Switzerland, Japan and Vietnam. In 2014 the Supreme Court handed down a civil decree declaring that: Even a foreign arbitral award may have enforceability (zhi xing li) after being approved by a court decree; such enforceability is based on Paragraph 1(6), Article 4 of the Compulsory Execution

55 

Art 49(1) of the Arbitration Act. Whether there is ‘lack of due process’ should be determined according to the procedural rules agreed on by both parties or the applicable procedural laws in each case. See Tai-Chung District Court Decree 96 Kang-Tzi No 94 (2007). 57  Art 50 of the Arbitration Act. 58  Supreme Court Civil Decree 75 Tai-Kang-Tzi No 335 (1986). 56 

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Law,59 and is different from a domestic arbitral award, which has the same effect as a court judgment as explicitly specified in the Taiwanese Arbitration Act.

The Supreme Court therefore concluded that a final and definitive foreign arbitral award would not have res judicata (ji pan li) and would not prohibit a party from lodging the same issue in the court.60 The plaintiff in that case was a Taiwanese company, and the defendant was a Dutch company. The plaintiff brought a suit before the Taiwan Taipei District Court to claim damage caused by a violation of a stock sale contract. Under the disputed contract, the parties should resolve any disputes arising under the contract via arbitration in Singapore.61 The parties had tried to resolve the same issues through arbitration administered by the Singapore International Arbitration Centre (SIAC). The defendant received a favourable arbitral award and the plaintiff ’s counterclaim was rejected by the arbitral tribunal.62 The defendant invoked the arbitration clause to argue that the courts in Taiwan did not have jurisdiction owing to the arbitration clause, and since the same issue had been decided by the SIAC arbitral tribunal, the case should be dismissed based on res judicata (ji pan li). The Taipei District Court ruled in favour of the defendant.63 The Taiwan High Court quashed the Taipei District Court Decree.64 The Supreme Court upheld the decision of the Taiwan High Court.65 The Supreme Court ruling was thus final and confirmed with the result that the Singapore award could not be used to counter the debtor objection suit. The Supreme Court’s position on whether a foreign arbitral award has both res judicata and enforceability is untenable. The Supreme Court’s understanding of the Taiwanese Arbitration Act is strictly literal and without any justifiable reason. Although before 2 December 2015, Chapter VII of the 1998 Arbitration Act (entitled ‘Foreign Arbitral Awards’) did not have a provision like Paragraph 1, Article 37,66 reference should be made to Chapter IV of the same Act (entitled the ‘Enforcement of Arbitral Awards’). That accords to an arbitral award the same effect as a court judgment. It does not justify the conclusion that only a ‘domestic arbitral award’ enjoys res judicata under Paragraph 1, Article 37. Chapter VII expressly excludes applicability to domestic awards, while Chapter IV does not so expressly exclude and should therefore be understood as applying to all arbitral awards. More importantly, there is no reason for the Taiwanese legislators to distinguish res judicata of a domestic arbitral award from that of a foreign award. The New York Convention,67

59  Art 4(1)(6) of the Compulsory Execution Law reads: ‘Enforcement can be carried out based on the following: other laws that grant the enforcement.’ 60  Supreme Court Civil Decree 103 Tai-Kang-Tzi No 850 (2014). 61  The arbitration clause in that case reads: ‘All disputes, differences or controversies arising out of or in connection with this Agreement that cannot amicably be solved by the Parties shall be submitted to arbitration in Singapore, to a panel of three (3) arbitrators (one chosen by Purchaser, one chosen by Seller and the third chosen by the original two arbitrators). The Arbitration rules of the Singapore International Arbitration Center (SIAC Rules) shall be applied. The arbitration shall be conducted in English. The arbitral award shall be final and legally binding upon the Parties. This Agreement and the documents to be entered into pursuant to it, save as expressly referred to therein shall be governed by and construed in accordance with the laws of Singapore.’ 62  See Taiwan Taipei District Court Civil Decree 99 Chung-Su-Tzi No 357 (2010). 63 ibid. 64  Taiwan High Court Civil Decree 102 Kan-Gan-1-Tzi No 13 (2013). 65  Supreme Court Civil Decree 103 Tai-Kang-Tzi No 850 (2014). 66  Para 1, Art 37 of the Arbitration Act reads: ‘The award shall, insofar as relevant, be binding on the parties and have the same force as a final judgment of a court.’ 67  Convention on the Recognition and Enforcement of Arbitral Awards, June 10, 1958, 21 UST 2517, TIAS No 6997, 330 UNTS 38.

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UNCITRAL Model Law68 and international practice all encourage enforcement and recognition of foreign arbitral awards. As a member of the global community, there is no justifiable reason to discriminate against foreign arbitral awards. The Legislative Yuan was alarmed by the Supreme Court decision and, grasping the gravity of the potential repercussions, moved quickly to mend the Supreme Court’s misstep. On 13 November 2015, the Legislature amended Paragraph 2, Article 47. The amendment took effect from 2 December 2015. The new provision states: ‘After recognition by a court ruling, a foreign arbitral award shall be binding on the parties like a final judgment of a court and shall be enforceable’ (emphasis added). In making the amendment, the Legislature opined that, with respect to the recognition of foreign arbitration awards, the Judiciary should accept res judicata as a basic inviolable premise. The parties and the courts of Taiwan should respect the legal relationship formed or confirmed by foreign arbitral awards. The Legislature also referred to the New York Convention, especially Article 3. That provision states that ‘each contracting state shall recognize arbitral awards as binding and enforce them.’ The Legislature found the original Paragraph 2, Article 47 of the 1998 Arbitration Act was nebulous, because it stipulated only that a foreign arbitral award could be enforceable, and neglected to specify the binding force of the foreign award. Thus, the Legislature amended the article for consistency with Article 37 of the 1998 Arbitration Act.

4.2.  Enhancing Competitiveness, Independence and Professionalism In Taiwan, there are very few professionals who work solely as arbitrators. Most arbitrators have a professional career outside arbitration.

5. Conclusion Taiwan is not a signatory to the New York Convention. However, this fact has not dissuaded Taiwan from its long-time commitment to respecting international practices. Taiwanese courts have shown a similar respect for international arbitration practice. The grounds for denying recognition of a foreign award under the Arbitration Act are identical to those under Article V of the New York Convention. Taiwan’s courts generally follow international standards and practice in hearing an application for recognition and enforcement of a foreign award. Although influenced by continental and common law, Taiwan is a civil law country and many civil law theories shape the understanding of laws locally. Separating ji pan li from zhi xing li is one example. Out of political sensitivity, the Supreme Court first applied the theory in Mainland China-related cases. It next applied the theory to foreign arbitral awards for logical consistency. But once set on this course, the Supreme Court became unable to promote the international arbitration practice of encouraging enforcement, including recognition, of foreign arbitral awards.

68 

UNCITRAL Model Law on International Commercial Arbitration, 24 ILM 1302 (1985).

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Since the Supreme Court stripped foreign arbitral awards of res judicata, whenever a party seeks enforcement of a foreign arbitral award in Taiwan, the opposing party can file an objection suit to suspend the enforcement procedure, and the court will examine the substantive issue confirmed by the arbitral award. One of the consequences of the Supreme Court’s decision has been that, to circumvent recognition and enforcement issues pertaining to foreign arbitral awards in Taiwan, the parties have had to give serious consideration to Taiwanese arbitration. Fortunately, the Legislative Yuan decisively stepped in to fix the conundrum, amending Paragraph 2, Article 47 of the Arbitration Act. The new law recognises that a foreign arbitral award has binding force just like a final judgment and shall be enforceable. The amendment demonstrates again the Taiwanese legislature’s dedication to aligning Taiwanese arbitration practice with that of the international arbitration community. Nonetheless, the issue remains with an arbitral award rendered in Mainland China.

4 Arbitration Reform in Japan: Reluctant Legislature and Institutional Challenges NOBUMICHI TERAMURA AND LUKE NOTTAGE*

1. Introduction The term ‘reform’ may imply major change, but can also encapsulate less far-reaching revisions to law and practice. The latter meaning characterises the Japanese experience. Reforms to the legal framework for arbitration in Japan have been conducted in different ways by legislative, judicial and arbitration institutions. The common primary objective of these reforms has been to make ‘Japanese’ arbitration more attractive and accessible to the international market, while a secondary aim has been to promote arbitration and alternative dispute resolution (ADR) for domestic disputes.1 This chapter examines what these reforms have achieved. It first discusses the current framework of arbitration in Japan. ­Second, it highlights recent reforms to arbitration law and practice made by legislative, judicial and arbitration institutions, analysing patterns in the reforms. Third, it proposes further reforms in specific areas of arbitration law and practice.

2. Background 2.1.  Legislative and Regulatory Framework The current statute regulating arbitration in Japan is the Arbitration Law (Law No 138 of 2003). This statute dutifully follows the 1985 UNCITRAL Model Law on International Commercial Arbitration (the Model Law), with only minor modifications to suit the ­Japanese legal context. To a limited extent, as outlined in section 3.1.2 below, the 2003

*  The authors are grateful to Professor Yasuhei Taniguchi and Dr Makiko Shinjo for their comments on early drafts of this chapter. 1 Luke Nottage, ‘Japan’s New Arbitration Law: Domestication Reinforcing Internationalisation?’ (2004) 7 ­International Arbitration Law Review 54–60.

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statute took into account deliberations underway since 2000 in UNCITRAL that eventually generated the revised Model Law in 2006. The Japanese legislation applies to both domestic and international arbitrations.2 It did not adopt a dual-track mechanism, typically allowing more intensive Court intervention in domestic arbitration (eg regarding serious errors of law by the arbitral tribunal), as found in several other Model Law jurisdictions in Asia outlined elsewhere in this book. In addition to the Arbitration Law, some statutes deal with aspects of arbitration. For example, the Rules of the Supreme Court (No 27 of 2003) prescribe the procedures to be followed by the courts in relation to applications governed by the Arbitration Law. The Rules provide (among other matters) for the filing and service of petitions and the taking of evidence in court proceedings ancillary to arbitrations. Article 22(iv)-2 of the Civil Execution Law (Law No 4 of 1979) provides that compulsory execution shall be carried out based on an arbitral award. Article 23(1)(vi) of the Japanese Code of Civil Procedure (Law No 109 of 1996) (JCCP) provides that a judge shall be disqualified from performing duties where the judge has participated in making an arbitral award in a case. Japan has ratified the 1958 New York Convention3 and the 1965 ICSID Convention. It has also entered into several bilateral and multilateral investment treaties and regional free trade agreements (FTAs) including investment chapters. Almost all such treaties and FTAs contain provisions for dispute resolution by arbitration.4 Among these FTAs, the TransPacific Partnership Agreement (TPP) signed on 4 February 2016 by Japan, the United States and 10 other Asia-Pacific states may heighten the visibility of international arbitration in Japan, especially if TPP comes into effect and any investor-state dispute settlement (ISDS) claim is made against Japan.5

2 

Art 3 of the Arbitration Law. The Arbitration Law virtually reproduces the provisions of the New York Convention in terms of the recognition and enforcement of foreign arbitral awards and agreements providing for arbitration with the seat outside Japan. Complex issues may arise in the interpretation of similar (but not identical) articles in the Arbitration Law and the New York Convention. In such cases, it is submitted that the New York Convention should prevail as treaties are higher in the normative hierarchy than domestic laws, except the Constitution, under the Japanese legal system and Art 98(2) of the Constitution of Japan provides that ‘treaties concluded by Japan and established laws of nations shall be faithfully observed’. See generally Tony Cole, ‘Commercial Arbitration in Japan: Contributions to the Debate on Japanese Non-Litigiousness’ (2007) 40(1) New York University Journal of International Law and Politics 108. 4  See Shotaro Hamamoto and Luke Nottage, ‘Japan’ in Chester Brown (ed), Commentaries on Selected Model Investment Treaties (Oxford, Oxford University Press, 2013) 347–91, with an earlier and abridged manuscript version at http://ssrn.com/abstract=1724999. The substantive and procedural provisions in these agreements are more significant in practice than earlier agreements such as the Treaty of Friendship, Commerce, and Navigation between Japan and the United States of America (1953), Treaty of Commerce, Establishment and Navigation between the United Kingdom of Great Britain and Northern Ireland and Japan (1962), the Japan-China Trade Agreement (1974). 5  The ISDS provisions negotiated in the TPP have attracted significant parliamentary and public scrutiny in recent years: Shotaro Hamamoto, ‘Recent Anti-ISDS Discourse in the Japanese Diet: A Dressed-up but Glaring Hypocrisy’ (2015) 16(5–6) Journal of World Investment and Trade 931–51. On this procedure, substantive commitments made by host states to foreign investors, and prospects for ratification of the TPP, see generally Luke ­Nottage, ‘International Arbtiration and Society at Large’ in Andrea Bjorklund, Franco Ferrari and Stefan Kröell (eds), Cambridge Compendium on International Arbitration (Cambridge, Cambridge University Press, 2017). 3 

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2.2.  Institutional Framework No provision of the Arbitration Law prohibits ad hoc arbitration. Hence, parties may freely agree to resolve their disputes through ad hoc tribunals. There are no statistics on the number of ad hoc arbitrations conducted in Japan, due to the confidentiality associated with such proceedings. However, institutional arbitration is thought to be gaining growing popularity, compared to ad hoc arbitration.6

2.2.1.  Arbitration Institutions There are several arbitration institutions in Japan. The most prestigious is the Japanese Commercial Arbitration Association (JCAA), with a history extending over six decades. Its predecessor, the International Commercial Arbitration Committee, was established in 1950 within the Japanese Chamber of Commerce and Industry. It aimed to serve as an organisation to settle commercial disputes, enhance international trade, and ultimately contribute to the development of the Japanese economy. In 1953, in order to emphasise its primary purpose of promoting international trade, the arbitration committee was reorganised as the JCAA and became independent from the Japan Chamber of Commerce and Industry. Its independence was further cemented by becoming a general incorporated association in 2009. Nonetheless, the JCAA President has traditionally been a former official of the Ministry of Economy, Trade and Industry (METI), which has general jurisdiction over business associations.7 This contrasts with more popular arbitration institutions worldwide, including in the region (notably, the Singapore International Arbitration Centre), which have recently been appointing experienced arbitration experts as presidents or vice-presidents even from outside the jurisdiction in question. The Tokyo Maritime Arbitration Commission (TOMAC) of the Japan Shipping Exchange is another institution in Japan in which arbitration proceedings can and do take place. Established in 1926, TOMAC has extensive expertise in maritime disputes and is Japan’s only permanent maritime arbitration institution in the country. Shipping and related matters are generally regulated by the Ministry of Land, Infrastructure, Transport and ­Tourism (MLIT), and the jurisdictional boundaries still characteristic of bureaucracy in Japan8 would impede efforts to merge TOMAC with JCAA, in order to gain more critical mass in attracting and managing international arbitration cases. In any event, other countries also maintain separate centres to administer arbitrations in the specialised area of maritime disputes (eg Singapore and the United Kingdom). 6 

Takeshi Kojima and Takashi Inomata, Arbitration Law [in Japanese] (Tokyo, Nipponhyoronsha, 2014) 20. Taniguchi, ‘Interview: The Background of the Appointment for the Judge of Newly Established ­Singapore International Commercial Court’ [in Japanese] (2015) The Lawyers 22. On the still-widespread practice of amakudari (‘descent from heaven’: government officials retiring to positions in private or semi-private organisations engaged in similar fields), see generally Colin Jones, ‘The Influence of Amakudari on the Japanese Legal System’ (2015) 40 Journal of Japanese Law 1–58. 8  See generally Jones, ibid. However, since Japan’s economic slowdown in the 1990s and beginning with the Koizumi Administration, there have been some significant shifts towards more ‘whole of government’ approaches to more politically pressing issues, such as consumer law and policy: see, for example, Luke N ­ ottage, ‘Consumer Rights in Japan’ in Parissa Haghirian (ed), Japanese Consumer Dynamics (New York, Palgrave M ­ acmillan, 2010) 31–60. 7 Yasuhei

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The Construction Dispute Committee was established by the Construction Business Law (No 100 of 1949), under MLIT jurisdiction, to administer ADR relating to construction disputes. Most cases involved mediation rather than arbitration, and cases overwhelmingly involve domestic disputes.9 Covering another important field for international business, intellectual property rights, the Japan Intellectual Property Arbitration Center (JIPAC) was founded in 2001. Originally, the organisation was established as the Industrial Property Rights Arbitration Center by the Japan Patent Attorneys Association and the Japan Federation of Bar Associations (JFBA). The Japan Patent Office is associated with METI, but copyright law matters come instead under the jurisdiction of the Ministry of Education. Local Bar Associations also run ADR centres across Japan, in which arbitration and (more commonly) mediation are conducted, although most of the cases are domestic rather than international. Today, there are 35 ADR centres maintained by 32 local Bar Associations.10 They were mostly established in the 1990s. Several other domestic (and sometimes international) arbitration institutions exist in the country, such as the Japan Sports Arbitration Agency, the Japan Real Estate Arbitration Association, etc. But these too are recent and only handle a few cases every year.11 There has been little sustained effort by the Japanese government to develop a concerted approach to enhancing the administration and visibility of arbitration in Japan. Nor has the legal profession, which traditionally had a tendency to maintain its independence from the government,12 mobilised strongly as a whole towards that objective. These features characteristic of Japan, in sharp contrast for example with Singapore, combine with other aspects to keep arbitration filings at low levels (as outlined in section 3.3 below). As well as multiple Japanese institutions to which domestic as well as international business parties can bring their disputes, organisations have emerged in Japan that offer broader support to such parties and practitioners such as counsel and arbitrators. A notable example is ICC Japan, an ICC national committee, which provides information on ICC arbitration to the Japanese business community, thereby enhancing awareness of the ICC’s services. However, ICC Japan does not engage itself in the arbitration process, apart from proposing candidates as arbitrators for consideration by the Paris-based ICC itself. The Japan Association of Arbitrators (JAA) is another example. The JAA encourages the use of formal arbitration institutions (such as JCAA) to Japanese business communities, but places special emphasis on providing arbitrator and mediator training courses. The JAA together with the Chartered Institute of Arbitrators sponsored a seminar on international commercial arbitration in Tokyo in 2012.13 The Japan Chapter of the UK-based Chartered Institute of Arbitrators has also provided training programmes for arbitrators since 2003. 9  See generally, for example, Ministry of Land, Infrastructure, Transport and Tourism, ‘Concerning construction work disputes committees’, available online: www.mlit.go.jp/sogoseisaku/1_6_hf_000127.html. 10  Japan Federation of Bar Association, ‘ADR Center’ (‘紛争解決センター’) [in Japanese], available online: www.nichibenren.or.jp/contact/consultation/conflict.html. 11  For more details and statistics, see Tatsuya Nakamura and Luke R Nottage, ‘Arbitration in Japan’ in Tom Ginsburg and Shahla F Ali (eds), International Commercial Arbitration in Asia 3rd edn (New York, Juris, 2013) 251–55. 12  Shigeo Kisa, Setsuo Miyazawa, Tetsuo Sato, Shiro Kawashima, and Norio Mizutani, Japanese Judicial System [in Japanese] 6th edn (Tokyo, Nipponhyoronsha, 2015) 124–39. 13  See Japan Federation of Bar Association, ‘JAA(社団法人日本仲裁人協会)主催 模擬国際仲裁セミナー’ [in Japanese], available online: www.nichibenren.or.jp/event/year/2012/120529.html.

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2.2.2. Arbitrators 2.2.2.1. Appointment Under the Arbitration Law, most of the provisions for appointing arbitrators are based on the Model Law, and consequently parties are free to agree on a procedure for their ­appointment.14 If parties agree to resolve their dispute through an arbitral institution, the rules of the latter on the appointment procedures may apply. However, parties’ specific agreement on an appointment will normally prevail.15 For example, when parties have selected JCAA as their arbitration institution with an agreement on the appointment of specific arbitrators or on a procedure, the JCAA default rules on appointment procedures need not apply. When parties come to the JCAA without such an agreement, the parties will need to appoint arbitrators in accordance with the JCAA procedures. When the parties cannot reach an agreement on the appointment within a prescribed time frame, the JCAA offers to appoint arbitrators on their behalf, following the JCAA Rules. In case parties have agreed on neither the JCAA Rules nor appointing arbitrators, the court will make the appointment instead.16 No provision has been established on the standard of the appointments, leaving it to the discretion of the court in each case.17 Unlike the Model Law regimes in other Asia-Pacific countries, Japan’s Arbitration Law does not provide for an arbitration institution (like the JCAA) to make default appointments of arbitrators, instead of the relevant national court, if the parties have not agreed on specific appointments or a different procedure through arbitration rules. 2.2.2.2. Qualifications Under the Arbitration Law, no clear provisions exist concerning qualifications. For example, parties are not barred from appointing arbitrators based on their nationalities.18 The JCAA Rules do not detail mandatory qualifications for arbitrators. Although the JCAA maintains a list of arbitrators to facilitate appointments, by parties and otherwise the institution itself, parties are not forced to choose their arbitrators from the list. Unanimous consensus among practitioners and commentators has not yet been reached on whether or not the tribunal should be formed exclusively with licensed lawyers ­(bengoshi).19 Article 72 of the Japanese Attorney Law (Law No 205 of 1949) provides that: [n]o person other than an attorney or a Legal Professional Corporation may, for the purpose of obtaining compensation, engage in the business of providing legal advice or representation, handling arbitration matters, aiding in conciliation, or providing other legal services in connection with any lawsuits, non-contentious cases, or objections, requesting for re-examination, appeals and other petitions against administrative agencies, etc, or other general legal services, or acting as

14 

Art 17 of the Arbitration Law. JCAA Commercial Arbitration Rule 25(1) provides that ‘[A]rbitrator(s) shall be appointed pursuant to the agreement of the Parties’. 16  Art 17 of the Arbitration Law. 17  Masaaki Kondo, Takeshi Goto, Kotatsu Uchibori, Hiroshi Maeda and Tomomi Kataoka, Arbitration Law of Japan (Tokyo, Shojihomu, 2004) 69. 18  Koichi Miki and Kazuhiko Yamamoto, Theory and Practice of the New Arbitration Act [in Japanese] (Tokyo, Yuhikaku, 2006), 149, comments of Professor Yamamoto. 19  Kojima and Inomata (n 6) 175. 15 

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an intermediary in such matters; provided, however, that the foregoing shall not apply if otherwise specified in this Act or other laws. (emphasis added)

Thus Article 72 appears to prohibit anyone other than licensed lawyers from serving as arbitrators. However, a strong opinion exists that supports appointment of legal scholars or non-bengoshi professionals as arbitrators, based on the Article 35 of Japanese Penal Code.20 According to this Article, such individuals serving as arbitrators fall within the ‘lawful business’ exception.21 The JFBA (the umbrella association for bengoshi) has itself stated that a foreign lawyer or a person without legal qualification may be appointed as an arbitrator.22 That statement was made in the context of observations by the government (in the Lower House ­Judicial Affairs Committee on 27 May 2003 and the Upper House Judicial Affairs ­Committee on 24 July 2003) that, in the absence of any contrary agreement between the parties, arbitrators were not required to have any other qualification apart from being natural persons. In actuality, many Japanese and foreign professors of law or chartered engineers who have no current legal practice licence either in Japan or abroad have served as JCAA arbitrators.23 In addition, the Special Measures Law concerning the Handling of Legal Business by Foreign Lawyers (No 66 of 1986) allows foreign lawyers registered in Japan (gaikokuho jimu bengoshi) to serve as counsel for international arbitrations in Japan and (as clarified by Article 58-2 in 1996) other foreign-qualified lawyers to serve as counsel if retained outside Japan. Both types of foreign lawyers frequently appear in JCAA ­arbitrations,24 thus preparing them for possible appointments as arbitrators in future cases. The courts will restrictively interpret the grounds for challenging arbitrators. The ­wording of Article 18 of the Arbitration Law, ‘[j]ustifiable doubts as to impartiality or independence’, has been considered to mean that [not only] the fact that a fair arbitral award cannot be expected due to the arbitrator having a certain relationship with case or a party, [but also] some specific behaviour of the arbitrator gives rise to reasonable doubts about his or her impartiality or independence.25

Well-known commentators have suggested that interpretation of ‘the arbitrator having a certain relationship with a case or a party’ may be determined in light of Article 23 of the JCCP,26 which lists conditions for disqualification of judges. As the list consists of specific examples, it would be difficult for courts to stretch the meaning of those provisions.27

20 Hiroyuki Tezuka, ‘The New Arbitration Law and International Commercial Arbitration’ [in Japanese], in Koichi Miki, Hiroyuki Tezuka and Akihiro Hironaka (eds), International Arbitration and Corporate Strategy (Tokyo, Yuhikaku, 2014) 50. 21 ‘An act performed in accordance with laws and regulations or in the pursuit of lawful business is not punishable.’ 22  Tezuka (n 20) 50. 23  Nakamura and Nottage (n 10) 237. 24  ibid, 246. 25  Kondo (n 17) 73. 26  Miki and Yamamoto (n 18), comments of Professor Idei. 27  Art 24(1) of the JCCP, which allows a party to challenge a judge if there are circumstances concerning the judge that would prejudice the impartiality of a judicial decision, may also impact on a challenge to the arbitrators. This is because the fundamental objective of impartiality or independence of arbitrators is to increase the credibility of arbitration in the eyes of potential users of the procedure, especially Japanese nationals, and such

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2.2.2.3. Performance The Arbitration Law has no provision to regulate directly the performance of arbitrators. While they have a moral and ethical obligation to carry out their duties, their failure to satisfy the parties with their performance does not create legal liability, for example for damages.28 Nonetheless, liability may be pursued via Japanese Civil Code (Law No 89 of 1896). In Japan, an arbitrator agreement is treated as having the nature of a contract of mandate.29 Therefore, provisions of the Civil Code governing a mandate may apply to arbitrators. If so, they must act with due care in the practice of arbitration according to Article 644 of the Civil Code.30 In the event that obligation is not fulfilled, the parties may claim for damages based on Article 415 (in contract)31 or Article 709 (in tort).32 However, for example, JCAA Commercial Arbitration Rule 13 limits liability of arbitrators (and the JCAA) to ‘wilfull misconduct or gross negligence’. In principle, such contract-based limitations of liability are effective as between the parties.33 If the conduct of arbitrators entails some illegality, they may be criminally liable in accordance with Chapter 10 of the Arbitration Law, including for acceptance of a bribe, acceptance upon request, acceptance in advance, passing of bribes to a third party, aggravated acceptance, acceptance of resignation, and so on. Even when the illegal act is committed outside Japan, penalties would still be applicable.34 They apply to arbitrators if an arbitration has its seat in Japan,35 regardless of the arbitrators’ or the parties’ nationalities.36 However, parties may avoid the application of such penalties under Japanese law by specifying another country as the seat of the arbitration,37 even if a substantial part of the hearings

an objective is common to disqualification of and challenge to judges. See Takeshi Kojima, Comparative Study of Arbitration and Process of Complaints [in Japanese] (Tokyo, Chuo University Press, 1985) 204; Hiroaki Toyota, ‘Challenge to Arbitrators (1)’ [in Japanese] (2006) 53(9) JCA Journal 3. Other well-known commentators have stated that if parties request application of these provisions in the JCCP to arbitrators, they have to be interpreted expansively compared to when they are applied to judges. See Kojima and Inomata (n 6) 209. 28 

ibid, Kojima and Inomata 238. ibid, 189. There are some theoretical discussions about the precise nature of the contract with the arbitrator. See Jyunichi Nakata, Special Proceedings [in Japanese] (Tokyo, Nipponhyoronsha, 1938) 137; Noboru Koyama, Arbitration Law [in Japanese] 2nd edn (Tokyo, Yuhikaku, 1983) 124; Kazuhiko Yamamoto and Aya Yamada, Law of ADR & Arbitration [in Japanese] 2nd edn (Tokyo, Yuhikaku, 2015) 332. 30  This provides: ‘A mandatary shall assume a duty to administer the mandated business with the care of a good manager compliance with the main purport of the mandate.’ 31  This provides: ‘If an obligor fails to perform consistent with the purpose of its obligation, the obligee shall be entitled to demand damages arising from such failure. The same shall apply in cases it has become impossible to perform due to reasons attributable to the obligor.’ A Bill to amend the contract provisions of the Civil Code was introduced into the Japanese parliament in 2015, but remains pending and does not significantly impact on the relevant principles outlined here. For background, see, for example, Souichirou Kozuka and Luke Nottage, ‘Policy and Politics in Contract Law Reform in Japan’ in Maurice Adams and Dirk Thilbaut (eds), The Method and Culture of Comparative Law (Oxford, Hart, 2014). A longer manuscript version is available at http://ssrn.com/ abstract=2360343. 32  This provides: ‘A person who has intentionally or negligently infringed any right of others, or legally protected interest of others, shall be liable to compensate any damages resulting in consequence.’ 33  Kojima and Inomata (n 6) 237, fn 370. 34  Art 55 of the Law. 35  Miki and Yamamoto (n 18) 413, comments of Mr Kondo. 36  Takeshi Kojima and Akira Takakuwa, The Arbitration Law: Commentary and Issues [in Japanese] (Tokyo, Seirinshoin, 2007) 133. 37  Art 28(1) of the Law. 29 

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take place in Japan.38 (Of course, they may then find themselves subject to sanctions in that other country.)

2.3.  Judicial Framework Following the Model Law, the Japanese court may support or supervise arbitration procedure only as provided in the Arbitration Law.39 As for its supportive role, the court may serve a written notice in arbitral proceedings upon the request of the parties,40 may dismiss an action brought in contravention of an arbitration agreement,41 may issue a provisional measure,42 may appoint arbitrators in case there is insufficient agreement by the parties,43 may decide to remove an arbitrator upon the request of the parties,44 and may assist in taking of evidence.45 As for its supervisory role, the court may set aside an arbitral award,46 and decide about recognition and execution of the arbitral award.47 As mentioned below (section 3.2), courts have exercised such supervisory authority restrictively.

3. Reform 3.1.  Legislative and Regulatory Initiatives The enactment of the Arbitration Law took place as a part of a broader Justice System Reform between 1999 and 2004.48 In 1999, the Justice System Reform Council was established under the jurisdiction of the Cabinet to make recommendations to the Prime Minister, rendered in 2001.49 One recommendation was a prompt overhaul of the arbitration system, in light of international developments in international commercial arbitration (including UNCITRAL’s work from 2000 to revise the Model Law). The Arbitration Law was enacted in the course of revising the Code of Civil Procedure,50 by the Secretariat of the Office of Promotion of Judicial System Reform. 38 

Art 28(3) of the Law. Art 4 of the Law. Art 12(2) of the Law. 41  Art 14(1) of the Law. 42  Art 15 of the Law. 43  Arts 16 and 17 of the Law. 44  Art 20 of the Law. 45  Art 35 of the Law. 46  Art 44 of the Law. Further details of this article are examined below. 47  Arts 45 and 46 of the Law. 48  See Kondo (n 17) i–ii; Nottage (n 1); and generally Toshimitsu Kitagawa and Luke Nottage, ‘Globalization of Japanese Corporations and the Development of Corporate Legal Departments: Problems and Prospects’ in ­William Alford (ed), Raising the Bar: The Emerging Legal Profession in East Asia (Cambridge MA, Harvard East Asian Legal Studies Program [distributed by Harvard University Press], 2007). 49  See The Justice System Reform Council, ‘Recommendations of the Justice System Reform Council for a Justice System to Support Japan in the 21st Century’, available online: http://japan.kantei.go.jp/judiciary/2001/0612report. html. 50  Luke Nottage, ‘Civil Procedure Reforms in Japan: The Latest Round’ (2005) 22 Ritsumeikan Law Review 81–86. 39  40 

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An 11-member ‘Arbitration Study Group’ established within the Secretariat handled the project. The Group consisted of four law professors, a judge, a government official from the Ministry of Justice, another official from Ministry of Economy, Trade and Industry, a lawyer from the JFBA, and three lawyers from arbitration institutions. The Group met 13 times from February 2002 to March 2003, and at the final meeting published a draft proposal for the Arbitration Act. The Cabinet in turn approved a bill based on this draft. After that, the bill was enacted by the Diet (Parliament) as the Arbitration Law on 25 July 2003. The Arbitration Law came into force on 1 March 2004, even extending to pre-existing arbitration agreements,51 making Japan the 45th jurisdiction to adopt the Model Law.

3.1.1.  Impact of the Model Law on the 2003 Reform The predecessor of the Arbitration Law, the Law Concerning Public Peremptory Notice and Arbitration Procedure (Law No 29, 21 April 1890) (LCPPNAP).52 It was criticised by academics and practitioners as outdated and irrational by the end of the twentieth century. For example, Article 786 provided ‘[a]n agreement to submit a dispute to one or more ­arbitrators …’. Thus, the parties could have an arbitral tribunal consisting of an even number of arbitrators if, for example, each party nominated a single arbitrator, resulting in deadlock for procedural and final decisions. The main purpose of the reform in 2003 was to overhaul the outdated arbitration statutes in Japan, especially the LCPPNAP, and adopt current international standards as reflected in the 1985 UNCITRAL Model Law. The 2003 reform achieved its purpose, and drawbacks and ambiguities in LCPPNAP have been removed. UNCITRAL’s deliberations resulting in the 2006 amendments to the Model Law did have some impact on the Arbitration Law in Japan’s 2003 legislative reform. Notably, article 13(5) of the Arbitration Law provides that [W]hen an arbitration agreement is made in an electromagnetic record (ie, a record made in an electronic form, a magnetic form, or any other form not recognizable to human perception, which is used in information processing by computers) recording the contents thereof, such arbitration agreement shall be in writing.

This is almost a reproduction of Option I of Article 7(4) of the UNCITRAL Model Law as revised in 2006.53 However, the draft provisions concerning tribunal-ordered interim measures had no impact on the Arbitration Law 2003 because UNCITRAL deliberations

51 cf, for example, Richard Garnett and Luke Nottage, ‘What Law (if any) Now Applies to International ­Commercial Arbitration in Australia?’ (2012) 35(3) UNSW Law Journal 953–78. 52  Originally, the rules on Arbitration Law were within Ch 8 (Arbitration Proceeding) of the old version of the JCCP (Code of Civil Procedure Law No 29 of 1890), which was almost a direct translation of the old German Code of Civil Procedure. The JCCP was comprehensively revised in 1996. In the course of the revision, Ch 8 became independent from the JCCP and was renamed ‘the Law Concerning Public Peremptory Notice and Arbitration’. However, the reform at that time carried out neither substantially modified nor revised JCCP provisions, in contrast to the arbitration statute of Germany that was revised comprehensively based on the Model Law. 53  Option I of Art 7(4) states: ‘The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy’.

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around that time were less advanced.54 In any event, there is consensus that a Japanese court can enforce interim measures ordered by a foreign-seated tribunal,55 which became one provision added to the revised 2006 UNCITRAL Model Law (and the focus of a specific legislative reform in Singapore in 2010).

3.1.2.  Japan’s Modifications to the Model Law Regime As mentioned above, the Arbitration Law applies to arbitration whether it is international or domestic. The drafters of the Law intended to remove the difficulty of distinguishing international from domestic arbitrations for the purpose of increasing utility of the new legislation.56 According to the drafters, the fundamental principles behind international arbitration—such as party autonomy and limited scope for judicial intervention—should equally apply to domestic arbitration.57 They supported their belief by reference to practical examples suggesting that the unified mechanism already adopted in the LCPPNAP and the tenth book of German Code of Civil Procedure had experienced no serious difficulties.58 Another unique characteristic of the Arbitration Law is that it does not restrict its area of arbitration to commercial disputes. In this respect, too, the Arbitration Law is designed to cover a wider group of disputes compared to the Model Law.59 Moreover, Article 38(4) provides that attempts by the arbitral tribunal at settlement may only be made where both parties consent to it. This provision was said to be compatible with the traditional Japanese practice, in which harmony or efficient dispute resolution is considered the highest objective, resulting in judges and arbitrators traditionally being expected to encourage amicable settlements.60 However, partly in response to some criticisms of arguably over-zealous settlement attempts by arbitrators, the legislative provisions (and JCAA Rules) emphasise that ‘arb-med’ should only be conducted with prior party consent.61 Articles 3 and 4 of Supplementary Provisions on the Arbitration Law stipulate exceptions relating to arbitration agreements concluded between consumers and businesses, and agreements concerning individual labour-related disputes. In the former situation, an increasingly topical issue especially in the United States,62 consumers may unilaterally cancel an arbitration agreement except when the consumer is a claimant in arbitral proceedings.

54 ‘Minutes of the 5th Meeting of the Arbitration Study Group (‘仲裁検討会第5回議事録) (in Japanese)’, 27 May 2002. available online: www.kantei.go.jp/jp/singi/sihou/kentoukai/tyuusai/dai5/5gijiroku.html. 55  See Nakamura and Nottage (n 10) Pt II.J. 56  From 2010, Australia similarly attempted to align the regime for domestic arbitration more closely with the Model Law regime applicable to international arbitration, but inadvertently created a ‘legislative black hole’ for certain pre-existing international arbitration agreements: Garnett and Nottage (n 51). This was only rectified through the Civil Law and Justice Legislation Amendment Act 2015 (Commonwealth). 57 ‘Minutes of the 1st Meeting of the Arbitration Study Group (仲裁検討会第1回議事録) (in Japanese)’, 5 February 2002, available online: www.kantei.go.jp/jp/sihouseido/kentoukai/tyuusai/dai1/1gijiroku.html. 58  Miki and Yamamoto (n 18) 17, comments of Professors Aoyama and Miki. 59  ibid, comments of Professor Nakamura and Professor Idei. 60  Haig Oghigian, Mami Ohara and Hiroyuki Hamai, ‘Japan’ in Nancy M Thevenin (ed), Baker & Mckenzie International Arbitration Yearbook: 2012–2013 (United States, Juris Publishing, 2013) 250. 61  See, with further references, Nakamura and Nottage (n 10) 243–44; Luke Nottage and Albert Monichino, ‘International Commercial Arbitration Developments in Model Law Jurisdictions: Japan Seen from Australia’ (2013) 1 International Arbitration Law Review 35–36. 62  See, for example, David Horton and Andrea Cann Chandrasekher, ‘After the Revolution: An Empirical Study of Consumer Arbitration’ (2015) 104 Georgetown Law Journal 57–124.

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In the latter, arbitration agreements contained in an employment contract are deemed invalid. There also a few other minor differences between the Model Law and the Arbitration Law.63

3.2.  Judicial Initiatives Article 76 of the Constitution of Japan provides that ‘[a]ll judges shall be independent in the exercise of their conscience and shall be bound only by this Constitution and the laws.’ ‘Independent’ implies not only that judiciary is free from external pressures, for example from the government, but also that each judge shall not be affected by extraneous factors in handling cases.64 Therefore, over-generalisation about ‘judicial support’ for arbitration is inappropriate. It is also much more uncommon for judges in Japan, following a continental European career system, to make extensive extra-judicial pronouncements (eg through public lectures or journal publications). Those are much more common in the common law tradition, and therefore provide a further resource for discerning trends in judicial attitudes.65 Instead, in Japan this needs to be determined primarily by analysing actual court judgments. Even here, the task is complicated because a far smaller proportion of judgments are published, compared to common law jurisdictions, and there is no strict doctrine of ­precedent.66 Nonetheless, the Japanese judiciary generally has an impressive record in enforcing foreign awards under the New York Convention.67 In addition, since enactment of the Arbitration Law in 2003, the case law also appears to be pro-arbitration, or at least appears to be following the pro-arbitration spirit of the legislation closely. A few examples are introduced below.68

3.2.1.  Acceptance of Severability In a decision of the Tokyo District Court,69 the plaintiff claimed that the arbitration ­agreement was invalid because the patent licence agreement containing the arbitration 63  For more detailed comparison between the Arbitration Law and the Model Law, see, for example, Kondo (n 17) 315–27. 64  Kisa et al (n 12) 105. 65  cf, for example, recently in Australia: Albert Monichino, ‘The Future of International Arbitration in Australia’ (2015) 5(1) Victoria University Law and Justice Journal 60–74; James Morrison and Luke Nottage, ‘Country Report on Australia For: International Commercial Arbitration—an Asia-Pacific Perspective’, Sydney Law School Research Paper No 14/95 (2014), with further references to speeches and published articles on arbitration from senior ­Australian judges from various courts. 66  However, judgments of higher courts have strong de facto precedent value: see generally, Masaki Abe and Luke Nottage, ‘Japanese Law’ in Jan Smits (ed), Encyclopedia of Comparative Law (Cheltenham, Edward Elgar, 2012) 357–71. 67 Yasuhei Taniguchi and Tatsuya Nakamura, ‘Japanese Court Decisions on Article V of the New York ­Convention’ (2008) 25 Journal of International Arbitration 857–63. 68  As for Japanese arbitration cases in general, see Tatsuya Nakamura, ‘The Recent Japanese Court Decisions on Arbitration’ (2012) 28 JCAA Newsletter; Tatsuya Nakamura, ‘The Recent Court Decisions on the Japanese ­Arbitration Law’ (2015) 34 JCAA Newsletter. 69  Taiyo Ink Manufacturing Co Ltd v Tamura Kaken Corporation (Tokyo District Court, 21 October 2004) 1216 Hanrei Times 309; 1926 Hanrei Jiho 127. See generally Christopher Heath and Luke ­Nottage, ‘Case No 71: Arbitration Law—Separability and Arbitrability—Terminated Contract’ in Moritz Bälz, Marc D ­ ernauer, ­Christopher Heath and Anja Petersen-Padberg (eds), Business Law in Japan: Cases and Comments (Alphen aan den Rijn, ­Kluwer, 2012) 773–84.

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agreement had been terminated. However, the Court dismissed the claim and stated that ‘the arbitration agreement will not retroactively be null and void because of the termination of the license agreement and Plaintiff ’s argument in this respect is improper.’ The Intellectual Property High Court dismissed an appeal. Both courts clearly supported the internationally accepted separability (or severability) doctrine set out in the Model Law provisions (and also inferred under earlier law in Japan), namely that ‘the arbitration clause in a contract is considered to be separate from the main contract of which it forms part and, as such, survives the termination of the contract.’70 This was despite the dispute arising in the context of intellectual property, and judicial acknowledgement that the question of patent validity was not arbitrable and must instead be decided by the Japan Patent Office.71 The Tokyo District Court further affirmed the separability doctrine in a decision rendered on 28 January 2015, declining to hear an insolvency law claim by a foreign shipowner against a Japanese time charterer that had been entered into corporate reorganisation proceedings.72

3.2.2.  Restrictive Use of Public Policy to Set Aside Arbitral Awards There are two milestone cases that illustrate the judiciary’s approach to applying public policy in arbitration cases. Both examples favour the restrictive use of public policy. This is most obvious in the first case, where the court refused to set aside the award; but it is also apparent from the second case, where the award was set aside. 3.2.2.1.  The AIU Case73 In this case, the award was rendered in 2008 in Japan in a dispute between AIU and X. The losing party in this arbitration requested the Tokyo District Court to set aside the award, in which X was ordered to pay NT$2.688 billion and related legal fees to AIU. X relied on the following grounds under the Arbitration Law: (1) it had been unable to defend in the arbitral proceedings (Article 44(1)(iv)); and (2) the arbitral award was in violation of Japan’s public policy (Article 44(1)(vi)). The court rejected both arguments as follows. The Court reasoned that ‘inability to defend in the arbitral proceedings’ must be construed narrowly, holding that an arbitral award is regarded as a final decision and thereby courts may set aside an arbitral award only when significant violation of due process exists. Rejecting the second argument, the Court also favoured a narrow interpretation of the public policy provisions in the Arbitration Law. Unreasonableness of fact findings or legal decisions by the arbitral tribunal was not sufficient ground to set aside an arbitral award.

70  Nigel Blackaby, ‘Redfern and Hunter on International Arbitration’ in Constantine Partasides, Alan Redfern, and Martin Hunter (eds), International Arbitration 6th student version edn (Oxford, Oxford University Press, 2015) 104. 71  Heath and Nottage (n 69). 72  Polestar Ship Line SA v The Sanko Steamship Co Ltd (Tokyo District Court, 28 January 2015) 2258 Hanrei Jiho 100, noted by Nakamura (n 68) at 5–6. The charterparty contract itself was also governed by English law. 73  X KK v American International Underwriters Ltd (Tokyo District Court, 29 July, 2009), Hei 20 (Chu) no 3, 292 Hanrei Times 1304, and X KK v American International Underwriters Ltd (Tokyo High Court, 26 February 2010). For the English summary of these cases, see Hiroyuki Tezuka and Yutaro Kawabata, ‘Japan’ in International Arbitration Review, European Lawyer Reference Series (England, Sweet & Maxwell, 2012) 296–306.

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The Tokyo High Court rejected an appeal, following almost the same reasoning.74 The fact that the courts narrowly interpreted potentially expansive grounds such as due process and public policy evidences their respect for the autonomous character of arbitration. 3.2.2.2.  The Blast-Furnace Slag Case75 In this case, the plaintiff requested the Tokyo District Court to set aside a JCAA award on the ground that there was a violation of procedural public policy. The Court accepted the request and set aside the award. While the Court stated that arbitration rests on the principle of party autonomy, and therefore undue intervention should be prohibited, the Court found, in view of the need to protect minimum due process in arbitration, that the tribunal had erroneously decided that certain material facts were not disputed and that the tribunal would have reached a different conclusion had the tribunal correctly ascertained the material facts. The Tokyo District Court reasoned that: Regardless of the law governing the arbitration proceedings, in light of the Arbitration Law’s provisions with respect to procedure and their purposes, [the court] cannot affirm that an award rendered pursuant to an arbitration procedure which violates the procedural public policy of Japan [to have the same effect as a final judgment rendered by the court] because the content of [the award] does not adhere to procedure in accordance with the procedural public policy [of Japan] and therefore violates the fundamental rules of law of Japan, and consequently, such award shall fall under the grounds for setting aside an award provided in Article 44(1)(viii) of the Arbitration Law.

The Tokyo High Court upheld the first-instance decision. The appellant’s principal arguments on the procedural public policy ground where that: (1) the public policy ground under Article 44(1)(viii) of the Japanese Arbitration Act does not include procedural public policy; and (2) even if so included, the issue of material facts does not fall within the scope of the procedural public policy. The Tokyo High Court rejected the first argument, in accordance with the internationally accepted view that public policy provisions in both the Model Law and the New York Convention cover not only substantive public policy but also procedural public policy. To deny the second argument, the High Court cited Article 34.2(b)(ii) of the Model Law, which provides that ‘an arbitral award may be set aside by the court if the court finds that the award is in conflict with the public policy of this state.’ (emphasis added) Thus, an international (or transnational) public policy standard was not expressly adopted. According to the Court, the Model Law drafters considered that public policy may differ depending on the legal system or situation of each state. Hence, referring to the corresponding Article 44(1)(viii) of the Arbitration Law, which refers to the situation where ‘the content of the arbitral award is against public policy in Japan’ as a ground for setting aside arbitral awards, the Court held that existence of a

74 

X KK v American International Underwriters Ltd (Tokyo High Court, 26 February 2010). KK X v Y Inc (Tokyo District Court, 13 June 2011) Hei 21 (Chu) no 6; 58 Hanrei Jihou 2128, and KK X v Y Inc (Tokyo High Court, 13 March 2012), Hei 23 (Ra) no 1334. For the English summary of the judgment of the first trial, see, Tezuka and Kawabata (n 73) 305–06, and Junichi Tobimatsu, ‘Is “Public Policy” and Authorization to Take a Second Look at an Arbitration Award? Not in Japan’, available online: http://uk.practicallaw. com/3-535-3518. 75 

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violation of public policy under Article 44(1)(viii) should be determined on a case by case basis, taking into account the fundamental legal order of Japan. The Tokyo High Court then referred to Article 338(1)(9) of the JCCP which allows parties to file an action for a re-trial where there is an omission in a determination of material matters that should have affected a judgment. The Court stated that Article 338(1)(9) constitutes a part of Japanese procedural public policy and so upheld the first instance decision. Even though the Tokyo District and High Courts ordered the arbitral award to be set aside, this does not illustrate that Japanese courts interfere with arbitration aggressively. Their application of the ‘public policy’ grounds was instead restrictive, focusing on violations of fundamental legal principles in Japan.76 The courts acknowledged that the ‘public policy’ ground should not be construed expansively, but added that blind recognition of an arbitral award on the basis of party autonomy would clearly undermine the dignity of the arbitral proceeding.77 In this case, the main issue was to determine whether the payment of technical service fees related to the manufacturing licence had been made in accordance with the contract. In the arbitration, the sole arbitrator stipulated, in the arbitral award, that the technical service fees were paid to the respondent (the plaintiff in the subsequent court proceedings) as distribution profits from the slag sales formerly operated by a joint venture between the plaintiff and defendant. In fact, during the arbitral proceedings, the plaintiff had not admitted that the technical service fee was given as a distribution of profits from the joint business. Therefore, there was sufficient reason to set aside the award, and this judgment should not be considered as the rule but rather as the exception, as is often pointed out by commentators.78

3.3.  Other Factors Over the last decade, even the most prominent arbitration institution in Japan, the JCAA, has received around 10–20 cases per year. TOMAC reportedly has a similar caseload.79 In stark contrast, as indicated in Table 1 below, the ICC receives hundreds of arbitration filings per year.80

76 For similar standards expressed recently by Australian courts, which also do not refer expressly to ‘­international public policy’ (but sometimes emphasise that an assessment of what is ‘fundamental’ requires an appreciation that the parties have chosen an international dispute resolution mechanism), see Morrison and Nottage (n 65). 77  Takashi Inomata, ‘Case Analysis-Tokyo Dist. Ct., 13 June, 2011’ [in Japanese], Hanrei Jihou 2145 (2012), 161–69. See also Yasuhei Taniguchi, ‘Violation of Procedural Public Policy as a Ground for Setting Aside Arbitral Awards’ [in Japanese] in Miki, Tezuka and Hironaka (eds) (n 20) 302–26. 78  Hiroyuki Tezuka, ‘The New Arbitration Law and International Commercial Arbitration [in Japanese]’ in Miki, Tezuka and Hironaka (eds) (n 20) 68. In a recent case, Osaka High Court set aside an arbitral award issued by a JCAA tribunal on the ground that the arbitrators did not fulfil conflicts of interest and disclosure requirements: See X v Y (Osaka High Court, 28 June 2016) Hei 27 (Ra) no 547; 32 Hanrei Jihou 2319. See also Tetsuo Morishita, ‘Setting aside of a JCAA arbitral award and violation of the arbitrators’ duty of disclosure’ [in Japanese] Jurist, no 1505, 315–16. 79  Nakamura and Nottage (n 10) 227 (graphical depiction of JCAA case filings annually from 1950 to 2010) and 253. 80  Hiroyuki Tezuka and Yoko Maeda, ‘Development of arbitration in Asia, and Japan’ [in Japanese] (2015) 1084 Horitsu Jiho 13.

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Table 1:  New requests for arbitration: JCAA and ICC

ICC81 JCAA82

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

599

663

817

793

796

759

767

791

801

966

15

12

18

27

19

19

26

14

20

18

Although the demand for arbitration still appears to be small, Japanese arbitration institutions have been making a steady effort to keep up with international trends in the international arbitration market in order to become more competitive. For example, the JCAA has upgraded its arbitration rules several times since it issued its first rules in 1954. The first revision was in 1963, and then further revisions occurred in 1971 and 1989.83 In 1992, the JCAA reformed its rules comprehensively, including English as a possible language for the arbitration proceeding.84 As a result, the JCAA became more convenient for foreign corporations. After minor modifications in 1995 and 1997 (on arbitrators’ remuneration), a comprehensive revision took place in 2004 under the influence of the legislative reform of 2003, for the purpose of making its rules better align with that of other international arbitration institutions.85 For example, Article 13 of the 2004 rules provided limited liability of arbitrators and the JCAA (as mentioned above).86 In 2008, the JCAA issued an amended version of Regulations for Arbitrator’s Remuneration, which doubled the limit on the maximum hourly rate for arbitrators. Previously, international arbitrators had often complained that the institution’s remuneration was so low that they hesitated to conduct proceedings in Japan.87 The latest amendment was made in 2014 ‘to reflect [better] its practice and to conform with current trends such as the 2010 amendments to the UNCITRAL ­Arbitration

81 International Chamber of Commerce, ‘ICC Statistical Reports’, library.iccwbo.org/dr-statisticalreports. htm. About the statistics of 2016, see International Chamber of Commerce, ‘ICC reveals record number of new Arbitration cases filed in 2016’, www.iccwbo.org/media-wall/news-speeches/icc-reveals-record-numbernew-arbitration-cases-filed-2016/. Only a limited number of ICC arbitration cases has a place of arbitration in Japan, tabulated as follows:

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

4

4

3

5

3

5

3

2

2

2

See International Chamber of Commerce, ‘ICC Statistical Reports’, library.iccwbo.org/dr-statisticalreports.htm. 82  Based on statistics provided by the JCAA. 83  Yasuhei Taniguchi, Akira Takakuwa, Yoshimitsu Aoyama and Masato Dogauchi, Commentary on Arbitration Rules of the Japan Commercial Arbitration Association [in Japanese] (Tokyo, The Japan Commercial Arbitration Association, 1999) 23–24. 84  Before then, only Japanese could be used as the language in JCAA arbitrations, even where negotiation beforehand had been delivered in English. See Charles Ragan, ‘Arbitration in Japan: Using Alternative Methods of Resolving Disputes’ (1992) 14(10) East Asian Executive Reports 8. 85  Phil Taylor, ‘Japan’s Arbitration Phobia’, AsiaLaw (2008). Retrieved from ProQuest. 86  As for international movements on arbitrators’ immunity from liability, see Pierre Lalive, ‘Irresponsibility in International Commercial Arbitration’ (1999) 7(2) Asia Pacific Law Review 161–76. For the details on the 2004 reform of the JCAA Rules, see Gerald McAlinn and Luke Nottage, ‘Changing the (JCAA) Rules: Improving International Commercial Arbitration’ (2004) 18 Journal of Japanese Law 23–36. 87 Tatsuya Nakamura, ‘Investigation of Arbitration for JCAA Arbitration and Japanese Companies’ [in J­ apanese] (2009) 56(1) JCA Journal 43.

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Rules and those of other arbitral institutions.’88 In this reform, culminating in Rules in effect from 10 December 2015, current issues in the international arbitration area were addressed, such as emergency arbitrators, interim relief, expedited proceedings and ­multi-party arbitration.89 Similarly, TOMAC has frequently revised its arbitration rules,90 but more recently: in 2001, 2004, 2010 and 2014. For the Rules of Simplified Arbitration and the Rules of Small Claims Arbitration Procedure, modifications were made in 2001, 2004 and 2014. These efforts by arbitration institutions have not spurred an increase in the number of arbitration cases handled by JCAA, as indicated by the Table of Arbitration Requests set out above. Yet it is too early to conclude that the revisions have been without effect. There may be other reasons holding back the growth of arbitration cases in Japan. Each institution has a narrow specialisation, as indicated above (section 2.2.1), and none has become a general arbitration institution able to receive a wide range of arbitration cases. For example, JCAA mainly hears commercial disputes, while TOMAC deals with maritime disputes. Without further growth in institutional expertise, and without a critical mass of cases, their competitiveness in the eyes of potential users may be limited—especially users or legal advisors abroad, able to compare the larger caseloads increasingly reported by other institutions outside Japan.91 Other regional venues, let alone longer-established traditional institutions like the ICC, have benefitted from ‘first-mover’ advantages.92 In addition, such providers and arbitrators in ad hoc proceedings are free to conduct arbitrations with the seat in Japan, competing with the Japanese arbitral institutions.

3.4.  What Drives Reform? Arbitral institutions and even the judiciary have arguably implemented changes at a much faster pace, compared to the one-off legislative reform in 2003.

3.4.1.  Legislative, Judicial and Institutional Elements Building easier access into the international arbitration market in Japan appears to have been a major driver behind Japanese arbitration reforms in recent decades. The 2003 legislative reform introduced many elements of the 1985 Model Law regime, which is aimed to increase the attractiveness of international arbitration. The judicial system also appears to be supportive of this effort to connect the Japanese arbitration market to the international community.

88  JCAA, ‘Key Points of Proposed Amendment to the Commercial Arbitration Rules’, 12 August 2013, available online: www.jcaa.or.jp/new/docs/kaiseiten2e.pdf. See also JCAA, ‘The Key Points of The 2014 Amendment to the Commercial Arbitration Rules’ (2014) 31 JCAA Newsletter 1–12. 89  Lars Markert, ‘The JCAA Arbitration Rules 2014—One Step Forward in the Modernization of Japanese ­Arbitration’ (2014) 32 JCAA Newsletter 1–5. The 2015 Rules are available at www.jcaa.or.jp/e/arbitration/rules. html. 90  The Japan Shipping Exchange Inc, ‘Arbitration’, available online: www.jseinc.org/tomac/index.html. 91 See, for example, Singapore International Arbitration Centre, ‘Statistics’, available online: www.siac.org. sg/2014-11-03-13-33-43/facts-figures/statistics/64-why-siac. 92  Heath and Nottage (n 69) 782.

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The 2003 legislative reform dramatically improved the legal context for Japan to be selected as the seat of international arbitration, compared to when the arbitration procedures were governed by the century old LCPPNAP. It is unclear to what extent Japan’s lack of acceptance of the 2006 amendments to the Model Law may affect modernisation of Japanese arbitration instruments compare with other jurisdictions. This is because only a limited number of jurisdictions have so far adopted the 2006 amendments.93 The judiciary has supported this legislative reform by rendering judgments that are in line with the reform, clearly acknowledging the autonomous character of arbitration. The courts carefully studied the perspectives of the Model Law drafters to better understand the objective of the Arbitration Law. Thus, they indirectly engage in the international debate over the trajectory of international arbitration. Their primary focus is filling apparent gaps in specific cases, drawing on the international instruments’ underlying principles. In the common law tradition, the courts are expected to find but also develop the law. By contrast, the principal mandate of Japanese courts is to apply laws to specific cases or facts. Certainly, Japanese courts, especially the Supreme Court, sometimes act as de facto lawmakers by issuing judgments in light of evolving social situations.94 They can then reflect their views on society in their rulings, which may eventually become the foundation for new legislation. However, such a phenomenon has not been evident in international arbitration law in Japan.95 Accordingly, there is no clear indication yet whether courts have the explicit intention to promote or support international arbitration. In the cases highlighted in this chapter, the courts refrained from over-interfering with international arbitration in accordance with the policy of the Arbitration Law. But if a court issues a judgment that looks pro-arbitration, such a characteristic may be merely a reflection of the underlying legislation’s pro-arbitration policy. To that extent, the Japanese judiciary has made a credible effort to comply with the legislative reforms, in turn heavily influenced by international developments.96 In addition, judges have played a lesser role on the relevant law reform bodies than in areas where there is more accumulated case law and/or less influence from a particular source abroad.97 By contrast, the judiciary in common law jurisdictions in the region (notably Hong Kong and Singapore) play much more important and visible roles in directly and indirectly shaping the development of arbitration law. This tendency may also reflect experiences of those judges as advocates in arbitral proceedings before being appointed

93 ‘Status: UNCITRAL Model Law on International Commercial Arbitration (1985), with Amendments as Adopted in 2006’, available online: www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html. 94  John O Haley, ‘The Role of Courts in Making Law in Japan: The Communitarian Conservatism of Japanese Judges’ (2013) 22(3) Pacific Rim Law & Policy Journal 491–503. cf also generally Takao Tanase, Law and the Community: A Critical Assessment of American Liberalism and Japanese Modernity, trans Luke Nottage and Leon Wolff (Cheltenham, Edward Elgar, 2010). 95  Miki and Yamamoto (n 18) 119, noting that a landmark Supreme Court judgment under the LCPPNAP, the Ringling Circus case (Supreme Court, 4 September 1997; Hanrei Times No 969 (1998), 138–45), was not, in the end, specifically reflected in the Arbitration Law. 96 In other fields, such as consumer law since the 1990s, the Japanese judiciary arguably has been more ­pro-active in pursuing or developing the agenda set out by legislative reforms: Nottage (n 8). 97  cf the significant representation of judges (directly, and via secondments to the Ministry of Justice) in the Civil Code reform project, underway informally from 2006 and formally from 2009, outlined in Kozuka and ­Nottage (n 31).

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mid-career to the judiciary, and some ongoing or emerging interest in the field given that judges are quite often selected as arbitrators after retirement; both phenomena are rare for Japanese judges, who almost always spend their entire career in the judiciary. Arbitration institutions, being independent of the government and judicial system, are free to pursue their own course to improve their services. Certainly, as in the JCAA, staff of the institutions sometimes join the committee or research group that discusses the reform of arbitration legislation. In turn, institutional reforms can proceed under the influence of legislative reform initiatives.98 However, arbitration institutions ultimately are private professional service providers, so their main focus is to improve their competitiveness, especially in the international arbitration market given the persistent limited attraction of arbitration for domestic disputes (discussed further below). Contrary to the legislature, which needs to follow complicated procedures in their course of operations and give priority to any more pressing socio-political issues, arbitral institutions may revise their rules with a simpler procedure, and more quickly and consistently. Accordingly, institutional reforms have occurred more frequently than legislative reforms. The usual objective is to keep up with the latest developments in the international sphere, not limited to the (more slow-moving) initiatives by bodies such as UNCITRAL. Since the arbitration market within Japan is still not so active and specialisation between each arbitration institution is clear-cut, arbitration institutions desire to be more competitive in the international market rather than the domestic arbitration market. This is one of the reasons why the Japanese arbitration institutions, especially the JCAA, pay close attention to developments in foreign arbitration institutions. However, as with some counterparts abroad (especially those with lower caseloads, as in Australia),99 the JCAA tends to play catch-up rather than to venture out in new directions.

3.4.2.  Top-down Versus Bottom-up Reform The 2003 legislative reform in Japan was a comprehensive top-down reform, part of an ambitious package aimed at improving ADR and indeed court procedures more widely. It significantly changed the legal framework for arbitration in the country. However, nothing comes from nothing, and there had been some thorough preparatory efforts before the reform, on the part of scholars and practitioners as well as parts of the government.100 One of the organisations that first started calling for legislative reform was an ‘Arbitration Study Group’, established by leading academics in Civil Procedure Law in Japan, such as Professors Akira Mikazuki and Tsunahiro Kikui. The Group was established in 1977 and published a ‘Provisional Draft of Arbitration Law’ in 1989. Shortly after the issuance of the ‘Provisional Draft’, the Japan Association of the Law of Civil Procedure, the only academic circle dedicated to promoting the research in that field, held a symposium on arbitration in the same year. In the 1990s, the movement towards the arbitration law reform became more

98 

See, for example, McAlinn and Nottage (n 86). cf Malcolm Holmes, Luke Nottage, and Robert Tang, ‘The 2016 Rules of the Australian Centre for International Commercial Arbitration: Towards Further “Cultural Reform”’ (2016) 12(2) Asian International Arbitration Journal 211–34, available online: http://ssrn.com/abstract=2786839. 100 Miki and Yamamoto (n 18), citing comments of Professor Miki, Professor Yamamoto, and Professor Idei, 6–7. 99 

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active. In 1992, the International Commercial Arbitration Committee organised a ‘Study Group for Upgrading International Arbitration System’. JFBA co-founded a ‘Study Group for International Arbitration Attorneys’, together with the Ministry of Justice, in 1994. The discussion in this group crystallised into an amendment to the Foreign Lawyers Law in 1996 (outlined above). Furthermore, an ‘Arbitration Law Study Group’ was established within the Civil Procedure Law Division of Legislative Council of the Ministry of Justice in 1996. The Council had a heavy workload and prioritised other reforms, but the Study Group’s research informed deliberations that were resumed following the 2001 Recommendations of the Justice System Reform Council (also outlined above). It is worth noting that the Japan Association for the Law of Arbitration and Alternative Dispute Resolution was established in 2004, aiming at the further development of arbitration in Japan. These various more bottom-up initiatives preceded the top-down legislative reform achieved in 2003. This pattern reveals some important lessons from a comparative perspective. First, Japanese law reform proceeds with more input from academics, often informally before formally through ad hoc reform committees, than in many common law jurisdictions.101 Second, the business sector can still play a role, but here it was quite diffuse—seeking and obtaining a broad array of reforms throughout Japan’s justice system after the ‘lost decade’ of economic stagnation over the 1990s102—and the business community placed more attention on reforming other substantive law fields (such as corporate law).103 Third, the legal profession did not and does not play such an active role in pressing for ongoing reforms to arbitration law—again because of other priorities, but also because the practice of law in Japan (even within several now very large law firms) remains quite domestic-focused.104

3.4.3.  Special Considerations Since the Japanese legal system is historically rooted in the European civil law tradition, albeit with growing influences from common law especially after World War II, statutes are always at the centre of legal debate. The Arbitration Law clearly adopted the Model Law, so courts are basically allowed only to intervene on limited grounds in arbitral proceedings held within their jurisdiction, in individual cases as requested by the parties. Consistently with this ethos, there is no case other than the Blast-Furnace Slag Case (as mentioned above) where the court has set aside an arbitral award. In addition, almost all foreign ­arbitral awards have been enforced within Japan.105 Further, that Model Law based statute is in effect all over Japan since the latter is a unitary jurisdiction and courts are centralised (even though not bound by a strict ­doctrine

101 

See also, for example, regarding contract law, Kozuka and Nottage (n 31). Kitagawa and Nottage (n 48). See, for example, Bruce Aronson, Souichirou Kozuka and Luke Nottage, ‘Corporate Legislation in Japan’, in Haghirian (ed) (n 8) 103–13. 104  See generally, for example, Bruce E Aronson, ‘Elite Law Firm Mergers and Reputational Competition: Is ­Bigger Really Better? An International Comparison’ (2007) 40(3) Vanderbilt Journal of Transnational Law 763–831, available online: http://ssrn.com/abstract=985096. 105 Kurita Tetsuo, Yoshida Takeshi, Tateno Tomohiro and Oomori Yuichiro, International Commercial ­Arbitration in Asia [in Japanese] (Tokyo, LexisNexis Japan, 2014) 338–39; Hiroshi Harata, ‘Interpretation and Application of the New York Convention in Japan’ in George Berman (ed), New York Convention (Berlin, Springer, 2017) 585–615. 102 

103 

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of ­precedence). As such, case law development in Japan is more consistent than in some federal and/or state legal systems.106 This has advantages, in making outcomes more predictable (at least for those who can access and read Japanese-language sources) and thereby minimising unnecessary litigation, as well as providing better guidance for arbitrators engaged in proceedings within Japan. Yet a paucity of case law has disadvantages from the systemic perspective of promoting arbitration, especially to an international audience. In other countries such as Australia, even if judgments are rendered that commentators view as contrary to the rules or spirit of international instruments such as the Model Law or New York Convention,107 they provide an opportunity to highlight some more ‘pro-­ arbitration’ judgments and possible alternative interpretations, or to call for further legislative reforms.108 Such reactions can reach a wider (mostly English-speaking) audience of international arbitration experts, reminding them that Australia is a credible—albeit still not very popular—option as a seat.

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform Active movements in this field largely came to an end with the 2003 reform in Japan, and there are few reform initiatives evident today. In the legislative branch, there is no clear indication that the government is planning to prepare a fresh round of reforms.109 The motivation for the last reform was to follow international developments surrounding arbitration, and the government achieved that objective sufficiently at that moment by adopting the 1985 UNCITRAL Model Law, adding also a few elements based on discussions towards what became the 2006 amendments to the Model Law.110 The government will probably only consider further reform if and when the Model Law is reformed again, and more comprehensively. After all, the 2006 revisions mostly liberalised writing requirements and promoted tribunal-issued interim measures (both partly available under the current Japanese law), and added general intepretative provisions to encourage pro-arbitration and internationalist interpretations (which the Japanese courts largely do anyway).111 106 

Such as Australia: see generally Nottage and Monichino (n 61). for example, Albert Monichino, Luke Nottage and Diana Hu, ‘International Arbitration in Australia: Selected Case Notes and Trends’ (2012) 19 Australian Journal of International Law 181–212. 108  See, for example, Luke Nottage, ‘International Commercial Arbitration in Australia: What’s New and What’s Next?’ (2013) 30(5) Journal of International Arbitration 465–94. 109  Even among Japanese scholars, there is limited discussion toward the next round of arbitration law reform. For example, a search through ‘Cinii Article’, the largest Japanese database of articles published in academic society journals, university research bulletins, and materials in the National Diet Library’s Japanese Periodicals Index Database (http://ci.nii.ac.jp/en/), indicates that only a few articles have introduced in detail the UNCITRAL Model Law revisions in 2006. Not only the government but also Japanese academics seem to be quite unwilling to adopt the 2006 amendments, and there has been little focused interest in arbitration law reform from the business sector and even the legal profession (as explained elsewhere). 110  See discussions above in s 3.1.2. 111  See generally Dan Lewis, The Interpretation and Uniformity of the UNCITRAL Model Law on International Commercial Arbitration: Focusing on Australia, Hong Kong and Singapore (Alphen aan den Rijn, Wolters Kluwer, 2016). 107  See,

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By contrast, judicial modifications may continue steadily as their ‘reforms’ occur by applying and gap-filling provisions laid down in statute. Despite the quite narrow scope of the 2006 Model Law amendments, Japanese courts may be able to refer to them (expressly or otherwise) if and when interpreting a few relevant provisions of the Arbitration Law.112 The Model Law and New York Convention regimes have a number of longstanding gaps or areas of uncertainty, generating differences across national courts, so Japanese courts may refer to those developments and international commentaries.113 However, the courts are able to make decisions on significant aspects of international arbitration only if parties have a dispute involving theoretically important aspects. In other words, it is difficult for the courts to initiate systematic reform of international commercial arbitration. As for other possible future developments, according to the former chairperson of the JCAA, this arbitration institution aims to: 1. Continuously update its arbitration rules taking into account international movements; 2. Improve its arbitration administration service if any difficulties arise; 3. Consider planning to upgrade its facilities and equipment, as budget permits.114 Such continuous efforts will push Japan forward, a step closer to international standards; but they are not enough, especially as regional neighbours invest significantly for example in new facilities (beginning with Singapore, then Malaysia, Hong Kong and Korea). Immediate reforms are necessary to improve the arbitration market generally as well as arbitrator professionalism (discussed in the next section).

4.2.  Enhancing Competitiveness, Independence and Professionalism As mentioned above, the Japanese arbitration market—comprising the arbitration market within Japan and Japan’s share of the international arbitration market—is still not large when compared to other countries’ markets. Calls for arbitration reform, meaning expectations for Japanese arbitration, are not high. This can be explained by supply and demand. The primary impediment for the future growth of the Japanese arbitration market is its continued lack of popularity within and outside of Japan. The cause of this will be briefly analysed below, followed by a potential solution. For resolving domestic disputes, first, the credibility of the Japanese court system is high among individual citizens and firms.115 The Japanese people trust judges and respect their decisions, and there has been little scandal reported on the Japanese court system.

112  Professor Miki suggests that it is necessary to discuss whether the 2006 Model Law amendments should be reflected in the interpretation of Arts 13(2) and (5), and Art 24 of the Arbitration Law: see Koichi Miki, ‘The Present and the Future of Arbitration (2)’ [in Japanese]’ (2008) 55(6) JCA Journal 13. Nonetheless, few cases have been reported that explicitly took the 2006 Model Law amendments into account, which might be justified as merely elaborating on the core principles of the Model Law regime. 113  See, for example, the recent Guide available at http://newyorkconvention1958.org/ and www.uncitral.org/ uncitral/en/case_law/digests/mal2012.html. 114  Hiroshi Yokokawa, ‘The Approaches of the Japan Commercial Arbitration Association’ [in Japanese], (2015) 1084 Horitsu Jiho 49–50. 115  John O Haley, ‘The Japanese Judiciary: Maintaining Integrity, Autonomy, and the Public Trust’ in Daniel H Foote (ed), Law in Japan: A Turning Point (Seattle, University of Washington Press, 2007) 99.

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Thanks to a difficult qualifying examination, an extensive judicial training programme, and active mentoring during a largely lifelong career as judges, their decisions maintain good ­quality.116 This is very different from countries in the region that attract large numbers of arbitration filings, such as the People’s Republic of China and recently Vietnam. Second, Japanese people tend to think that there is little gain in using arbitration instead of going to court. With respect to special expertise,117 one potential benefit of arbitration compared to litigation, Japanese courts have dedicated divisions to deal with specific issues, such as intellectual property disputes. In addition, cost-effectiveness is not the primary benefit of arbitration,118 since the salary of the judges and cost of the court proceedings is mostly covered by tax revenues, while the parties in arbitration have to pay (sometimes very high) remuneration to arbitrators and administrative fees out of their pockets. In addition, court litigation in Japan is quite quick and cost-effective,119 compared with jurisdictions in comparable developed economies (especially common law jurisdictions such as Hong Kong, Singapore or Australia where lawyers’ hourly rates are relatively high). Third, commentators (especially within Japan) still maintain the view that Japanese ­people have traditionally favoured compromise or amicable settlement over a binding legal resolution in order to avoid overt conflicts, as a result of living in the crowded, densely populated society over centuries.120 Earlier commentators also stressed that decisions determining who is right or wrong have been disfavoured by the majority of traditional Japanese.121 For example, a prominent scholar in Meiji period, Yukichi Fukuzawa, severely criticised people using litigation, since he thought it may bring disgrace or leave the root of the evil to the people.122 Accordingly, judicial settlement or conciliation has traditionally been popular, while litigation or arbitration has been used less frequently.123 Admittedly, as Japan’s civil litigation rate started to rise from the 1970s (albeit off a still very low base), such ‘culturalist’ explanations started to be queried. It was argued instead the low rate was instead caused by ‘institutional barriers’ to litigation (such as low numbers of lawyers), possibly reinforced by ‘elite management’ of social problems (by conservative politicians, bureaucrats and big business interests), although it was also pointed out that low litigation rates and high settlements could be explained by the comparatively high predictability of Japanese law (at least in some fields, such as traffic accident compensation claims).124 Recently, studies across various fields have noted how law-related behaviour in Japan is driven by complex combinations of ‘cultural’ norms (impacting directly, or

116 

Yoshihisa Hayakawa, ‘Historical Phase of Arbitration in Japan’ [in Japanese] (2015) 1084 Horitsu Jiho 21. ibid, 21. 118  Such a phenomenon has been observed across many countries: Margaret L Moses, The Principles and Practice of International Commercial Arbitration 3rd edn (Cambridge and New York, Cambridge University Press, 2017) 4. 119  For improvements in case disposition times since the 1990s, underpinned by Code of Civil Procedure reforms, see, for example, Nottage (n 50). 120  Hayakawa (n 116) 19. See also Shuji Yanase and Joel Greer, ‘International Arbitration in Japan: Untouched Opportunities’ [in Japanese] (2012) 975 NBL Journal 28–31. 121  Takeyoshi Kawashima, Japanese Legal Consciousness [in Japanese] (Tokyo, Iwanamishoten, 1967) 140. 122  Shiro Kawashima, Japanese and Litigation [in Japanese] (Kyoto, Horitsubunkasha, 2010) 128. 123  Yanase and Greer (n 120) 30. 124  Abe and Nottage (n 66). 117 

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indirectly via more or less entrenched organisational forms) and economically rational cost–benefit assessments.125 What is clear is that court-annexed mediation schemes remain a frequently-used and cost-effective alternative.126 Such tendencies have been reinforced further by the government improving procedures for civil trials127 and developing government-supported ADR schemes.128 Given such longstanding alternatives, there has never been a sufficient track record for using arbitration extensively to resolve disputes in Japan. Japanese practitioners therefore still tend to avoid using arbitration, for fear of exposing themselves to unexpected results (and consequent criticism from clients).129 Turning to the international level, Japan is still not recognised as a popular arbitration seat, unlike London, Paris, Hong Kong, Singapore and Geneva. Those are reportedly the most preferred arbitration seats in 2015, due primarily to their reputation and recognition.130 These attractions are underpinned by prominent international arbitration institutions headquartered or active in these five cities, especially the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC). Clearly this is not an optimal condition from which to attract international attention and develop more appetite for arbitration. Since those dominant players have already captured the market, there might be no or very little room left for Japan. There are also impediments related to Japanese corporate behaviour. Even large Japanese companies (with more negotiating power to seek arbitration with the seat in Japan) often prefer instead to press for an exclusive jurisdiction clause providing for local courts. This has the benefit for them of eventual court proceedings being conducted in Japanese, and a civil procedure rule that even a successful claimant cannot obtain its reasonable lawyers’ fees in a contract-based dispute. Both may be important since Japanese companies have traditionally considered that they are more likely to be subject to claims than to have to initiate them against foreign parties.131 This perception, which may reflect a general cultural norm but is reinforced by the organisational structure of large Japanese companies, explains the 125  See, for example, Mark West, ‘The Resolution of Karaoke Disputes: The Calculus of Institutions and Social Capital’ (2002) 28(2) The Journal of Japanese Studies available online: http://ssrn.com/abstract=339880; for consumer credit, see Kozuka and Nottage (n 31); and generally Tanase (n 94); and Luke Nottage, ‘The Cultural (Re) Turn in Japanese Law Studies’ (2009) 39(4) Victoria University of Wellington Law Review 755–77. 126  For statistics, see Nottage (n 50). 127  Yasuhei Taniguchi, ‘The Development of the Adversary System in Japanese Civil Procedure’ in Foote (ed) (115) 80–98; Nottage (n 50). 128  Aya Yamada, ‘ADR in Japan: Does the New Law Liberalize ADR from Historical Shackles or Legalize It?’ (2009) 1 Contemporary Asia Arbitration Journal 1–24; Joel Rheuben and Luke Nottage, ‘Now That the (Radioactive) Dust Has Settled: Resolution of Claims from the Fukushima Nuclear Disaster’ (October 2013) Asian Dispute Review 126–31. 129  JCAA, ‘The Methods of Activating International Commercial Arbitration in Japan from the Perspectives of Japanese Companies’ (2008) 55(8) JCA Journal 55 64–73; (2008) 9, 48–55; and (2008) 10, 34–45. Risk-aversion is another ‘cultural’ trait often remarked with respect to Japanese decision-making, although it is also highlighted more widely by social psychologists: see Kozuka and Nottage (n 31) for consumer credit. 130  Queen Mary University of London School of International Arbitration, ‘2015 International Arbitration ­Survey: Improvements and Innovations in International Arbitration’, 11–12, available online: www.arbitration. qmul.ac.uk/docs/164761.pdf. 131  For a critique of such ‘finger pointing’ clauses from an English lawyer based in Tokyo, see, Peter Godwin, ‘The Arbitration in Asia—the Good, the Bad and the Ugly!’ (2016) 22 Kuala Lumpur Regional Centre for ­Arbitration Newsletter; Peter Godwin, ‘“Finger-Pointing” Arbitration Clauses—Don’t Use Them!’ (2006) 43 Herbert Smith— Dispute Avoidance Newsletter.

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tendency still for Japanese firms—when they do agree to arbitration clauses—to seek a provision whereby the seat and/or arbitral institution for the arbitration shall be in the state of the respondent. The same perception, which nowadays may be quite over-optimistic, also seems to lie behind the historical readiness of Japanese firms (and their legal advisors) to agree on arbitration clauses providing simply for the seat abroad. That readiness can be inferred for example from the significant numbers of cases involving Japanese parties reported by overseas arbitral institutions and/or indeed overseas courts.132 What then can make ‘Japanese’ international arbitration popular and help expand the Japanese arbitration market? Domestically, it is necessary to increase public awareness of arbitration itself. More educational opportunities on arbitration should be provided in addition to current programmes in universities.133 For instance, the situation should change dramatically if the Ministry of Justice decided to include arbitration in the National Bar Exam as a required subject or an elective subject. Providing LLM courses with an exclusive focus on international dispute settlement—including investment treaty arbitration, already a burgeoning field outside Japan—could be another option for universities. ­Furthermore, courses may be offered on arbitration to general public in business who have no legal background in academic training, although institutions like the JCAA have long made persistent efforts in this respect. Some people might still not be convinced about the utility of international arbitration. On this point, Japanese arbitration institutions should pay careful attention to Singapore where courts and arbitration institutions are competing with one another, but also mutually supporting each other.134 Internationally, it is necessary to promote Japanese international arbitration in the global marketplace. Budget is always limited, but arbitration institutions and especially the Japanese government (which has been much less forthcoming than say its Singaporean counterpart)135 has to accept that it takes money to make money. Having a solid Model Law legislative framework, bringing Japanese law up to global standards, makes such promotional activities more worthwhile. Commentators suggest that Japan has failed to produce a sufficient number of ‘international’ arbitrators who are able to hear transnational disputes.136 This view, and indeed the number of such arbitrators, is difficult to confirm or deny. But it is understandable given that the Japanese arbitration market is still small, with few cases, so there are few practitioners who have accumulated much experience in this field—even as counsel. 132  For prominent case law from foreign courts involving Japanese parties to arbitration agreements, mostly providing for arbitration outside Japan, see Kitagawa and Nottage (n 48). That also presents detailed statistics on the slow development of in-house corporate legal departments, their interactions with other departments, and preferred dispute settlement mechanisms. 133  After the 2003 legislative reform, arbitration came to be taught in law departments as well as new postgraduate law school programmes established after the 2001 Justice System Reform Council recommendations: see ‘Workshop: Education in Arbitration at Law Department and Law School’ [in Japanese] (2005) 52(4) JCA Journal. Another promising development has been the Intercollegiate Negotiation Competition, held for students in both English and Japanese every December in Tokyo, where one of the two days is dedicated to arbitrating an international contract law dispute (although not arguing issues of arbitration procedural law): see www.negocom.jp/eng/. 134  Michael Hwang, ‘Commercial Courts and International Arbitration—Competitors or Partners?’ (2015) 31 Arbitration International 193–212. 135  Even Japanese government lawyers take a rather purist or strict view of the ‘rule of law’, resulting in a reluctance to settle cases and less support generally for ADR in government-related litigation, compared for example with Australia in recent decades: Luke Nottage and Stephen Green, ‘Who Defends Japan? Government Lawyers and Judicial System Reform in Japan and Australia’ (2011) 13(1) Asian-Pacific Law and Policy Journal 129–73. 136 Tatsuya Nakamura, ‘Future of International Arbitration of Japan’ in Miki, Tezuka and Hironaka (eds) (n 20) 503–04.

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Relatedly, there is no standardised method established yet to evaluate and express the knowledge and skills of arbitration. Establishment of any certification system is left to the discretion of each arbitration institution, which are comparatively fragmented. Established around the time the Arbitration Law was enacted, the JAA does certify arbitrators known to be experts in arbitration,137 and such arbitrators can use the certification as a proof that they have the professional skills of an arbitrator. However, it is not obvious what sort of international experience is required to obtain this certification. One of the easiest solutions to this problem would be to expand cooperation between JAA and the Chartered Institute of Arbitrators in training arbitrators. This may also contribute to energising the arbitration market in Japan. A further challenge is that, until recently, Japan had few large law firms, which in other parts of the world generally play a major role in developing national and international arbitration law instruments and practices.138 Large law firms, by generating advocates for international arbitration proceedings who become known to counterparties and existing arbitrators, are also now fertile training grounds for future arbitrators. Although a new generation of Japanese arbitration counsel and arbitrators is now slowly emerging, it is relatively difficult (and rare) for them to figure prominently in the major international arbitration conferences and other networking opportunities, not least because their own country’s experience remains so limited in terms of caseloads.

5. Conclusion The Japanese arbitration system has several characteristics that could potentially make the country an attractive arbitration destination. It has modern arbitration legislation based on the 1985 UNCITRAL Model Law (and its 2006 amendments, to some extent). Within the jurisdiction, several arbitration institutions exist, which have continuously updated their rules and practices. Reflecting the policy behind the New York Convention and more recently the UNCITRAL Model Law, courts play a supportive role in arbitration. They have the power to supervise arbitration, yet they may exercise this power only in limited and appropriate circumstances. Despite the several reforms to prepare the Japanese legal environment to make it more suitable for international arbitrations to be conducted, there is no sign that the international market has favourably responded to the reforms. Rather, arbitration remains unpopular not only within the country but also outside of the country. This may be partly because the concept of adjudication has not been widely accepted yet in general society, so that Japanese businesspeople, even when they have a serious dispute, tend to prefer an ­amicable settlement through direct negotiations or conciliation. Even where they might benefit from accepting a binding decision from a third-party neutral, litigation is preferred

137  Akira Kawamura, ‘The Approaches of The Japan Arbitrators Association’ [in Japanese] (2015) Horitsu Jiho 51–52. 138  For example, through the committees of the International Bar Association and (to a lesser extent) International Law Association. On the comparatively recent emergence of large law firms in Japan, partly in response to allowing full profit-sharing partnerships with foreign lawyers and the consequent expansion of international law firms in Tokyo from 2004, see Aronson (n 104).

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over a­ rbitration. This is reinforced by economic disincentives to pursue arbitration, given the lower costs of direct negotiations and efficient court procedures in Japan. To make matters worse, there are insufficient arbitrators who can credibly claim to deal effectively with cross-­border disputes. Arguably, the lack of further arbitration law reforms over the last decade exacerbates the persistent lack of popularity. However, the latter situation makes it harder to get the attention of the legislature, especially given the quite technical nature of this field of law, thus creating a vicious circle.139 The 2003 legislative reform was proof of the country’s intention to globalise and modernise its outdated arbitration legislation. In incorporating the Model Law, Japanese ‘localisation’ can be seen in multiple places, providing further evidence that the Japanese legislature has been quite diligently working to bridge the gap between the Japanese arbitration market and the international arena. The drafters decided not to adopt controversial provisions and put some additional articles to adapt the regime more effectively to the existing Japanese legal culture. However, the drafters did not intend to completely localise the international instruments. Rather, they tried to make the Model Law conform to Japanese legal practice and even attempted some innovations, to a reasonable extent. The Model Law itself envisages and even encourages such modifications, because uniformity is the final objective of the instrument but not necessarily an immediate objective; the Model Law is a model legislation, not a treaty. The judgments of the Japanese courts often reflect such a stance of legislation. In this regard, legislative and judicial reforms play complementary roles. In contrast, institutional reforms are independent of those movements and seek to accomplish their purpose; to improve their service and attract more customers. Their various improvements to their arbitration rules have taken place for that purpose. They are not compelled to do such reforms by the judiciary. As the Japanese court maintains the pro-arbitration stance, they strictly restrain themselves from over-interfering with the arbitration process. Hence, arbitration institutions are free from direct or indirect pressure from the judiciary. In other words, judicialisation of the arbitration has not occurred in the country. The legislature, judiciary and arbitral institutions have made quite concerted efforts to promote Japanese arbitration. However, the reform patterns are divergent. Legislative reform is conducted with a macro-view perspective and in a somewhat time-consuming manner that sometimes require long-term bottom-up efforts. Meanwhile, judicial reform keeps focusing at the micro or technical level, in a piecemeal fashion. The reforms take place as a response to practical issues faced in court. Institutional reforms combine both macro and micro approaches. In the course of their frequent revisions of rules, they may therefore change their rules either comprehensively or partially. Accordingly, legislative reform is slow while judicial and institutional reforms are rapid. Of course, reforms will likely be accelerated if and when the market becomes more active. Sooner or later, the Japanese government will have to think about this potential more seriously.140 139  Japan is hardly alone in this respect. For example, Australia did not experience a significant increase in international arbitration cases after adopting the Model Law in 1989, and any increase following 2010 amendments therefore comes off a very low base. This has made it hard to get traction for another round of needed reforms, including corrections of legislative drafting errors: see Garnett and Nottage (n 51), and Nottage (n 108). However, some minor revisions were enacted in 2015, as outlined in this volume. 140  The Japanese government has already started to work towards this direction: ‘Japan to open center for international business arbitration’, Nikkei Asian Review, 18 May 2017, available online: http://asia.nikkei.com/ Politics-Economy/Policy-Politics/Japan-to-open-center-for-international-business-arbitration. See also Yasuhei Taniguchi and Isomi Suzuki (eds), Law and Practice of International Commercial Arbitration [in Japanese] (Tokyo, Maruzenyushodo, 2016) for the recent discussion on Japanese arbitration by experienced commentators.

5 Arbitration Reform in Korea: At the Threshold of a New Era JOONGI KIM

1. Introduction Korea has emerged as one of the fastest growing and sophisticated arbitral jurisdictions in the world. From its humble beginning 50 years ago, Korea has become an established presence in international arbitration, particularly over the past 10 years, both in terms of its depth and breadth. The country’s growth has been made possible by a confluence of factors, including economic development, formation of a modern legal infrastructure, and a series of legislative and regulatory reforms that were first initiated by the government and then propelled by a coalition of users and industry specialists. To further solidify Korea’s stature as an arbitration centre, in 2016, the Korean government promulgated two major legislative initiatives under the auspices of the Ministry of Justice. First, after extensive deliberation, Korea enacted major amendments to the Arbitration Act (hereinafter the ‘Act’) as part of an adoption of key provisions of the 2006 UNCITRAL Model Law on International Commercial Arbitration (2006 Model Law). Second, the government also decided to promote the development of the arbitration industry from an infrastructure standpoint and passed new legislation called the Arbitration Industry Promotion Act. Both laws should help catapult the advancement of Korea-related arbitration and contribute to the country securing its position as a major hub for arbitration in the Asia-Pacific region. Overall, this chapter argues that Korea’s arbitration reforms have come from a combination of top-down and bottom-up efforts that has become an effective coalition. Top-down reforms have been usually spearheaded by the government from a more macro perspective. At the same time, in terms of reforms geared at international arbitration private sector organisations such as the Korean Council of International Arbitration (KOCIA) have served as a key industry voice in developing bottom-up reforms that are more technical and frequent. Legislative and regulatory reforms have generally been measured in pace and are not rapid but significant when they occur.

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2. Background 2.1.  Legislative and Regulatory Framework Korea first promulgated its modern arbitration law, the Arbitration Act, in 1966.1 The Act serves as the backbone of the country’s regulatory framework, covering both domestic and international arbitrations under a single legislative regime. Initially, until the early 1990s, the Korean arbitration market remained nascent and oriented toward the resolution of domestic disputes. In terms of international treaties related to arbitration, Korea previously signed the ICSID Convention in 19672 and the New York Convention in 1973.3 As Korean companies began to expand internationally, they gained exposure to international arbitration involving international arbitration institutions such as the ICC, LCIA, HKIAC and SIAC. During these early years, the number of cases that offered judicial interpretations of the provisions of the Act remained limited. Furthermore, as a civil law country, without stare decisis, only Supreme Court cases had persuasive effect so the number of cases that involved arbitration was further limited. The few arbitration cases that did exist usually involved disputes between domestic parties. Against this backdrop, in 1999, Korea became the first jurisdiction in Northeast Asia and the fifth in Asia overall after Singapore (1994), Sri Lanka (1995), India (1996) and Macao (1998) to adopt the 1985 version of the UNCITRAL Model Law.4 This marked a major landmark in Korea’s arbitration regime that laid the foundation for the substantial growth to follow. The other event that sparked an upsurge in large scale international disputes was the Asian Financial Crisis in 1997.5 In terms of investor-state arbitration (ISA), starting from the 1960s, Korea was among the most active countries in entering into bilateral investment treaties with ISA provisions, initially driven by the need to attract investment inflows. As of June 2017, Korea has entered into 87 BITs, the second most in Asia after China.6 Almost all of Korea’s bilateral or multilateral investment treaties contain ISA as a means for dispute settlement. Korea has recently shifted to including investment protection related provisions as a separate chapter in its free trade agreements (FTAs). Other than the Korea-EU FTA, all of Korea’s free trade agreements include ISA as an option. Following the adoption of the Model Law, therefore, Korea experienced considerable growth in the number of domestic and international arbitration cases and has continued to expand as a significant market in the region. Korea stands as one of the largest trading nations in the world so cross-border commerce remains essential for the expansion of its companies. Korean companies have grown accustomed to including in their transactions dispute resolution clauses that call for arbitration to resolve their disputes, particularly in sectors such as construction, shipbuilding, maritime, technology, and oil and gas. 1 

Act No 1767 of 16 March 1966. Multilateral Treaty No 234 of 21 February 1967. 3  Multilateral Treaty No 471 of 19 February 1973. 4  The Act underwent four minor revisions thereafter in 2001, 2002, 2010 and 2013, before the major revision in 2016, discussed below. 5  ‘International Arbitration Guide for Our Companies’, Republic of Korea Ministry of Justice, 176–77. 6  This includes Korea’s investment treaty with the Belgium-Luxembourg Economic Union, and trilateral treaty with China and Japan. 2 

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2.2.  Institutional Framework Within Korea, the Korean Commercial Arbitration Board (KCAB) remains the preeminent arbitration institution.7 Entering its 50th year, the KCAB has emerged as a major institution that boasts one of the largest caseloads in the world in terms of the number and size of domestic and international disputes, and diversity of parties. A dedicated staff of 40 members oversee the operation of modern arbitration rules for domestic and international disputes. As shown in Table 1 below, the number of cases has increased at a steady rate and recent reports indicate that the size of disputes has considerably grown. In terms of milestones, KCAB registered more than 100 cases on an annual basis for the first time in 1996, more than 200 cases in 2002, more than 300 cases in 2009 and more than 400 cases in 2015. As another sign of KCAB’s enhanced standing, many renowned arbitrators not only serve on the KCAB’s Panel of Arbitrators but are also currently acting on KCAB tribunals in actual disputes. In 2015, KCAB had a record year when it reached over 400 total cases for the first time. The total quantum sought has also steadily increased and even reached over USD 2 billion in 2013. Over the past five years, the number of international cases has averaged over 20 per cent of the institution’s caseload. This remains a significant figure that needs to increase for Korea to become a truly international centre with a global presence that is not confined to domestic disputes as its mainstay. Table 1:  Total Number of New Cases (International/Domestic) Year

KCAB

SIAC

HKIAC

LCIA

ICC

CIETAC

2009

318 (78/240)

160 (114/46)

429 (309/120)

272

817

1,482

2010

316 (52/264)

198 (140/58)

291 (175/126)

246

793

1,352

2011

323 (77/246)

188

275 (179/96)

224

796

1,435

2012

360 (85/275)

235

293 (199/94)

265

759

1,060

2013

338 (77/261)

259

260 (195/65)

290

767

1,256

2014

382 (87/295)

222

252 (234/18)

296

791

1,610

2015

413 (74/339)

271

271 (257/14)

326

801

1,968

Source: KCAB, SIAC, HKIAC, LCIA, ICC, CIETAC

As part of its economic development that was largely made possible through international trade and investment, Korean corporations have also gained extensive arbitration experience with all the major institutions in the world over the past 20 years. Among the leading arbitration institutions, for instance, the ICC and SIAC provide statistics of the nationality of parties. The data confirm that Korean parties have ranked among the most active users of the ICC and in recent years also the SIAC. The growth in the percentage of cases with Korean parties is particularly significant at SIAC, reaching 7.6 per cent of the total number

7  Another institution called the ‘Korean Institution of Arbitration’ was established in 2007, but they do not appear to have a statistically meaningful caseload.

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of cases (Table 2). At the same time, it has been reported that the cases involving Korean parties are on average much larger in terms of quantum.8 Table 2:  Number of Korean Parties in SIAC and ICC Cases Year

SIAC

ICC

Korean Parties

Total Cases

%

Korean Parties

Total Cases

%

2010

12

198

6.06%

–

–

–

2011

7

188

3.72%

26

796

3.26%

2012

13

235

5.53%

41

759

5.40%

2013

19

259

6.50%

24

767

3.12%

2014

17

222

7.60%

35

791

4.42%

Source: KCAB, SIAC

From another perspective, in recent years, increasingly more parties agree to designate Seoul as the place of arbitration and Korean law as the applicable law in their contracts. As a hearing venue, Seoul continues to become a more popular option, particularly with the establishment of the state of the art Seoul International Dispute Resolution Center (Seoul IDRC) in 2014. Seoul IDRC has established partnerships, branch offices or cooperation arrangements with such leading institutions as the ICSID, PCA, WIPO, ICC, LCIA, ICDR, HKIAC and SIAC. A modern legal regime backed by strong rule of law and a sophisticated and competent judicial system has contributed to Korea’s development as a centre for arbitration. At the same time, Korean companies with increasing bargaining power have become more sophisticated and aggressive when negotiating contractual terms and conditions. This has increased the number of instances where KCAB has become the arbitral institution and Seoul has been designated the place of arbitration. As a leading metropolis, Seoul’s first rate facilities and accommodations, safety and convenient access also serve as some of the important attractions for parties, counsel and arbitrators when deciding upon a hearing venue.

2.3.  Judicial Framework Since the adoption of the Arbitration Act in 1966, Korean courts in general have remained proponents for the development of alternative dispute resolution, particularly arbitration. During the early stages of the country’s arbitration history, the courts tended to view their role more as acting as a guardian to assure that arbitral tribunals properly rendered awards and the KCAB administered cases. As the capacity of tribunals and the KCAB have improved, this perceived role has significantly diminished. The Korean judiciary has also become increasingly sophisticated in their understanding of the intricacies of international

8  Kap-you Kim, John P Bang, Seungwoo Cho and Bae, Kim & Lee LLC, Arbitration Law of Korea: Practice and Procedure (New York, Juris, 2012) 9.

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arbitration law. In 2003, the Supreme Court even established a special division within the Seoul District Court that specialised in international transactions, including international arbitration. A similar division was also established within the Seoul High Court.

3. Reform 3.1.  Legislative and Regulatory Initiatives After extensive deliberation, in 2016, Korea promulgated its long-anticipated amendments to its Arbitration Act.9 The Act last underwent substantial changes in 1999 when it adopted the 1985 version of the Model Law.10 The key revisions included new provisions regarding the definition of arbitration, expanding the scope and application of interim measures, taking evidence through the courts, simplifying the requirements for enforcement of awards and further guaranteeing the independence of the KCAB. The new amendments entered into force in November 2016 six months after the legislation was promulgated. Though questions emerged, particularly from scholars and jurists regarding the practical efficacy of some of the proposed revisions, the law was enacted.

3.1.1.  General Amendments 3.1.1.1.  Definition of Arbitration Previously the Act defined arbitration only as disputes that arose under private laws, consisting of such core statutes as the Civil Act that included contract and property law and the Commercial Act that included corporate, insurance and maritime law. This meant that the range of disputes that could be subject to arbitration remained unnecessarily narrow since technically disputes under public law and intellectual property disputes, for example, would be excluded. As with many civil law countries whose jurisprudence calls for a more rigorous separation between private and public law, under Korean law, public law traditionally comprised such areas as constitutional law, administrative law, criminal law, procedural law and international law. Through amendments to Article 3, the Act seeks to expand the definition of arbitration by removing the ‘private law’ limitation. According to the new provisions, disputes subject to the Act would be those that are based upon ‘disputes based on property rights or disputes based on non-property rights that the parties can resolve through a settlement’ (Article 3). This wording in fact closely follows Article 1030.1 of the German Civil Procedure Act. Notably, among other areas of law, the revision allows for the Act to apply to international treaty arbitration.11 9 

Act No 14176 of 29 May 2016. Non-substantive amendments occurred in 2001, 2002, 2010 and 2013. 11  A considerable amount of treaty-based investment arbitration related to Korea has emerged recently both with Korea as a respondent and Korean investors as claimants. See Joongi Kim, ‘A Bellwether to Korea’s New ­Frontier in Investor-State Dispute Settlement? The Moscow Convention and Lee Jong Baek v. Kyrgyz Republic’ (2015) 15 Pepperdine Dispute Resolution Law Journal 549–65. 10 

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The current amendment, however, chose not to adopt footnote 2 of the 2006 Model Law that provides an explanation of the scope of ‘international commercial arbitration’ that is subject of the law. Footnote 2 stipulates that the definition of ‘commercial’ should be given a ‘wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not’ and then provides a non-exhaustive list of transactions that would be considered as commercial in nature.12 Nevertheless, one may argue that the current amendment expands the scope of application covered under the Act even wider than the Model Law because a dispute technically does not even have to be commercial in nature. 3.1.1.2. Competence-Competence An amendment to the Act that does not appear in the Model Law concerns when an arbitral tribunal has made a decision that it does not have jurisdiction. As with many jurisdictions such as Singapore, France and the UK, the new Act provides that a tribunal’s negative competence-competence ruling may be subject to a court review (Article 17.6). This will overturn previous Korean Supreme Court precedent that held that a court could not provide such a review, particularly because the court held it was not specifically provided for under the old Act.13 The old Act only provided for a court review of a tribunal’s positive finding of jurisdiction.14 3.1.1.3.  Taking of Evidence Another area where the Act provides more extensive provisions than the 2006 Model Law concerns the taking of evidence by courts for an arbitration proceeding. The amendments to the Act provide arbitral tribunals more options when seeking a court’s assistance to take evidence. At an arbitral tribunal’s request, a court will now be able to order witnesses or those that possess documents to appear before the tribunal or to produce documents ­(Article 28.5). Furthermore, with a court’s approval, arbitrators and parties will be allowed to participate in the court’s taking of evidence and even examine witnesses (Article 28.3). Through the court’s compulsory powers, these changes will further enhance the ability of tribunals to obtain evidence necessary for arbitration proceedings. 3.1.1.4.  Costs and Interest The Act adds a new provision concerning the costs and delay interest that also does not exist in the 2006 Model Law. Unless the parties provide otherwise, tribunals can explicitly order the payment of the arbitration costs and interest for delays in an award (Articles 34-2 and 34-3). For costs, the tribunal is supposed to consider the totality of the circumstances. 12  Under the footnote, commercial transactions subject to the Model Law include ‘any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road’. 13  Supreme Court, 2003 Da 5634 (2004). See also Joongi Kim, International Arbitration in Korea (Oxford, Oxford University Press, 2017) 244–47. 14  Art 17.6 under the previous version of the Act.

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In terms of delay interest, the tribunal is also supposed to factor in the ‘totality of the circumstances’ to determine whether it would be ‘appropriate’ to order it.15 Although not specified, it is anticipated that tribunals will take into consideration such factors as the relative success of claims that each party asserts, and the reasonableness of the costs claimed and conduct during the proceedings. While Korean tribunals routinely have granted costs and interest in the past, this was not explicitly provided for in the law and led to unnecessary controversy. Whether the default 15 per cent delay interest rate that is stipulated for civil litigation cases under the Litigation Expedition Special Act and is applied by some arbitral tribunals seated in Korea will continue to be applied under this new provision remains to be seen.16 3.1.1.5.  Review of KCAB Rules A symbolically significant change in the Act involves the ending of the requirement that the Supreme Court approve the KCAB’s arbitral rules. This requirement had existed since 1966 when the Act was first promulgated and the KCAB’s predecessor was first established. The approval process was established as a means to offer oversight over the KCAB’s rule-making process. The Supreme Court seldom if ever denied approval or required amendments. Nevertheless, to outside observers, the provision created the impression that since the KCAB’s rules had to be approved by a governmental entity, albeit the judiciary, the institution remained under the government’s penumbra of influence, leading to questions concerning its neutrality, particularly in disputes that involved the government. Given the KCAB’s expertise and history, the provision was also viewed as a remnant of a paternalistic age when the judiciary deemed it their duty to assure that justice would be properly carried out. Article 41 was deleted such that the KCAB no longer needs the Supreme Court’s approval when amending its rules. This should serve to dispel any doubts that existed in the past concerning the institution’s independence from government influence.

3.1.2.  Adoption of the 2006 UNCITRAL Model Law In addition to the general amendments above, most of the substantive revisions to the Act focus on the adoption of the 2006 Model Law provisions and some changes even involve adopting provisions that were not originally incorporated from the 1985 Model Law. 3.1.2.1.  Writing Requirement for Arbitration Agreements The current Act requires that arbitration agreements have to be in writing. This writing requirement provision artificially limits the scope of agreements and had become anachronous, particularly in the digital age. By choosing to adopt Option 1 of the 2006 15  In Art 47, the KCAB’s International Rules provides that in principle the costs shall be borne by the unsuccessful party but allows the tribunal to apportion such costs at its discretion ‘taking into the circumstances of the case’. Art 48 then provides that the necessary costs and expenses including but not limited to attorney fees and costs for experts, interpreters, witnesses incurred by a party during the arbitration proceedings shall be borne by such party subject to the allocation of the tribunal. Unless agreed otherwise by the parties, the tribunal shall decide the allocation between the parties of the necessary expenses incurred. 16  Art 3, Litigation Expedition Special Act; 2015 Regulation on the Statutory Interest Rate in the Main Text of Art 3.1 of the Litigation Expedition Special Act. Previously, before 1 October 2015, the statutory rate was 20 per cent.

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Model Law, the new Act provides that, electronic expressions of intent such as by email and telexes and other expressions by electronic means can be considered as arbitration agreements if the intent of the parties can be confirmed (Article 8.3.2). In addition, Article 8.3.1 provides that an arbitration agreement or clause may be made orally, by action or by any other recorded means as long as its content is recorded in some form. Furthermore, the Act now clarifies that when establishing the existence of an arbitration agreement through an exchange of documents, which the other party does not contend, it should be done not through any documents but through the statement of claim and statement of defence (Article 8.3.3). 3.1.2.2.  Interim Measures After considerable debate over the efficacy of interim measures, particularly given the ability of Korean courts to already provide most protections that would be sought, lawmakers decided to incorporate the more extensive 2006 Model Law’s provisions in ‘Chapter IV.A’ concerning interim measures. One notable exception is that Korea decided to exclude the provisions on ex parte preliminary orders as provided under ­Articles 17B and 17C. First, under the new Act, the scope of matters that can be subject to interim measures has been expanded. Previously, as provided under the 1985 Model Law, only the subject matter of a dispute itself could be the focus of an interim measure. This meant that measures not directly connected to the subject matter of the dispute could not be covered by an interim measure (Article 18.1). The Act adopts the 2006 Model Law’s deletion of this requirement. Second, as provided in Article 17(2) of the 2006 Model Law, the types of interim measures that can be provided have been specified to explicitly allow a variety of different type of measures. Interim measures can now require the maintenance or return to the status quo, action to prevent harm or prejudice to the arbitral process, preservation of the assets that are the subject of the enforcement, preserving evidence that are relevant and material to resolve the dispute (Article 18.2). Third, interim measure must meet various conditions as provided under ­Article 17A of the 2006 Model Law to be issued. An applicant, for instance, must demonstrate that harm not adequately reparable by an arbitral award of damages is likely to result if the interim measure is not granted (Article 18-2(1)(1)). The tribunal also must determine that the requesting party has a reasonable possibility of succeeding on the merits (Article 18-2(1)(2)). Fourth, the Act adopts Article 17D of the 2006 Model Law and allows arbitral tribunals to modify, suspend or terminate interim measures (Article 18-3). Unlike the Model Law, however, the Act adds a requirement that the tribunal must examine the parties before they modify, suspend or terminate interim measures. Fifth, as with Article 17F of the 2006 Model Law, the tribunal may require a party to disclose any material change in the circumstances on the basis of which the interim measure was requested or granted (Article 18-5). Sixth, the Act requires that if a tribunal later determines the interim measure should not have been granted then the requesting party shall be liable for cost and damages (Article 18-6 of the Act; Article 17G of 2006 Model Law). Seventh, pursuant to Article 17H of the 2006 Model Law, the Act specifically provides that interim measures may be recognised and enforced by the courts (Article 18-7). The Act provides that the enforcement of interim measures shall occur according to the

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provisions on preservative measures under the Civil Execution Act that applies in civil ­litigation (Article 18-7(4)). Previously, because interim measures were only issued in the form of a ‘decision’, they could not be the subject of a court’s enforcement judgment. The Act, however, excludes the explicit language from Article 17H that an interim measure shall be enforced ‘irrespective of the country in which it was issued’. This may suggest that interim measures by foreign tribunals might not be treated in the same manner as those by domestic tribunals. Another difference is that Article 17H requires that the party seeking or that has obtained recognition or enforcement of an interim measure must inform the court of any modification, suspension and termination. In ­contrast, the Act expands this obligation to apply to not only to the requesting party but also the other party as well. Finally, the Act differs on the conditions when recognition and enforcement of interim measures may be refused under the circumstances provided under Article 17I of the 2006 Model Law (Article 18-8). The 2006 Model Law provides that enforcement or recognition may be refused if the interim measure has been terminated or suspended by the tribunal or, where so empowered, by the court of the state in which the arbitration takes place or under the law of which the interim measure was granted. The Act, in contrast, only allows refusal if the measure has been terminated or suspended by the tribunal. 3.1.2.3.  Enforcement of Arbitral Awards Arbitral awards may now be recognised and enforced by a court ‘decision’ instead of by ‘judgment’ that requires substantive hearing and court review (Article 37.1). This follows the legal practice of Germany and many other leading civil law jurisdictions and helps expedite and simplify the enforcement process for parties. By default, an arbitral award will be recognised as long as grounds to refuse recognition under Article 38 or 39 cannot be found (Article 37.1). The Act provides that in case a party requests such a decision the court must provide the parties with adequate notice for a chance to hold a hearing (Article 37.4) and must explain their reasoning (Article 37.5). Furthermore, in line with the provision under the Civil Procedure Act, a court’s decision can be subject to an immediate appeal (Article 37.6) and the relevant appeal court may request a security (Article 37.7). For enforcement of an arbitral award, the Act follows the 2006 Model Law’s approach in Article 35(2) and significantly simplifies the requirements under the New York Convention. First, parties do not have to submit documents related to the arbitration agreement. Second, if an authenticated original of the arbitral award is not submitted, a certified copy of the award is no longer necessary and instead a copy will suffice (Article 37.3). Third, when an award is rendered in a foreign language, the Korean translation that has to be attached does not have to be duly certified (Article 37.3). After an award is rendered parties no longer have to submit the original award to the competent court to serve as a depository unless one of the parties desires otherwise (Article 32.4). This follows the 2006 Model Law that does not have such a requirement. 3.1.2.4.  Appointment of Arbitrators Under the Act, when the parties fail to appoint an arbitrator or reach agreement on a sole arbitrator or the chair, the court can now designate an institution such as the KCAB to appoint the arbitrator (Article 12.3). Previously, the Act did not adopt the applicable provision in Article 11(4) of the 1985 and 2006 Model Law and only provided the courts

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with appointing authority and did not allow them to delegate this power. In the past, Korea did not have many ad hoc arbitration cases so courts were seldom involved in the appointment of arbitrators. One major issue that was considered in adopting this change was that when a court appoints an arbitrator it may require service of process through diplomatic channels or the Hague Convention. This can cause considerable delay and may increase the potential for procedural defects. Not only is this unnecessary in the case of the KCAB, but KCAB now also has considerable experience in handling international cases and has greater institutional knowledge concerning the expertise of potential arbitrators. 3.1.2.5.  Provisions Not Adopted The current version of the Act does not adopt some provisions of the 2006 Model Law. Article 2A of the 2006 Model Law, for instance, that provides that in the interpretation of the Model Law ‘regard is to be had to its international origin and need to promote uniformity in its application and the observance of good faith’, was not included. Similarly, as noted earlier, the Act does not include the provisions related to ex parte preliminary orders.

3.1.3.  Arbitration Industry Promotion Act Another legislative initiative that was enacted is the Arbitration Industry Promotion Act (AIPA). AIPA seeks to provide broad-ranging infrastructure support to help advance Korea’s arbitration industry.17 Like the Arbitration Act, the Ministry of Justice completed a draft of the AIPA through a special committee consisting of arbitration specialists from leading law firms and academia, held a public hearing and submitted the legislation to the National Assembly. The AIPA fundamentally seeks to provide a statutory basis for the government to provide various support. A primary goal under the legislation is for ‘Korea to develop into an arbitration hub’ (Article 1). More specifically, the Act seeks to attract more international arbitration cases to Korea so that more hearings can be held in Korea and more contracts designate the place of arbitration as a location in Korea (Article 7.1). The law seeks to establish a dispute resolution facility (Article 5), to train arbitration specialists (Article 6), to promote research related to the arbitration industry for promotion of international cooperation (Article 7.2), and to foster such activities as international information events and cooperation with international arbitration organisations (Article 7.2). Notably, the legislation emphasises that the independence and autonomy of any institution, legal person or organisation that receives financial or other assistance under the law will be guaranteed (Article 10). The AIPA passed the National Assembly in December 2016 and entered into force in June 2017. Unlike the Arbitration Act, the AIPA did not face any major objections at the legislature but the more significant challenge will be how much fiscal support can be generated through the legislation.

3.2.  Judicial Initiatives In international cases, in particular, Korean courts adhere to the civil law tradition and are consistently strict in their application of the New York Convention and the ­Arbitration Act, and are taking a non-interventionist approach. Only under extremely rare circumstances 17 

Act No 14471 of 27 December 2016.

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will Korean courts deny recognition or enforcement or set aside arbitral awards. The courts have been consistent in their deference to party autonomy when arbitration has been chosen to resolve a dispute.

3.3.  Other Factors In terms of practitioners, Korea now has several homegrown law firms with extensive experience that have become recognised as significant players in international commercial arbitration and also more recently in investment arbitration. Notably, firms such as Bae, Kim and Lee, Kim and Chang, KL Partners, Lee & Ko, Shin and Kim, Yoon & Yang, and Yulchon have been ranked in industry publications such as the GAR 100 and Chambers. Furthermore, with the entry into force of the Korea-EU FTA and Korea-US FTA, over 20 leading Europe and America-based law firms have established offices in Korea, many with specialised arbitration practices. Among the 2015 GAR 30, for instance, 10 of the 30 firms listed have established Seoul offices.18

3.4.  What Drives Reform? As with many Asian jurisdictions, the most distinctive aspect in Korea’s experiences of arbitration reform, its patterns and development discourse would have to be role of the state. This closely follows the government-led economic development model adopted by many Asian countries. This could be classified as an Asian model of arbitration modernisation. In terms of challenges in adopting the Model Law provisions, the efforts expended to minimise the potential conflicts with Korea’s civil law based system are notable.

3.4.1.  Legislative, Judicial and Institutional Elements In Korea, arbitration reforms have been largely driven by the executive branch with the primary responsibility lying with the Ministry of Justice. In recent years, the Ministry has been active in developing ways for legal services to contribute to economic growth, promoting the internationalisation of the Korean legal profession, trying to expand the legal services market. The judiciary has also been a constant supporter of alternative dispute resolution, particularly arbitration. The judiciary has consistently maintained a pro-arbitration, non-interventionist approach toward the arbitral process and recognition and enforcement of awards. As one of the Korea’s major arbitral institutions, KCAB has been at the forefront in amending their rules to stay aligned with global trends. It does not appear likely that KCAB will face any serious competition in the near time as an institution within Korea. KCAB have been active in promoting itself as an institution and Korea as a venue and place of arbitration through conferences, workshops and roadshows. They have also engaged Korean companies to help educate them of the benefits of international arbitration as a means to resolve disputes with foreign parties. Finally, they have enlisted leading practitioners to provide training for attorneys, in-house counsel and future arbitrators. 18  As of September 2015, the ten firms are White & Case (1st), Herbert Smith (8th), Allen & Overy (9th), Baker & McKenzie (13th), Clifford Chance (14th), DLA Piper (17th), Skadden (18th), Cleary Gottlieb (19th), Linklaters (25th), and Squire Patton Boggs (30th).

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Another key stakeholder in Korea’s arbitral reform has been KOCIA, that was established in 2005. Composed of key members of Korea’s arbitration profession from the heads of the leading law firms to academics and arbitrators, who devote their time on a pro bono basis, KOCIA is recognised as the leading interest group that represents the collective voice of international arbitration specialists in Korea. It has not only been a key sponsor in major international conferences such as the Asian Pacific Regional Arbitration Practice Group (APRAG) in 2008, but annual conferences with such major institutions and organisations as ICC, LCIA and UNCITRAL among others. KOCIA was directly involved in providing advice to the KCAB throughout the enactment of their international arbitration rules in 2007, the subsequent revision in 2011 and the most recent revision in 2016. Leading members of KOCIA have also been involved in the amendments to the Arbitration Act and the AIPA. Korean legislators themselves have not been active in proposing arbitration-related legislation. The amendments to the Arbitration Act and the AIPA passed during the 19th National Assembly have been almost always based upon the drafts prepared by the Ministry. Korean legislators themselves have not been active in proposing arbitration-related legislation.

3.4.2.  Top-down versus Bottom-up Reform Given that traditionally the executive branch leads most legislative initiatives, particularly those related to arbitration, Korea’s approach to arbitration reforms can be characterised as top-down with input from the judiciary and legislative branch and key stakeholders. The executive branch traditionally will establish a law revision or promulgation committee consisting of experts who will convene together over a period of time to consult with each other and draft proposed changes.19 More bottom-up initiatives have come from the arbitration institutions such as the KCAB and KOCIA, among others. The leading example would be the enactment and revisions to the KCAB’s international arbitration rules as explained above.

3.4.3.  Special Considerations As a traditional civil law system, Korea’s civil procedure law can trace its roots to ­German and Japanese law. At the same time, Korea has adopted many common law type ­features such as stronger disclosure requirements, concentrated hearings instead of multiple hearings, and cross-examination of witnesses and experts. In terms of rule of law, after the installment of a democratically elected presidential system in 1987, Korea boasts herself as one of the strongest democracies in the world. It has established a strong rule of law tradition that was ranked eleventh in the world in 2015 according to the World Justice Project, only behind Singapore in Asia, and ranked fifth in Asia under the World Bank’s 2014 Governance Indicator’s Rule of Law index, after Singapore, Hong Kong, Japan and Taiwan.20

19  An outline of the background of how the 1999 Model Law was adopted can be found in Young Joon Mok, Commercial Arbitration (Seoul, Parkyoungsa, 2011), 15. As with almost all Korean laws, a similar process was ­followed with the recent revisions. 20  The World Justice Project measure includes such factors as constraints on government power, absence of corruption, open government, fundamental rights, regulatory enforcement and civil justice. See www.world­ justiceproject.org.

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Starting from 2007, Korea overhauled its legal education system from a largely undergraduate based system that focused on rote-learning for a judicial exam to a formal, post-graduate education system that draws upon a diverse pool of people to train legal professionals. The three-year law school system has allowed the country to train a new generation of legal service providers who will even further enhance the competitiveness of Korea in the international arbitration arena. From the standpoint of legal culture, Korean companies have been more aggressive in asserting their rights and defences and resorting to arbitration when attempts at settlement have been unsuccessful. Anecdotal evidence suggests that due to structural and cultural reasons Korean parties are more likely not to settle a case once arbitration commences.21

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform As part of the efforts to further advance Korea’s stature in the international arbitration arena, whether the country’s proposed legislative reforms will be successful and then contribute to a quantum leap in Korea’s arbitration landscape remains to be seen. Many observers believe that Korea has the potential to become a major arbitration hub in Northeast Asia, akin to a Switzerland in Asia, given its sophisticated arbitration infrastructure, its strategic location, its neutral position relative to the economic superpowers in the region and its competent judicial system. Policy-makers hope that the new statutory regime that includes the 2006 Model Law and the AIPA, together with KCAB’s new 2016 rules, will act as a catalyst for achieving this goal.

4.2.  Enhancing Competitiveness, Independence and Professionalism The next step for Korea will be whether it can expand beyond its national borders and become a bona fide arbitration hub that attracts cases from around the region, particularly ones that are unrelated to Korea. Given the tremendous volume and experience of cases, and its attractiveness as a neutral venue with knowledgeable courts and effective laws, the future of Korea to fulfil its potential remains bright. The important ingredients that have enabled Korea to become a major jurisdiction and regional arbitration centre include major corporate users with extensive outboundoriented cross-border business, a proper legislative and judicial framework, and a coalition of arbitration institutions, practitioners, arbitrators and academics. Based on this confluence of factors, Korea has reached critical mass in terms of the quantity and size of disputes. Korea needs to make a final quantum leap to become competitive with such leading jurisdictions in Asia as Hong Kong and Singapore. The recent arbitration reform efforts should play a major role toward this end. 21  One theory suggests that this stems from the structure of decision-making in Korean companies: see Kim, Bang, Cho and Bae, Kim and Lee LLC (n 8) 9.

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5. Conclusion Korea stands to be another country that will be affected by the global impact of arbitration law reform with its adoption of the 2006 Model Law. Korea’s adoption could be characterised as being closer to ‘localised globalism’ rather than ‘globalised localism’ given the overall importance placed upon incorporating the harmonised arbitration system to gain greater access to international markets. Korean lawmakers and courts were generally open to the adoption of the Model Law provisions and did not push for provisions substantially different from other jurisdictions. The only contentious provisions involved those that were deemed incongruous with Korea’s existing civil procedure regime. Reforms by judicial and institutional entities have generally made complementary contributions and there has been no formal process other than, for instance, seeking advice and expertise. At the same time, a trend toward an increasing judicialisation of the arbitration process can be discerned to the extent that the process has become more formal and institutionalised compared to the past when many arbitrators viewed their role as more as a mediator. In the end, arbitration reform in Korea has been generally conducted from a macro-view perspective with occasional piece-by-piece, technical, and bottom-up reforms. The contextual legal system and dispute resolution system have played a significant role in shaping the pattern of reform. Arbitration developments thus far have not been overly slow or rapid, and the prospects for a similar reform process appear to be unchanged.

6 Arbitration Reform in Malaysia: Adopting the Model Law LAM KO LUEN

1. Introduction Arbitration in Malaysia was previously governed by the Arbitration Act 1952 (the 1952 Act), which was adopted from the then English Arbitration Act 1950 in order to meet the need to regulate domestic arbitration in Malaya at the time. Perhaps as the legislation was drafted too early in the day, the incorporation of the distinction between international and domestic arbitration was far from the minds of the drafters. Instead, the 1952 Act provided a more statutory ‘hands on’ approach to the courts, which failed to appreciate the need for party autonomy. Amended once in 1980, the 1952 Act recognised and promoted the use of arbitration as a form of international dispute resolution. Section 34 of the 1952 Act was amended to allow for court intervention in international arbitrations seated in Malaysia. Thought by most to be archaic and not in line with the global approach to streamline the arbitration regime, the 1952 Act left much to be desired. In 2005, the Arbitration Act 2005 (the 2005 Act) came into place. The 2005 Act reformed and repealed the 1952 Act and caused a blanket change to the arbitration regime as it ­incorporated the Model Law on International Commercial Arbitration (the Model Law). Recognising the need for harmonisation and uniformity in promoting international trade, the purpose of the 2005 Act was enacted to enable Malaysia to fulfil and perform its obligations as outlined in the United Nations Commission on International Trade Law ­(UNCITRAL) Model Law on International Commercial ­Arbitration as well as to overcome the weaknesses of the 1952 Act to keep up with the changing times.

2. Background 2.1.  Legislative and Regulatory Framework 2.1.1.  Arbitration Act 2005 It was not until 15 March 2006 that Malaysia decided to adopt the Model Law through the 2005 Act.1 1  Sundra Rajoo and WSW Davidson, The Arbitration Act 2005 UNCITRAL Model Law as applied in Malaysia (Malaysia, Sweet & Maxwell Asia, 2007) 1–2.

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Essentially, there are four parts to the 2005 Act. Parts I, II and IV are applicable to a­ rbitrations seated in Malaysia across the board, be it domestic or international. Part III on the other hand applies to domestic arbitration (unless opted out) and does not apply to international arbitration (unless opted in). Part I (sections 1 to 5) forms the preliminaries. Part II (sections 6 to 39) forms the crux of the 2005 Act. Subject to minor exceptions to embody the requirements of the laws of ­Malaysia, the headings of the sections and the order in which they are displayed reflect closely the Model Law articles. Throughout this part, the phrase ‘Unless otherwise agreed by the parties …’ can be seen in several sections and sub-sections. Such embodiment upholds party autonomy and indicates that if there exists an agreement between the parties with regards to a specific subject matter in a section with such a phrase, the intention of the ­parties will take precedence. On the other hand, in absence of such a phrase or a phrase similar thereto, the provisions in the part can be considered mandatory.2 Part IV (sections 47 to 51) contains miscellaneous provisions dealing with, inter alia, the liability of arbitrators, repeals and savings. The sections therein are not similarly found in the articles of the Model Law. The part of particular interest is Part III (sections 40 to 46), which provides for, inter alia, consolidation of proceedings, court determination of preliminary points of law, reference to court on questions of law and costs. The provisions contained therein are optional, in the sense that it applies to all domestic arbitrations unless parties ‘opt out’ and it is not applicable to international arbitrations (wherein the seat of arbitration is Malaysia) unless parties ‘opt in’. This is an additional part in the Malaysian 2005 Act that is not based on the Model Law.3

2.2.  Institutional Framework 2.2.1.  Ad Hoc and Institutional Arbitration Ad hoc and institutional arbitrations are both common in Malaysia. There are several industry-based professional bodies in Malaysia that administer arbitral proceedings. ­ Examples of these are the Malaysian Institute of Architects (MIA or commonly known in Malaysia as PAM), the Royal Institution of Surveyors Malaysia (RISM) and the Institution of Engineers Malaysia (IEM). These institutions deal with mainly domestic construction related arbitration. This chapter will however focus on the Kuala Lumpur Regional Centre for Arbitration (KLRCA) (previously known as the Regional Centre for Arbitration Kuala Lumpur) and its contributions to the arbitral landscape in Malaysia.

2.2.2.  Kuala Lumpur Regional Centre for Arbitration (KLRCA) Established in 1978 under the Asian-African Legal Consultative Organisation (AALCO) pursuant to a host country agreement signed with Malaysia, the KLRCA, the first

2  3 

ibid, 34. ibid, 191.

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arbitration centre of its kind in Asia, was set up to promote and provide institutional support as a neutral and independent venue for domestic as well as international arbitration proceedings in Asia. KLRCA, a non-profit and non-governmental international body, had its first office at a pre-WWII colonial bungalow at 576 Persiaran Sultan Salahuddin. In 2014, KLRCA put down roots at the refurbished and historic state of the art Bangunan Sulaiman.4 Besides having a panel of over 1000 experienced domestic as well as international ­arbitrators,5 in order to provide for the growing demands of the global business community, KLRCA developed new rules for example, the KLRCA Arbitration Rules, the KLRCA i-Arbitration Rules, the KLRCA Fast Track Rules and Mediation and Conciliation Rules. It is notable that KLRCA was the first arbitration centre in the world to adopt the UNCITRAL Rules for Arbitration (revised in 2010). Malaysia being a signatory to the New York Convention has enabled KLRCA to achieve international recognition in terms of the enforcement of its arbitration awards. Coupled with the fact that Malaysia has now embraced the Model Law in the Arbitration Act 2005 and the Arbitration (Amendment) Act 2011 which promotes limited court intervention and at the same time according the Director of KLRCA with the statutory authority and freedom to appoint arbitrators to hear a dispute, it is no wonder arbitration has become more popular in this day and age for parties to resolve their disputes in Malaysia. The current Director of KLRCA is Datuk Professor Sundra Rajoo, the man responsible for re-branding KLRCA and putting it on the global map. His efforts in actively promoting arbitration as a form of alternative dispute resolution with KLRCA as the centre of choice within the region can be seen with the rise of number of arbitrations held in KLRCA.6 In 2010, there were 22 (20 domestic and two international arbitrations) cases handled by KLRCA; in 2011, there were a total 52 (49 domestic and three international arbitrations) cases handled by KLRCA; in 2012, there were 135 (118 domestic and 17 international ­arbitrations) cases handled by KLRCA; in 2013, there were 156 (128 domestic and 28 international arbitrations) cases handled by KLRCA; and in 2014, there were 112 (80 domestic and 32 international arbitrations) cases handled by KLRCA.7 This goes to show that ­arbitration is increasing in popularity in Malaysia.

2.2.3.  Malaysian Institute of Arbitrators (MIArb) Established in 1991, the Malaysian Institute of Arbitrators (MIArb) is a non-profit and nongovernmental institute aimed at endorsing and facilitating resolution of disputes via arbitration. In light of recent popularity in alternative dispute resolution, MIArb has included mediation and adjudication in its focus as well. A wide range of respected individuals in their respective fields, boasting prominent qualifications and experience, can be found in

4  Kuala Lumpur Regional Centre for Arbitration (ed), KLRCA: Acknowledging The Past, Building The Future (Kuala Lumpur, Kuala Lumpur Regional Centre for Arbitration, 2015) 26–29. 5  KLRCA 2016 Annual Report, available at https://www.klrca.org/annual-reports.php, 21. 6  KLRCA (n 4) 41. 7  ibid, 96.

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MIArb’s panel list of arbitrators. It is notable that to aid parties in dispute, MIArb has also developed and makes available Arbitration Rules and Mediation Rules for the adoption of parties.8 MIArb, in collaboration with Brickfields Asia College, offers a Diploma in International Arbitration course directed at practising and aspiring arbitrators and to those wishing to enhance their dispute resolution knowledge.9 Assessment courses are also available for individuals wishing to qualify as Fellows of MIArb. Further, MIArb plays host to training sessions, seminars, workshops and educational talks in alternative dispute resolution for its members and non-members. Notwithstanding the above, MIArb is an active participant in the reform for alternative dispute resolution.

2.3.  Judicial Framework In recent years, the Malaysian courts have been taking a more pro-arbitration approach pursuant to the promulgation of the 2005 Act. Support by the courts is demonstrated in the fact that the judiciary is slow to set aside arbitration awards, be it seated domestically or internationally, as will be discussed further below.

3. Reform 3.1.  Legislative and Regulatory Initiatives 3.1.1.  Arbitration (Amendment) Act 2011 As the 2005 Act was a relatively new and developing statute, different interpretations and applications of the 2005 Act provisions by the courts have led to the need for an amendment to the 2005 Act. The Arbitration (Amendment) Act 2011 (the Amendment Act)10 which came into force on 1 July 2011 was passed in hopes to address the lacunae identified in the 2005 Act.11 Previously, section 8 of the 2005 Act reads ‘Unless otherwise provided, no court shall intervene in any of the matters governed by this Act.’ Pursuant to the Amendment Act, the new section 8 now reads ‘No court shall intervene in matters governed by the Act, except where so provided in this Act.’ This makes it beyond doubt that the intention of the ­legislature is for the Court to refrain from intervening except where so provided in the Act.

8  ‘MIArb

Institute’, available online: www.miarb.com/institute.html. in International Arbitration’, available online: www.miarb.com/courses.html. 10 Ashok Kumar, ‘The Arbitration (Amendment) Act 2011’. www.skrine.com/the-arbitration-amendmentact-2011. 11  Sundra Rajoo, The Malaysian Arbitration Act 2005 (Amended 2011): An Annotation (Malaysia, LexisNexis 2013) 8–9. 9  ‘Courses—Diploma

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Another amendment made to the 2005 Act is in relation to section 10, a section that mandates stay of court proceedings in favour of enforcing parties’ obligations to resolve their dispute by arbitration when there is an arbitration agreement. Previously, section 10(1)(b) read, inter alia, that [a] court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds—that there is in fact no dispute between the parties with regard to the matters to be referred. (emphasis added)

This provision has since been removed by the Amendment Act as it would seem that it is unnecessary.12 Now, section 10(1) provides that the only ground for refusing a stay of ­proceedings pending arbitration is when the court ‘finds that the agreement is null and void, inoperative or incapable of being performed’ (emphasis added). This is to be consistent with the provision for a mandated stay under the Model Law. Further to the court’s power to stay Admiralty proceedings, the Amendment Act provides the court with the power to order any property be arrested, be placed on bail or any other form of security given, be retained as security for the satisfaction of any award given in the arbitration in respect of the dispute, under section 10(2A)(a), or to order that the stay of the said proceedings be conditional on the provision of equivalent security for the satisfaction of any such award, under section 10(2A)(b). For the avoidance of doubt, the Amendment Act also inserted sub-section (4) in section 10, which provides that ‘This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia.’ This ensures that the national court can order a stay of court proceedings when there is an arbitration agreement even if the arbitration is seated outside Malaysia. With regards to section 11 of the 2005 Act, for the sake of completeness, Section 11(1)(e) was amended to read [a] party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for: securing the amount in dispute, whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High Court.’ (emphasis added)

Similar to section 10, section 11 was amended by adding in section 11(3) to expressly state its application to international arbitrations where the seat of arbitration is not in Malaysia. Again, this is to ensure that the national court can grant interim measures in support of arbitration even if the arbitration is seated outside Malaysia. In respecting party autonomy, section 30(1) of the 2005 Act which previously reads ‘[i]n respect of a domestic arbitration where the seat of arbitration is in Malaysia, the arbitral tribunal shall decide the dispute in accordance with the substantive law of Malaysia’ was amended to read ‘[u]nless otherwise agreed by the parties, in respect of a domestic arbitration where the seat of arbitration is in Malaysia, the arbitral tribunal shall decide the dispute in accordance with the substantive law of Malaysia.’ (emphasis added)

12 

Kumar (n 10).

Lam Ko Luen

128  Section 38(1) previously read

[o]n an application in writing to the High Court, an award made in respect of a domestic arbitration or an award from a foreign State shall, subject to this section and section 39 be recognized as binding and be enforced by entry as a judgment in terms of the award or by action.

To address the lacunae, the Amendment Act replaced the phrase ‘a domestic arbitration’ with the phrase ‘an arbitration where the seat of arbitration is in Malaysia’. This was done to rectify the problem wherein international arbitrations held in Malaysia could not, by the terms of the pre-amended 2005 Act, be enforced by entry as a judgment but could only be enforced by writ of action.13 In terms of the court’s powers to refuse the recognition and enforcement of an award, for practical purposes, section 39(1)(a)(ii) previously read [r]ecognition or enforcement of an award, irrespective of the State in which it was made, may be refused only at the request of the party against whom it was invoked … where that party provides … proof that the arbitration agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the laws of Malaysia. (emphasis added)

The phrase ‘under the laws of Malaysia’ was replaced with ‘under the laws of the State where the award was made.’ Further, to be in line with Model Law on an international scale and to provide for severability,14 Section 39(3) which reads ‘[w]here the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced’ was inserted by the Amendment Act. Another notable amendment was made to section 42 of the 2005 Act. Section 42(1A) was inserted to confer powers on the High Court to dismiss a reference on questions of law where it cannot be shown that that the question of law substantially affects the rights of one or more of the parties. Section 42(1A) reads, ‘[t]he High Court shall dismiss a reference made under subsection (1) unless the question of law substantially affects the rights of one or more of the parties.’ Further, the Amendment Act also sought to clarify the application of the 1952 Act and the 2005 Act. Section 51(4) which states ‘[a]ny court proceedings relating to arbitration commenced after the commencement of this Act shall be governed by this Act notwithstanding that such proceeding arose out of arbitral proceedings commenced before the commencement of this Act’ was inserted. The aforesaid amendments to the Arbitration Act 2005 were made with the view of bringing arbitration legislation in Malaysia more in line with international commercial arbitration practice in the region.

13  14 

Rajoo (n 11) 112–13. ibid, 115–17.

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3.2.  Judicial Initiatives 3.2.1.  Judicial Interpretation on Arbitration Act 2005 Section 42 of the 2005 Act15 which provides for the opportunity to refer questions of law arising out of an arbitral award to the judiciary is of particular interest. Previously, an arbitral award can be set aside on the grounds of error of law under section 24 of the 1952 Act, and the ‘test’ to determine whether or not an arbitral award ought to be set aside was based on whether an error of law on the face of the record arose. As the 1952 Act has since been repealed, the courts in Malaysia held the view that logically, the ‘test’ previously applied should not apply to section 42 of the 2005 Act. In challenging an arbitration award under section 42 of the 2005 Act, judicial aid can be found in the High Court case of Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd,16 where Nallini Pathmanathan J (now JCA) applied the ‘3-stage test’ propounded by Mustill J in The Chrysalis.17

15 

s 42 provides that: (1) Any party may refer to the High Court any question of law arising out of an award. (1A) The High Court shall dismiss a reference made under subsection (1) unless the question of law substantially affects the rights of one or more of the parties. (2) A reference shall be filed within forty-two days of the publication and receipt of the award, and shall identify the question of law to be determined and state the grounds on which the reference is sought. (3) The High Court may order the arbitral tribunal to state the reasons for its award where the award—(a) does not contain the arbitral tribunal’s reasons; or (b) does not set out the arbitral tribunal’s reasons in sufficient detail. (4) The High Court may, on the determination of a reference—(a) confirm the award; (b) vary the award; (c) remit the award in whole or in part, together with the High Court’s determination on the question of law to the arbitral tribunal for reconsideration; or (d) set aside the award, in whole or in part. (5) Where the award is varied by the High Court, the variation shall have effect as part of the arbitral tribunal’s award. (6) Where the award is remitted in whole or in part for reconsideration, the arbitral tribunal shall make a fresh award in respect of the matters remitted within ninety days of the date of the order for remission or such other period as the High Court may direct. (7) Where the High Court makes an order under subsection (3), it may make such further order as it thinks fit with respect to any additional costs of the arbitration resulting from that order. (8) On a reference under subsection (1) the High Court may—(a) order the applicant to provide security for costs; or (b) order that any money payable under the award shall be brought into the High Court or otherwise secured pending the determination of the reference.

16  17 

Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2014] 1 AMR 253. The Chrysalis [1983] 1 WLR 1469.

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In affirming the test laid out in the Exceljade case above, the Court of Appeal in the case of Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd,18 per Mohamad Ariff Yusof JCA (as he then was) delivering the judgment of the court, stated as follows: [54] … the Exceljade approach will align our law with that of other jurisdictions where the old jurisprudence on ‘error of law on the face of the award’ has been rejected … [56] The broader approach that a question of law ‘arising out of an award’ should not be taken to mean that the question of law must appear ‘on the record’ (ie, within the four corners of an award), will be consistent with our own statutory scheme, especially when s 42(4) is considered.

The Court of Appeal further provided a number of proposals which can be stated as non-exhaustive guidelines19 for future cases as follows: 1. The question of law must be identified with sufficient precision;20 2. The grounds in support must also be stated on the same basis; 3. The question of law must arise from the award, not the arbitration proceeding generally;21 4. The party referring the question of law must satisfy the court that a determination of the question of law will substantially affect his rights; 5. The question of law must be a legitimate question of law, and not a question of fact ‘dressed up’ as a question of law;22 6. The court must dismiss the reference if a determination of the question of law will not have a substantial effect on the rights of parties;23 7. This jurisdiction under section 42 is not to be lightly exercised, and should be exercised only in clear and exceptional cases;24 8. The court should nevertheless intervene if the award is manifestly unlawful and unconscionable; 9. The arbitral tribunal remains the sole determiners of questions of fact and evidence;25 and 10. While the findings of facts and the application of legal principles by the arbitral tribunal may be wrong (in instances of findings of mixed fact and law), the court should not intervene unless the decision is perverse. In the recent case of Chain Cycle Sdn Bhd v Government of Malaysia,26 the Court of Appeal, in referring to the Exceljade and Perwira Bintang cases, held that: [23] … It is this that once the court dealing with a reference under s 42 of the AA had under stage 2 of the process taken the view that the arbitral tribunal had understood, stated and applied the

18 

Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617. ibid, 637, para 57. Taman Bandar Baru Masai Sdn Bhd v Dindings Corportations Sdn Bhd [2010] 5 CLJ 83 and Maimunah Deraman v Majlis Perbandaran Kemaman [2011] 9 CLJ 689. 21  Majlis Amanah Rakyat v Kausar Corporation Sdn Bhd [2009] 1 LNS 1766 and Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2014] 1 AMR 253. 22  George SA v Trammo Gas Ltd (The Belarus) [1993] 1 Lloyd’s Rep 215. 23  Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2014] 1 AMR 253. 24  Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn Bhd [2013] 8 CLJ 655. 25  Gold and Resource Development (NZ) Ltd v Doug Hood Limited [2000] 3 NZLR 318. 26  Chain Cycle Sdn Bhd v Government of Malaysia [2016] 1 MLJ 618. 19  20 

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correct law, the court under the stage 3 process had to consider further the range of possible correct answers open to the tribunal. If the answer preferred by the tribunal was well within such identified range, the court answering the question of law before it would not intervene, although the individual judge considering the question would have been inclined to come to a different conclusion.

The arbitration-friendly approach towards the enforcement of international awards can be seen to have been adopted in the recent case of Sintrans Asia Services Pte Ltd v Inai Kiara Sdn Bhd,27 where the Court of Appeal, in dealing with an objection on the ­arbitrator’s jurisdiction and overturning the High Court’s decision, held that: [15] The validity of the arbitration agreement which we have referred to is to be determined by the law of the country where the award was made. In our particular case since the seat of the arbitration was in Singapore, the anchor or juridical home by which the arbitration clause is to be assumed is the laws applicable in Republic of Singapore. The arbitration clause is clear in terms and parties have subjected themselves to be bound by it. Upon a careful examination of s 39(1)(a)(ii) and since the arbitration agreement clearly provides the law applicable to the arbitration agreement, the learned judge erred in law in subjecting the same to Malaysian law. [16] The court in Malaysia is purely an enforcement court and must recognize a valid arbitration award save and except for the exception provided under the law. If the defendant in this case argues that the arbitration clause is not valid then they would have to establish that it is so under the ­Singapore law. And the matter would have to be dealt with by the courts having supervisory jurisdiction at the seat of arbitration ie the Singapore courts or in the arbitration proceeding itself.

Section 1128 of the 2005 Act provides for, inter alia, interim measures by the High Court. An example of such an application can be seen in the High Court case of Interactive Brokers LLC v Neo Kim Hock & Ors.29 The facts are as follows. The plaintiff is a US-based online securities and brokerage firm that provides loans to its customers whilst the defendants are the plaintiff ’s customers who had allegedly defaulted on loans taken out to trade in shares in Singapore. Connected to this, there were investigations carried out by the Singapore

27  28 

Sintrans Asia Services Pte Ltd v Inai Kiara Sdn Bhd [2016] 2 MLJ 660. s 11(1) provides that:A party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for: (a) security for costs; (b) discovery of documents and interrogatories; (c) giving of evidence by affidavit; (d) appointment of a receiver; (e) securing the amount in dispute, whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High Court; (f) the preservation, interim custody or sale of any property which is the subject-matter of the dispute; (g) ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and (h) an interim injunction or any other interim measure. s 11(2) provides that:Where a party applies to the High Court for any interim measure and an arbitral tribunal has already ruled on any matter which is relevant to the application, the High Court shall treat any findings of fact made in the course of such ruling by the arbitral tribunal as conclusive for the purposes of the application. s 11(3) provides that ‘This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia.’

29 

Interactive Brokers LLC v Neo Kim Hock & Ors [2014] 8 CLJ 747.

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Lam Ko Luen

Stock Exchange and Monetary Authority of Singapore into three companies connected with the defendants, arising from acute volatility in its share prices. The plaintiff commenced arbitration at the International Centre for Dispute Resolution and in the meantime, applied for an injunction against the defendants from using, disposing and dealing with their assets so as to frustrate the outcome of the arbitration. The High Court proceeded to grant a Mareva injunction in aid of arbitration, reportedly to the tune of SGD 79 million.30

3.2.2.  Recent Court Decisions on Arbitration Seated in Malaysia In the Court of Appeal case of Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd,31 in upholding parties’ wishes for their dispute to be resolved via arbitration and recognising the arbitrator’s authority to determine the ‘arbitrability’32 of a subject matter, Prasad Sandosham Abraham JCA (now FCJ) delivering the judgment of the court stated the following: [5] … As a matter of public policy, the courts should be slow to place technical hurdles against having the matter referred to arbitration in the face of the clear injunction to do so by s 10 of the Act. We refer to the commentary on s 10(1)(a) contained [in] the text the Arbitration Act 2005 Uncitral Model Law as applied in Malaysia [by] Sundra Rajoo [and] WSW Davidson and we quote: ‘10.4 The text of section 10 follows closely article 8 of the Model Law and the first exception from the mandatory provision is also found in the Model Law. As to the scope of this exception, it needs to be noted that under section 18 of the Act, the arbitral tribunal does have power to determine and rule on its own jurisdiction. …’33

A pro-arbitration approach is seen to be taken by the Courts in Malaysia, as illustrated in the Court of Appeal case of Best Re (L) Limited v Ace Jerneh Insurance Bhd,34 where Abdul Aziz Bin Abdul Rahim JCA (as he then was) delivering the judgment of the court said: [43] On our part, whilst we are appreciative of the fact that the English s 6(2) and our s 9(5) of the Act are similarly worded, we must also consider the intention of the legislature when it decided to adopt the UNCITRAL Model law in drafting s 9(5). As we have seen above, when the Model law was proposed the working group on the Model Law made it very clear (and this is supported by the numerous comments by textbook writers and commentators on the Model Law) that it was not the intention of Article 7(2) of the Model law to make it a necessary requirement to make specific reference to an arbitration clause or agreement in one document before it can be incorporated in another agreement. The working group on the Model law made it very clear that a general reference would suffice to give effect to the incorporation. In our opinion the principle that the Court should attempt

30  On 13 October 2014, the Court of Appeal unanimously upheld the High Court’s decision. The Court of Appeal reportedly held that there was a ‘real risk of dissipation’ of the assets as the matter among others arose from suspicious transactions investigated by both the Singapore Stock Exchange and the Monetary Authority of Singapore. 31  Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2015] 4 CLJ 734. The decision of the Court of Appeal was affirmed by the Federal Court on 15 August 2016. See Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 9 CLJ 1. 32  As provided for in s 4 of the Arbitration Act 2005. s 4(1) provides that ‘Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the ­arbitration agreement is contrary to public policy.’ 33  Press Metal (n 31) 740. 34  Best Re (L) Limited v Ace Jerneh Insurance Bhd [2015] MLJU 0526.

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to give business efficacy in interpreting and construing a commercial document or contract, must be applied liberally to save the commercial transactions entered into between the parties and not to disrupt them. This does not, however, mean that the Court must disregard all established principles of construction of documents and contracts. What it means is that within the perimeter of these principles, the Court ought to be courageous enough to apply the principle in most beneficial way that would contribute to the efficacy of doing business and to ensure that the law stays abreast with the real commercial world. (emphasis added)

With regards to the independence and authority of the Director of KLRCA to appoint an arbitrator to hear a dispute between parties as provided in the 2005 Act,35 the upholding of this position can be seen in the Court of Appeal judgment in the case of Sebiro Holdings Sdn Bhd v Bhag Singh & Anor,36 where Mohd Zawawi Salleh JCA delivering the judgment of the court stated: [21] In our view, the court cannot interpose and interdict the appointment of an arbitrator whom the parties have agreed to be appointed by the named appointing authority under the terms of the contract, except in cases where it is proved that there are circumstances which give rise to justifiable doubt as the first respondent’s impartiality or independence or that the first respondent did not possess the qualification agreed to by the parties.37 35 

Part of s 13 provided below:(2) The parties are free to agree on a procedure for appointing the arbitrator or the presiding arbitrator. (3) Where the parties fail to agree on the procedure referred to in subsection (2), the arbitration consists of three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator as the presiding arbitrator. (4) Where subsection (3) applies and—(a) a party fails to appoint an arbitrator within thirty days of receipt of a request in writing to do so from the other party; or (b) the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment or such extended period as the parties may agree, either party may apply to the Director of the Kuala Lumpur Regional Centre for Arbitration for such appointment. (5) Where in an arbitration with a single arbitrator—(a) the parties fail to agree on the procedure referred to in subsection (2); and (b) the parties fail to agree on the arbitrator, either party may apply to the Director of the Kuala Lumpur Regional Centre for Arbitration for the appointment of an arbitrator. (6) Where, the parties have agreed on the procedure for appointment of the arbitrator—(1) a party fails to act as required under such procedure; (b) the parties, or two arbitrators, are unable to reach an agreement under such procedure; or (c) a third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the Director of the Kuala Lumpur Regional Centre for Arbitration to take the necessary measures, unless the agreement on the appointment procedure provides other means for securing the appointment. … (8) In appointing an arbitrator the Director of the Kuala Lumpur Regional Centre for Arbitration or the High Court, as the case may be, shall have due regard to—(a) any qualifications required of the arbitrator by the agreement of the parties; (b) other considerations that are likely to secure the appointment of an independent and impartial arbitrator; and (c) in the case of an international arbitration, the advisability of appointing an arbitrator of a nationality other than those of the parties. (9) No appeal shall lie against any decision of the Director of the Kuala Lumpur Regional Centre for Arbitration or the High Court under this section.

36  37 

Sebiro Holdings Sdn Bhd v Bhag Singh & Anor [2015] 4 CLJ 209. ibid, 216.

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Another example where the judiciary has upheld the principle of finality and binding force of an arbitral award can be found in the Court of Appeal case of Awangku Dewa bin Pgn Momin & Ors v Superintendent of Lands and Surveys, Limbang Division,38 where Mohd Hishamudin JCA (as he then was) delivering the judgment of the court stated: [12] There is a basic and important legislative policy codified in our Arbitration Act, and that policy is that the award of an arbitrator is final and binding. There is no recourse to a court of law by way of an appeal. This is clearly stated by s 36 of the Act … [13] However, the Act provides for some but limited exceptions where an award of the arbitrator may be challenged in a court of law. A party to an arbitration proceedings aggrieved by an award may apply to a High Court to set aside the award under s 37 of the Act. But he may do so only in the limited circumstances as specified by that section. … [14] Another exception is that a party to an arbitral proceedings, dissatisfied with the decision of the arbitral tribunal, may refer a question of law to the High Court pursuant to s 42 of the Act for the court’s determination.39

His Lordship further said: [27] We wish to take the opportunity here to provide the following guidance for the benefit of the High Court judges in dealing with a s 42 reference. A High Court in considering a s 42 reference must not take lightly the duty to critically examine the questions posed by the applicant and to ensure that the question referred to the court is purely a question of law and not a question of mixed law and fact, and is clearly and concisely framed, before embarking to entertain the application and to answer the question posed. There should be no complication, confusion or duplicity in framing the questions. Instead, there should be simplicity and clarity. The legal burden is on the applicant to ensure that these requirements are strictly complied with. [28] A High Court in dealing with a s 42 reference must summarily dismiss the application, without even attempting to answer the ‘question of law’ posed to the court, if the question is, in the first place, not properly and intelligibly framed; or where it is clear to the court that there is a disguised attempt by the applicant to appeal against the decision of the arbitral tribunal. In other words, a court of law must always be vigilant against any attempt by a party to abuse the s 42 procedure as provided for by the Act and to utilise the provision as a backdoor avenue for appealing against the decision of the ­arbitral tribunal.40

The Malaysian judiciary has set a high threshold to be satisfied before an application to set aside an award under section 37 will be allowed. In the case of Ajwa for Food Industries Co (Migop), Egypt v Pacific Inter-link Sdn Bhd & Another Appeal,41 the Court of Appeal observed as follows: [13] Section 37(1) of the Arbitration Act 2005 provides for the various grounds on which an arbitral award may be set aside. The onus is on the party making the application to provide proof. The court’s discretion in setting aside arbitral award is now limited to the narrowly defined

38  Awangku Dewa bin Pgn Momin & Ors v Superintendent of Lands and Surveys, Limbang Division [2015] 3 MLJ 161. 39  ibid, 169. 40  ibid, 175. 41  Ajwa for Food Industries Co (Migop), Egypt v Pacific Inter-link Sdn Bhd & Another Appeal [2013] 2 CLJ 395. The appeal was dismissed by the Federal Court.

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c­ ircumstances in line with the modern international arbitral practice. The effect of the present ss 8, 9, 37 and 42 of the Arbitration Act 2005 is that the court should be slow in interfering with an arbitral award. The court should be restrained from interference unless it is a case of patent injustice which the law permits in clear terms to intervene. Once parties have agreed to arbitration they must be prepared to be bound by the decision of the arbitrator and refrain from approaching the court to set it aside. Constant interference of the court as was the case in the past will defeat the spirit of the Arbitration Act 2005 which is for all intent and purpose to promote one-stop adjudication in line with the international practice … (emphasis added)

This position is seen again in the fairly recent High Court case of Kluang Health Care Sdn Bhd v Lee Yong Beng & Another Case,42 with regards to an application to set aside an award under the guise of it containing or dealing with ‘a dispute not contemplated by or falling within the terms of submission to arbitration’; ‘the award contains decisions on matters beyond the scope of the submission to arbitration’; or that it is an award that is ‘in conflict with the public policy of Malaysia’, where Mary Lim J (now JCA) cited the case of The Government of India v Cairn Energy India Pty Ltd & Ors:43 [32] … ‘[124] It is not enough to make general allegations of such grounds without providing any evidence. It also goes without saying that the absence of such evidence must mean necessarily result in a refusal of the order(s) sought. To my mind, the presence of these two requirements suggests a “minimalist” intervention approach ought to be adopted when dealing with challenges on these grounds.’ …

Her Ladyship further held that: [33] The applicant is therefore expected to prove the allegations made on a balance of probabilities in order that the discretion to set aside may be exercised in its favour. The burden remains with the applicant throughout the application. Having examined the cause papers and having heard the submissions of learned counsel, I do not find this burden discharged. The applicant has not proved the matters complained of in which case, the court must necessarily dismiss the application. [34] I agree with the respondent that all that the applicant has done here is to recant its disagreement and allegations. These allegations are very general and vague. No evidence has been offered to substantiate or prove the allegations. The applicant has not shown to any degree how the matters complained of do not fall within the terms of submission to arbitration; how the arbitrator’s decision on these matters complained of is beyond the scope of submission to arbitration; or even how the award conflicts with the public policy of Malaysia. On the public policy ground, the applicant has not even cared to identify which public policy is under consideration. … [36] There is absolutely no allegation or evidence of any fraud, corruption or breach of natural justice which may be said to fall within the conflict with public policy of Malaysia ground. All that the court hears is the applicant’s dissatisfaction with the manner in which the arbitrator construed and interpreted the sub-contractual terms and obligations; that such construction and interpretation was apparently contrary to the clear terms of the subcontracts and read not in the applicant’s favour.

42 

Kluang Health Care Sdn Bhd v Lee Yong Beng & Another Case [2016] 1 CLJ 281. The Government of India v Cairn Energy India Pty Ltd & Ors [2014] 9 MLJ 149. It was affirmed on appeal to the Court of Appeal. 43 

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[37] Such an argument is hardly enough to count as meeting the high thresholds set in s. 37. It is precisely the function of the arbitrator to construe the terms and conditions of the relevant contract, be satisfied that there is sufficient proof of the respective heads of claim and counterclaim before making the appropriate orders. As submitted by the respondent, the evidence shows that the applicant was in fact given the fullest opportunity to present its case. Just that the arbitrator was not convinced; and the arbitrator has set out his reasons for his findings and conclusions. (emphasis added)

Minimal intervention by the Malaysian courts balanced against the duty to uphold party autonomy is further illustrated by the Court of Appeal in Kerajaan Malaysia v Perwira ­Bintang Holdings Sdn Bhd,44 where Mohamad Ariff Yusof JCA (as he then was) delivering the judgment of the court said: [39] … Inasmuch as our courts must embrace the principles of finality of awards, party autonomy and minimal court intervention in the context of the Model Law legal regime, and the more g­ eneral considerations that our courts should be arbitration-friendly and pro-enforcement, we cannot allow an award to stand in the face of a clear excess of jurisdiction and a breach of the equally important principle that arbitration proceeding is consensual and the mandate of the chosen arbitrator has to be limited to the terms of the submissions and the agreed issues. If four issues have been agreed, the arbitrator cannot, on his own volition, add another issue (particularly without prior consensus and after the close of the case of the parties), for to allow this will result in gross unfairness. …45 [51] Since this case was decided, Parliament has inserted sub-s (1A) to s 42, such that as a matter of statutory interpretation, the court is now cautioned against setting aside or varying an award unless the error of law substantially affects the rights of parties. It would thus appear (that) this particular jurisdiction is not to be lightly exercised by the courts, as indicated by the very terms of the provision … [52] The statutory wording mandates the court to dismiss (‘shall dismiss’) the reference on the question of law unless the question of law affects in a substantial way the rights of the party or ­parties. Additionally, the court may require the arbitral tribunal to provide the reasons for its award if the award does not contain the reasons, or contain reasons that are not in sufficient detail.46 [57] On the present case-authorities, a number of propositions can be stated as guidelines. We enumerate these below, without intending them to be exhaustive, since clearly the law has to be developed further. (a) (b) (c) (d)

The question of law must be identified with sufficient precision … The grounds in support must also be stated on the same basis … The question of law must arise from the award, not the arbitration proceeding generally … The party referring the question of law must satisfy the court that a determination of the question of law will substantially affect his rights … (e) The question of law must be a legitimate question of law, and not a question of fact ‘dressed up’ as a question of law … (f) The court must dismiss the reference if a determination of the question of law will not have a substantial effect on the rights of parties … (g) This jurisdiction under s. 42 is not to be lightly exercised, and should be exercised only in clear and exceptional cases …

44  45  46 

Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617. ibid, 632. ibid, 635.

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(h) Nevertheless, the court should intervene if the award is manifestly unlawful and ­unconscionable … (i) The arbitral tribunal remains the sole determiners of questions of fact and evidence … and (j) While the findings of fact and the application of legal principles by the arbitral tribunal may be wrong (in instances of findings of mixed fact and law), the court should not intervene unless the decision is perverse.47 (emphasis added)

Another example of the Malaysian Courts upholding Model Law principles advocating minimum judicial intervention can be seen in the Court of Appeal case of SDA Architects (sued as a firm) v Metro Millennium Sdn Bhd,48 where Hamid Sultan JCA said: [51] Judicial intervention under the old regime pursuant to the Arbitration Act 1952 was quite common and threshold to satisfy was much low, as reflected in a number of case laws. The courts took the position that arbitrators must strictly fulfil the requirement of strictly judicial and adjudicating process and any omission, misconduct or breach, etc, will entail judicial intervention. The more recent cases before the AA 2005 came into force will demonstrate that courts have already taken cognisance of UNCITRAL Model Law which advocated minimum intervention and in consequence had increased the threshold for intervention. The court had ruled that the final award of the arbitrator must be viewed in its totality and, any error of law on the face of the award must be one that is patent and obvious as to render the award manifestly unlawful and unconscionable to subsist and, thereby justify it to be set aside (see Crystal Realty Sdn Bhd v Tenaga Insurance (Malaysia) Sdn Bhd [2008] 3 CLJ 791). [52] Taking the lead from the decision of the Court of Appeal in the Crystal case, it is my considered view that even though a litigant may satisfy s 42 of the AA 2005 that does not mean the award must be varied or be set aside in whole or part.49 (emphasis added)

Although the Courts tend to be slow to set aside arbitration awards, it is noteworthy that the Courts will not hesitate to intervene when circumstances require it to be done. This is illustrated in the case of Ahmani Sdn Bhd v Petronas Penapisan (Melaka) Sdn Bhd & Other Cases,50 where Mary Lim J (now JCA) held as follows: [61] … intervention should only be exercised in clear and exceptional circumstances. The q ­ uestions of law must only be questions of law and not questions of fact or even questions of mixed fact and law. These questions of law must be identified with sufficient precision or is intelligibly framed citing the grounds or basis relied on. The identified questions of law must also be legitimate, real, proper and valid; and they must arise out of the award and not from or during the proceedings. It must be remembered that the arbitral tribunal remains the sole determinant of the facts and the evidence. The court however, must intervene where the award is manifestly unlawful and unconscionable.

In the recent judgment of the Federal Court in Thai-Lao Lignite Co Ltd & Anor. v Government of the Lao People’s Democratic Republic,51 Jeffrey Tan FCJ said: 239. … ‘Support for arbitration’ is not ‘no disturbance’. There are always two sides to the same coin. The loser will call for ‘disturbance’. If an arbitral award is a sacred cow and cannot be 47 

ibid, 637. SDA Architects (sued as a firm) v Metro Millennium Sdn Bhd [2014] 2 MLJ 627. 49  ibid, 650. 50  Ahmani Sdn Bhd v Petronas Penapisan (Melaka) Sdn Bhd & Other Cases [2015] 9 CLJ 782. This approach was upheld by the Court of Appeal. 51  Thai-Lao Lignite Co Ltd & Another v Government of the Lao People’s Democratic Republic [2017] 1 LNS 1169. 48 

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­ isturbed, that will not engender confidence in arbitration. ‘No disturbance’ may appear, at least d superficially, to support arbitrators. But in truth, ‘no disturbance’ is anathema to arbitration. ‘Do not disturb’ will kill confidence in arbitration. Once confidence is lost, both arbitration and ­arbitrators will be the worst for it. For arbitration to continue to be relevant, it must be accepted that arbitral awards are not sacrosanct. Arbitral awards will be reviewed by the supervisory court of the seat. ­Arbitration will be dead, in Malaysia and elsewhere, if a supervisory court will to rubber stamp arbitral awards. 240. But that is not to say that the court has a free hand to intervene. Section 8 of AA 2005 provides that ‘No court shall intervene in matters governed by this Act, except where so provided in this Act”’. Unless so provided by AA 2005, the court shall not intervene in the arbitral process or in arbitral awards … (emphasis added)

Over the last decade since the commencement of the Arbitration Act 2005, the ­Malaysian Courts have demonstrated that they are on par with the neighbouring jurisdictions in lending their support for international commercial arbitration. The Malaysian Courts are in particular mindful of upholding party autonomy and in recognising and enforcing ­arbitration agreements and arbitral awards.

3.3.  Other Factors KLRCA as the only international arbitration centre in Malaysia with its state of the art Bangunan Sulaiman remains one of the main players in international commercial arbitration. The only national arbitral institute, namely The Malaysian Institute of Arbitrators (MIArb) plays a supportive role in promoting and creating awareness amongst industry players. MIArb also conduct courses to train arbitrators and organise arbitration related conferences and seminars. The Chartered Institute of Arbitrators (CIArb) also has a branch office in Malaysia. Both MIArb and CIArb currently house their secretariat at the KLRCA premises in Bangunan Sulaiman.

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements Legislative efforts in reforming and developing the landscape of arbitration in Malaysia, in particular international commercial arbitration, are demonstrated by the amendments to the Arbitration Act 2005 to provide for support even where the seat of arbitration is not in Malaysia so long as there is an arbitration agreement. Examples of these are found in the additions of Sections 10(4) and 11(3) to the Arbitration Act 2005 which provides that ‘This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia.’ This ensures that the national court can order a stay of court proceedings when there is an arbitration agreement or grant interim relief to support arbitration even if the arbitration is seated outside Malaysia. Judicial efforts on the other hand are demonstrated by the several cases mentioned above where the courts have adopted a minimal interventionist approach when it comes to arbitration awards. Arbitration agreements are recognised and awards are enforced with very little room for challenge or resistance.

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Institutional efforts are demonstrated by the KLRCA which has promoted Malaysia as an arbitration hub globally. Apart from the KLRCA Arbitration Rules which is widely used, KLRCA has also introduced the KLRCA i-Arbitration Rules and the KLRCA Fast Track Arbitration Rules. These Rules are prepared in six different languages, namely English, Malay, Indonesian, Arabic, Spanish and Korean. The Director of KLRCA is also the default appointing authority of arbitrators under the Arbitration Act 2005. Apart from providing the premises and facilities for arbitration hearings, the institution also administers arbitration conducted under its Rules.

3.4.2.  Top-down versus Bottom-up Reform The reform of international commercial arbitration in Malaysia has been both top-down and bottom-up. Both the legislature and the judiciary are responsive to the needs of the industry and would react to demands where required. This is demonstrated by the amendments done to the Arbitration Act 2005 in 2011 and the numerous cases where the courts have been very supportive of arbitration. Institutions such as KLRCA, MIArb and CIArb have also been very active in promoting arbitration both in the country as well as overseas.

3.4.3.  Special Considerations One of the main factors that allows Malaysia to develop arbitration as a preferred mode of dispute resolution is the similarity that it shares with common law jurisdictions like ­Singapore and Hong Kong. All these jurisdictions are familiar with the English systems of laws. Malaysia is therefore able to observe the developments of both arbitration ­practice and laws in neighbouring countries, in particular the common law jurisdictions, and adopt what has been tried and tested. The move towards building an awareness, amongst the ­judiciary, legal practitioners and the industry players of how international commercial arbitration is conducted in those jurisdictions, has enhanced the development of international commercial arbitration in Malaysia.

4.  The Future In its effort to promote itself as a hub in international commercial arbitration, the role played by the judiciary and the legislature in Malaysia is crucial. The industry players who are the main user of arbitration as a mode of dispute resolution should also encourage more awareness and this can be done through the respective professional institutions and bodies. Malaysia has experienced the benefits of adopting the Model Law principles as it ­promotes uniformity and familiarity with foreign arbitration practitioners, be it arbitrators or lawyers (both external and in-house) as well as industry players. This familiarity made Malaysia an attractive place of choice for international commercial arbitration. Whilst the development of Malaysia as a hub for international commercial arbitration has made ­significant headway over the recent years, it is still behind established jurisdictions like

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Singapore and Hong Kong. Lessons learnt from these jurisdictions would serve Malaysia well in its development plan.

4.1.  Legislative, Judicial and Institutional Reform Whilst the judiciary has in recent years, in particular after the implementation of the Model Law based Arbitration Act 2005, demonstrated stronger support towards arbitration by taking a minimal interventionist approach when it comes to challenges of arbitral awards, the Malaysian international arbitration landscape can be improved by encouraging more consistency in court decisions throughout the country. The legislature could also be more proactive in expediting necessary amendments to statute when the need arises. Legal practitioners should also endeavour to move away from the conventional style of conducting cases in courts when appearing in arbitration proceedings, in particular when it is an international commercial arbitration, as expediency is a major factor to promote international commercial arbitration in the country.

4.2.  Enhancing Competitiveness, Independence and Professionalism Currently, KLRCA plays the most active role in serving the arbitration market in Malaysia. Steered by a visionary, the KLRCA has been nothing less than innovative and proactive in promoting Malaysia as a hub for international commercial arbitration. In this respect, the KLRCA can now boast a panel of over 1000 domestic and international arbitrators52 with wide-ranging expertise. KLRCA also offers facilities at the Sulaiman Building53 including 24 hearing rooms of various sizes which can accommodate from 6 persons up to 60 persons, 12 breakout rooms, arbitrators’ deliberation rooms, state-of-the-art video-conferencing, projection, interpretation, recording, sound and webcasting equipment, ultra-modern court recording and transcription system, seminar room, business centre, specialised ADR and construction law library, auditorium which can house up to 186 persons, private dining room, arbitrator’s lounge, cafeteria, outdoor cafeteria, dedicated professionals to manage all technical aspects of each hearing, security for all premises, including guard patrol. In addition to the aforesaid facilities provided to facilitate the conduct of arbitration proceedings, KLRCA also conducts workshops to train arbitrators, mediators and conciliators. The centre also hosts seminars and conferences on international commercial arbitration as part of the continuous professional development programme. In order for arbitration to be a successful tool to resolve disputes, the whole arbitration process commencing from the appointment of the arbitrator to the delivery of the award must be as impeccable as possible. The conduct of arbitration would only be as satisfactory as the person conducting the arbitration and an arbitral award can only be as good as the person making it. Thus, ensuring professionalism amongst arbitrators is a crucial goal to achieve. 52  53 

KLRCA 2016 Annual Report (n 5) 21. ibid, 24–26.

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In this regard, KLRCA seeks to provide for and maintain professionalism by ensuring that its panel arbitrators comply with the KLRCA Code of Conduct for Arbitrator (revised as at 1 October 2013). The Code of Conduct provides that an Arbitrator shall, when approached with an appointment, conduct reasonable enquiries with regard to potential conflict of interest that may arise from his appointment and which may affect impartiality and independence. The International Bar Association (IBA) Guidelines on Conflict of Interest is referred to in the Code of Conduct as a point of reference in determining the disclosure requirement and whether an Arbitrator is conflicted. The Code of Conduct also provides that an Arbitrator shall only accept an appointment if he is fully satisfied that he is independent of the parties at the time of the appointment, and is able to remain so until a final award has been rendered, is able to discharge his duties without bias, has adequate knowledge of the language of the proceedings, has adequate experience and ability for the case at hand, and is able to give to the proceedings the time and attention which parties are reasonably entitled to expect. The Code of Conduct further spells out the disclosure obligations of a prospective Arbitrator. Further, the Code of Conduct regulates the manner of communications that the Arbitrator may have with the parties or their counsel. Other matters that are provided for in the Code of Conduct includes issues of removal or disqualification upon conviction for corruption or unlawful or illegal activities, conduct of the Arbitrator during proceedings, issues of Arbitrator’s fees in particular if it departs from the scale of fees provided for in KLRCA Rules and the confidentiality of the proceedings. The problem however lies in those circumstances where the arbitrator appointed is not governed by any particular Code of Conduct. This would occur in particular in ad hoc arbitrations. The balancing act is to allow an arbitrator to be challenged where the circumstances give rise to justifiable doubts as to his impartiality or independence or where he does not possess the qualifications agreed to by the parties. These specific grounds for challenge are provided for in the Arbitration Act 2005.

5. Conclusion Arbitration in Malaysia has gained popularity over the years, in particular over the recent few years. The growth in arbitration as a preferred mode of dispute resolution can also be seen in the rise of the number of arbitration registered with KLRCA. The courts in Malaysia have also recognised the importance of being supportive of arbitration and in this regard, have adopted a minimal interference approach. In most cases, arbitration awards are recognised and enforced. Only in some rare cases where awards have fallen squarely within limited grounds of challenge have the courts set aside arbitral awards or refused recognition. Accordingly, it is observed that the future for arbitration in Malaysia is promising.

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7 Making Arbitration Work in Singapore CHAN LENG SUN, SC*

1. Introduction Singapore is one of the world’s most popular seats for arbitration.1 This can be attributed to a confluence of factors: infrastructure, the use of English as the lingua franca, transparency, the rule of law and a respected judiciary. Accordingly, many of Singapore’s arbitration reforms have sought to maintain its current well-respected position, as well as continually to update and innovate in order to stay ahead of the curve and anticipate global trends.

2. Background Singapore’s laws can be found in the pronouncements of the judiciary on issues of law coming before it and in the judiciary’s interpretations of the legislation promulgated by the legislature. These pronouncements form binding case precedents. Accordingly, arbitration with ‘Singaporean characteristics’ is informed by statute and case law. However, although Singapore is a common law jurisdiction, Singapore has by its legislation adopted global standards of international arbitration and thereby provided an arbitral framework that will be familiar to common and civil law practitioners.

2.1.  Legislative and Regulatory Framework Singapore adopts a dual-track legislative system for arbitration. The two main pieces of legislation on arbitration are the Arbitration Act2 (the AA) and the International Arbitration Act3 (the IAA). As the subject of constant attention by lawyers, the judiciary and the legislature, the AA and the IAA have been amended over the years. * 

The author thanks Ms Jennifer Hon for her assistance with an early draft of this chapter. Mary University of London School of International Arbitration, ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’, available online: www.arbitration.qmul. ac.uk/docs/164761.pdf. 2  Arbitration Act (Cap 10, 2002 Rev Ed). 3  International Arbitration Act (Cap 143A, 2002 Rev Ed). 1 Queen

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There is a third major statute on arbitration, namely the Arbitration (International Investment Disputes) Act,4 which implements the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention) that governs International Centre for Settlement of Investment Disputes (ICSID) arbitrations. This statute hardly ever comes before the courts and there has not been much occasion to trigger a need for reform. Reforms, if and when they come, will likely be at the global or treaty level, after which such reforms will trickle down to domestic legislation for implementation. Singapore also provides ‘short form’ statutory schemes of arbitration for consumers in the following sectors: private education,5 real estate pertaining to agents and clients6 and construction.7 These schemes are therefore confined to specialised areas and particular disputes. Accordingly, the focus in this chapter will be on general commercial arbitration, not ICSID arbitration, and the discussion will be on the AA and the IAA, with particular attention on the IAA as it operates in the space of international arbitration.

2.1.1.  The Dual-track Legislative System of Arbitration Up until the 1990s, the arbitration statutes in place were the Arbitration Act (Cap 10, Rev 1985), the ICSID Act mentioned above, and the Arbitration (Foreign Awards) Act 1986 (the Foreign Awards Act), which were enacted to give effect to the New York Convention as recommended by the Economic Committee.8 The 1985 Arbitration Act had replaced the Arbitration Act 1953, which was based on the old English Arbitration Act 1950. The Foreign Awards Act was repealed and superseded by Part III of the IAA when the IAA was enacted in 1994. The IAA was the brainchild of a Sub-Committee on Review of Arbitration Laws that benefited from the diversity of its members who were the cream of the local and international bar, arbitrators, academics and legislative drafters. The Sub-Committee recommended the adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the Model Law).9 The IAA became a turning point in the modernisation of the arbitration laws of Singapore, making the curial law of Singapore at once familiar globally and compliant with international standards. The IAA is divided into four parts. Part I sets out the title of the statute. Part II of the IAA is the substantive part setting out the lex arbitri (curial law) of Singapore. Part III implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Part IV contains merely ancillary provisions binding the ­Government and allowing for subsidiary legislation to regulate court procedure in respect of arbitration matters. Part II of the IAA gives the force of law to the 1985 Model Law as adopted by UNCITRAL on 21 June 1985 with some modifications. For example, Part II of the IAA applies to an 4 

Arbitration (International Investment Disputes) Act (Cap 11, 2012 Rev Ed). Private Education (Dispute Resolution Schemes) Regs 2010. Estate Agents (Dispute Resolution Schemes) Regs 2011. 7  Building and Construction Industry Security of Payment Act (Cap 30B) 2005. 8  The Economic Committee was set up in 1985 by the Singapore government to recommend ways to revive the Singapore economy. It was headed by then Minister for Trade and Industry Lee Hsien Loong. 9  Report of the Sub-committee on Review of Arbitration Laws 1994. 5  6 

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international arbitration, or any arbitration where parties agree in writing to its application or the application of the Model Law.10 The definition of an ‘international’ arbitration in Section 5(2) of the IAA is similar to Article 1(3) of the Model Law save for one aspect. Section 5(2)(a) IAA provides that an arbitration is international as long as one of the parties has its place of business outside of Singapore. In contrast, Article 1(3) of the Model Law requires that the parties to the arbitration agreement must have their places of business in different States. The 2006 amendments to the Model Law were not adopted wholesale in Singapore. These are discussed in further detail below in section 3. The current AA was enacted in 2001, and replaced the 1985 statute. The 2001 enactment was meant to harmonise domestic arbitrations with the IAA regime for international arbitrations seated in Singapore, while retaining the features that were deemed desirable for domestic arbitration where closer judicial supervision may be warranted, such as the appeal and determination of a preliminary point of law by the court.11 The AA governs arbitrations seated in Singapore which do not come within the scope of the IAA. Hence, the AA is often seen as the statute governing the domestic arbitration regime whereas the IAA applies to international arbitrations. However, it is possible for parties to agree to the application of one or the other, notwithstanding the default position in the absence of agreement.

2.2.  Institutional Framework Singapore allows for both institutional and ad hoc arbitration. In Singapore, ad hoc arbitration is widely used in private sector construction arbitrations as it is provided for in the standard form contract provisions of the Singapore Institute of Architects Conditions of Contract.12 Ad hoc arbitration is also popular in the shipping sector which is used to unadministered arbitrations. Although the number of ad hoc arbitrations is unknown since they are not registered anywhere, it is likely that the bulk of commercial arbitrations in Singapore are institutional arbitrations. Institutional arbitrations offer certain advantages—an established set of rules for parties to abide by, administrative assistance from the institution concerned and panels of accredited arbitrators.

2.2.1.  Arbitration Institutions in Singapore The main arbitration institution in Singapore is the Singapore International Arbitration Centre (SIAC). The recession of the mid-1980s triggered recommendations by an Economic Committee, headed by then Minister for Trade and Industry Lee Hsien Loong, to set up an international arbitration centre and accede to the New York Convention with a view to developing Singapore as a centre for legal services.13 SIAC was incorporated in 1990 as a public company limited by guarantee and commenced operations in 1991. 10 

International Arbitration Act (Cap 143A, 2002 Rev Ed) s 5(a). Singapore Parliamentary Debates, Official Report (5 October 2001), vol 73 at col 2214. 12  Sundaresh Menon, Arbitration in Singapore: A Practical Guide (Singapore, Sweet and Maxwell, 2014) 78. 13  Charles Lim, ‘The Development Life Cycle of International Arbitration Legislation—Singapore IAA Case Study’ (2011) 7 Asian International Arbitration Journal 1–28. 11 

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SIAC has become a major arbitration institution globally, enjoying steady and continual growth in the number of cases that it handles. While SIAC received two cases in its first year of operation in 1991, it has about 800 active cases as of 5 July 2017. SIAC handled a total sum in dispute of USD11.85 billion in 2016. SIAC arbitrations are governed by the SIAC Rules 2016 (SIAC Rules).14 On 1 January 2017, SIAC also launched its Investment Arbitration Rules (SIAC IA Rules), making it the first commercial arbitration institution to have a dedicated set of rules that specifically attempt to address issues common to investor-state arbitrations, such as spiraling costs, frivolous claims, partiality and public interest interventions. In addition to the SIAC, there is also the Singapore Chamber of Maritime ­Arbitration (SCMA), which was originally established in 2004 under management by the SIAC. The SCMA was reconstituted in 2009 and began functioning independently of SIAC.15 The SCMA specialises in maritime arbitration and, consistent with Singapore’s standing as a leading global port, aims to serve the shipping community. The third and latest version of the SCMA Rules has come into force with effect from October 2015. Singapore has also attracted regional offices of top global arbitration institutions to complement these local institutions such as: the International Centre for Dispute Resolution Singapore, the international division of the American Arbitration Association (AAA), the Permanent Court of Arbitration (PCA), the International Chamber of Commerce’s International Court of Arbitration (ICC), ICSID and the World Intellectual Property Organization’s Arbitration and Mediation Centre (‘WIPO). In addition to these institutional centres, there are a number of different alternative dispute resolution centers such as the Singapore International Mediation Centre (SIMC), the Singapore Mediation Centre (SMC’) and the relatively new Singapore International Commercial Court (SICC), which will be further addressed below in section 3.3.

2.2.2.  Arbitrators in Singapore Singapore’s respect for party autonomy in arbitration provides for full freedom in deciding upon the criteria and the rules of appointment of the prospective arbitrators, particularly in an ad hoc arbitration. At the same time, there are resources for parties to choose wellqualified and experienced arbitrators such as the Singapore Institute of Arbitrators (SIArb), which acts as both a centre for promoting knowledge of arbitration and an appointing authority for arbitrators upon requests.16 For SIAC arbitrations, the default position is that a sole arbitrator will be appointed unless parties have agreed otherwise or the Registrar determines that the dispute warrants three arbitrators.17 While SIAC provides a Panel of Arbitrators, which will ensure that the arbitrators meet certain standards,18 parties are not obliged to nominate an arbitrator from this Panel of Arbitrators.

14 

SIAC Rules (6th edn, 1 August 2016). See the SCMA website: www.scma.org.sg. 16  See www.siarb.org.sg/Index.html. 17  Rule 6.1 of the SIAC Rules. 18  Some of the standards are a tertiary education, at least 10 years post qualification experience, a fellowship from the Chartered Institute of Arbitrators, Singapore Institute of Arbitrators or any comparable professional arbitration institute, experience as an arbitrator in five or more cases, completion of at least two commercial arbitral awards and an age between 30 and 75 years. See www.siac.org.sg/our-arbitrators/standards-for-admission-to-siac-panel. 15 

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Parties do not appoint an arbitrator directly to the tribunal, as would be the default in most ad hoc arbitrations, but rather nominate an arbitrator who is formally appointed by the SIAC President.19 The SIAC President may reject a nominee who lacks independence or the appropriate knowledge or skills for the arbitration. There is no qualification prescribed under Singapore law for anyone wishing to act as an arbitrator in Singapore. Many arbitrators, however, belong to recognised arbitral institutes, such as SIArb or the Chartered Institute of Arbitrators (CIArb). Accreditation with these Institutes is helpful for those who wish to be recognised as competent arbitrators. While parties may nominate whoever they like, subject to the requirements of integrity, independence and impartiality, arbitral institutions will only appoint those who either have a good track record as arbitrators or have demonstrated a good knowledge of arbitration through other means.

2.3.  Judicial Framework Maintaining a consistent approach towards arbitration, the Singapore courts have historically been supportive of arbitration with a philosophy of minimal judicial intervention, emphasis on party autonomy and support of the finality and enforceability of awards. This pro-arbitration philosophy, detailed further below in section 3.2, is expressed through judgments pertaining to stays of litigation in favour of arbitration, judicial assistance in making interim orders and challenges against arbitral awards. It is further reflected in the approach of the Singapore courts on enforcement of awards.

3. Reform 3.1.  Legislative and Regulatory Framework No account of the reform of arbitration legislation in Singapore can go without acknowledging the insight shared by Charles Lim, the Parliamentary Counsel in the AttorneyGeneral’s Chambers of Singapore who was the lead draftsman of the IAA from its first enactment through the years of its most recent amendments. Lim wrote that the recession of the mid-1980s triggered recommendations by an Economic Committee (mentioned above) to set up an international arbitration centre and accession to the New York Convention with a view to developing Singapore as a centre for legal services.20 Initially, a series of amendments were made to the IAA (with harmonising amendments to the AA) in 2010, but these did not follow the 2006 amendments to the Model Law. These amendments were: 1. the definition of an arbitration agreement; 2. the jurisdiction of the Singapore Court in ordering interim measures; 3. authentication of awards made in Singapore to facilitate enforcement overseas; and 19  20 

Rule 6.3 of the SIAC Rules. Lim (n 13).

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4. identifying Convention countries for the application of the New York Convention (Part II of the IAA). The 2010 amendments updated the definition of an arbitration agreement to cover electronic communications. This definition would be amended again in 2012 to relax further the writing requirements of the IAA and finally adopt into the IAA and the AA the broader definition of arbitration agreement in Option 1 of Article 7 of the 2006 Model Law. In addition to widening the definition of an arbitration agreement, the 2012 amendments extended the definition of ‘arbitral tribunal’ in Section 2(1) IAA to include emergency arbitrators. This was to take into account the emergency arbitrator provisions which were introduced by SIAC in 2010 and retained in the current 2016 edition of the SIAC Rules. The 2012 amendments also allowed appeals from a tribunal’s ruling on jurisdiction whether the latter was a positive or a negative ruling.21 This amendment followed the recommendations of the Singapore Academy of Law’s Law Reform Committee in order to remedy inconsistencies with situations where an appeal could only be made to the Singapore courts if a tribunal decided that it had jurisdiction. Before 2012 there was no recourse to appeal if the tribunal decided it did not have jurisdiction. The rationale for this was that, if the tribunal ruled that it had no jurisdiction, there was no ‘award’ (as opposed to a negative ruling on jurisdiction) which was capable of being set aside by the court on appeal. The result (which was thought to be unbalanced) was that the aggrieved party was left without a remedy unless it commenced proceedings before a national court.22 Singapore has not adopted the 2006 amendments to the Model Law in their totality. For example, with respect to emergency arbitrators, although their decisions can sometimes be described as ‘awards’, the orders of an emergency arbitrator are typically interlocutory or procedural in nature. The widely accepted view is that they are not ‘awards’ under the New York Convention. To remedy this, the 2006 amendments to the Model Law introduced, amongst other provisions, Article 17H requiring Contracting States to recognise and enforce an interim measure by an arbitral tribunal wherever the order is issued. Singapore did not adopt Article 17H but instead, in its 2012 amendments, Singapore treats the interim orders of an arbitrator (including emergency procedural measures) as foreign awards enforceable under the New York Convention.23 In further illustration of Singapore’s determination to maintain its position as a leading arbitration centre, Singapore passed laws which took effect from 28 February 2017 to set up a framework to facilitate third party funding of international arbitrations seated in Singapore.24 The laws provided a light touch to clarify that third party funding of international arbitrations and court proceedings related to international arbitrations would be not considered to be illegal or contrary to public policy, subject to the funders meeting certain criteria. The legislation is supplemented by guidelines drawn up by the Law Society of Singapore, the Singapore International Arbitration Centre and the Singapore Institute of Arbitrators to recommend best practices for legal practitioners, arbitrators and third party funders. 21  s 10, IAA; s 21, AA. See Law Reform Committee, Singapore Academy of Law, ‘Report of the Law Reform Committee on Right to Judicial Review of Negative Jurisdictional Rulings’, January 2011. 22  As decided in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597. 23  s 27(1), IAA. 24  Amendments were made to the Civil Law Act and the Legal Profession Act, as well as subsidiary legislation.

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3.2.  Judicial Initiatives Singapore’s pro-arbitration philosophy is illustrated by an oft-quoted pronouncement by VK Rajah JA, as he then was, in the Court of Appeal judgment in Tjong Very Sumito vs Antig Investments Pte Ltd (‘Tjong Very Sumito’): There was a time when arbitration was viewed disdainfully as an inferior process of justice. Those days are now well behind us. An unequivocal judicial policy of facilitating and promoting arbitration has firmly taken root in Singapore. It is now openly acknowledged that arbitration, and other forms of alternative dispute resolution such as mediation, help to effectively unclog the arteries of judicial administration as well as offer parties realistic choices on how they want to resolve their disputes at a pace they are comfortable with. More fundamentally, the need to respect party autonomy (manifested by their contractual bargain) in deciding both the method of dispute resolution (and the procedural rules to be applied) as well as the substantive law to govern the contract, has been accepted as the cornerstone underlying judicial non-intervention in arbitration. In essence, a court ought to give effect to the parties’ contractual choice as to the manner of dispute resolution unless it offends the law.25

3.2.1.  Upholding Agreements to Arbitrate 3.2.1.1.  Staying Court Proceedings in Favour of Arbitration Singapore’s pro-arbitration policy is reflected in the low threshold to obtain a stay of litigation in favour of arbitration. Section 6(2) IAA implements Article 8 of the Model Law in mandating a stay of court proceedings ‘so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.’ There are many ways in which a party can resist a stay of court proceedings. A party can allege that there is no real dispute. The Singapore courts have emphatically rejected such an argument as a ground to refuse a stay. In Tjong Very Sumito, the Court of Appeal held that ‘dispute’ must be interpreted broadly. The Court will not go into the merits to see if there is ‘in fact’ a dispute or a ‘genuine’ dispute. There must have been an unequivocal admission of the claim and mere silence before the writ is issued is insufficient. Once the defendant asserts that he or she disputes the claim, there is a dispute for the purpose of the stay application.26 A party can also resist a stay by arguing that the requirement under Section 6 of the IAA has not been satisfied—that there is a valid arbitration agreement which covers the scope of the dispute and is not null and void, inoperative or incapable of being performed. Once again, Tjong Very Sumito established a high threshold in proving as such: [I]t is only in the clearest of cases that the court ought to make a ruling on the inapplicability of an arbitration agreement. The court’s jurisdiction to grant a stay is satisfied once the prerequisites of s 6 appear to have been met. If there is no binding arbitration agreement or if the arbitration agreement has no application, then the court has no jurisdiction to grant a stay under s 6 of the IAA, although it is of course open to the court to do so under its inherent jurisdiction. This ability to decide on its threshold jurisdiction works in much the same way as the court having

25  26 

Tjong Very Sumito vs Antig Investments Pte Ltd [2009] 4 SLR(R) 732. ibid, [48]–[51].

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the jurisdiction to determine whether an arbitration agreement is null and void, inoperative or incapable of being performed.27

This passage was examined later in The Titan Unity when an argument was mounted that, when it comes to the question of the existence of an arbitration agreement, the court should definitively examine and decide the issue rather than simply using the arguable test that is applied on the scope of the arbitration agreement. After considering authorities from many jurisdictions in addition to the Singapore precedents before him, AR Shaun Leong concluded that the court need only be satisfied that an arbitration agreement exists on a prima facie level for the purpose of Section 6 IAA, and there is no need for the court to descend into a protracted examination of the evidence to making a finding on the merits that an arbitration exists on a balance of probabilities at the stay stage.28 Malini Ventura v Knight Capital Pte Ltd and others (‘Malini Ventura’) also utilised a prima facie standard, holding that even in the face of allegations that the document containing the arbitration agreement was forged, it suffices for a stay if the party seeking to enforce the arbitration agreement can show on a prima facie basis that the agreement exists.29 Judith Prakash J in Malini Ventura outlined the clear distinction between Singaporean and English arbitration law, plainly illustrating the legislative break away from English common law in arbitration to the global standard which includes civil law elements. Prakash J declined to follow a number of English decisions which held that the court would not grant a mandatory stay where there was insufficient evidence on the conclusion of the arbitration agreement (the balance of probabilities standard). Finally, Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals (‘Tomolugen’) definitively establish the prima facie standard used in Singapore over the balance of probabilities standard from English arbitration law.30 The Court of Appeal determined that it should not engage in a full review or consideration of whether a valid arbitration agreement exists, as this would be contrary to the principle of kompetenz-­ kompetenz, ie the tribunal’s power to rule on its own jurisdiction, as is expressed in Article 16 of the Model Law and given the force of law by the IAA. The principle of kompetenz-kompetenz is also incorporated in Section 21(1) AA for domestic arbitrations. Yet, where an arbitration falls under the domestic regime of AA, a stay is not mandatory. The Court has a discretion under Section 6 AA whether or not to stay the court action, although it will do so if there is no sufficient reason not to refer the matter to arbitration and the applicant for stay is ready and willing to arbitrate. Even then, it does not mean that the Court will easily disregard an arbitration clause. In Sim Chay Koon and others v NTUC Income Insurance Co-operative Limited (‘Sim Chay Koon’), employees suing for breach of employment contracts tried to argue that their court action should not be stayed because of the higher cost of arbitration, statutory protections for workers and a subjective belief that the employees would get a better hearing in court. The Court of Appeal held that these were insufficient grounds for the court to exercise its discretion not to stay the court action. Something weighty must be shown to

27 

ibid, [24]. The Titan Unity [2013] SGHCR 28, [34]. 29  Malini Ventura v Knight Capital Pte Ltd and others [2015] SGHC 225. 30  Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57. 28 

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demonstrate sufficient reason not to hold parties to the arbitration agreement.31 Menon CJ, at [5], said: In our judgment, the existence and applicability of the doctrine means that as a general rule, where a party seeks to avoid its obligation to arbitrate its dispute, the court should undertake a restrained review of the facts and circumstances before it in order to determine whether it appears on a prima facie basis that there is an arbitration clause and that the dispute is caught by that clause. That standard is amply met in the present case. Hence, on the face of it, we should hold the parties to their duty to arbitrate and allow them to raise any relevant objections such as those in relation to jurisdiction, the validity of the arbitration agreement, or subject matter arbitrability before the tribunal.

3.2.1.2. Arbitrability Being a pro-arbitration jurisdiction does not mean rubber-stamping all disputes to arbitration. Some disputes are not susceptible to resolution by private process or run counter to public policy concerns. This refers to the arbitrability of the subject matter of arbitration, or objective arbitrability. Article 8 of the Model Law 1985 implicitly recognises that not all arbitration agreements are enforceable. It requires the court to stay court proceedings for arbitration unless the arbitration agreement is null and void, inoperative or incapable of being performed, subject to other conditions being met. Section 11 of the IAA is more specific: (1) Any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless it is contrary to public policy to do so. (2) The fact that any written law confers jurisdiction in respect of any matter on any court of law but does not refer to the determination of that matter by arbitration shall not, of itself, indicate that a dispute about that matter is not capable of determination by arbitration.

There is no legislative guideline on what is or is not arbitrable. It remains for case law to provide guidance. The content of arbitrability continues to be an elusive one in most countries. Sundaresh Menon SC, as he then was, identified two core instances when limits might be placed on parties’ freedom to arbitrate: where the remedy or issue being dealt with impacts parties other than the parties to the arbitration agreement and where the issue raised goes beyond the purely private interests of those parties.32 In Singapore, the public interest in the regulation of company insolvency led the Court of Appeal in Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) (‘Petropod’)33 to refuse the stay of an action brought by a company in liquidation, to avoid several transactions which were alleged to be unfair preferences or at an undervalue. Such avoidance claims brought by an insolvent company were deemed to be non-arbitrable since private dispute resolution would undermine the protections that avoidance claims provide to the general body

31 

Sim Chay Koon and others v NTUC Income Insurance Co-operative Limited [2015] SGCA 46, [9]. Menon, Rethinking Arbitrability in the Context of Corporate Disputes, paper presented in the Mauritius International Arbitration Conference 2010, [3]–[4]. 33  Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] SGCA 21. 32  Sundaresh

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of creditors and may override transactions that are binding upon the insolvent company under general law. The above case indicates that there are situations in which the Singapore courts will determine that there is a greater public policy interest that overrides upholding the parties’ agreement to arbitrate. Yet the recent Tomolugen case mentioned above notes that there is a presumption of arbitrability if there is an arbitration agreement which covers the subject matter of the dispute. This presumption can only be rebutted by showing that Parliament had intended to preclude a particular type of dispute from arbitration or that it would be contrary to public policy to resolve that type of dispute in private arbitration. In Tomolugen, the Court examined the Companies Act and determined that minority oppression claims were intended to uphold the commercial agreement between shareholders of the company and was not introduced to protect or further any public interest. Practically, if the Courts have determined that the dispute is arbitrable, any potential remedial inadequacy and procedural complexity will be dealt with by taking a practical case management approach. Accordingly, in Tomolugen, the Court upheld a stay of proceedings in favour of arbitration, to be lifted if there was undue delay in resolving the arbitration. These cases indicate that the courts will examine the statutes governing the claims to determine whether it is ‘contrary to public policy’ to arbitrate such a claim. The main point which the Singapore courts seemed to consider when determining whether a claim was arbitrable was whether there would be a restriction of statutory third party rights. 3.2.1.3.  Interim Measures In 2010, a new section 12A was introduced into the IAA to empower the Singapore courts to order interim measures, such as interim injunctions, in aid of arbitration regardless of the location of the seat. These amendments sought to resolve two prior conflicting decisions as to whether the Singapore courts had jurisdiction to grant Mareva injunctions in aid of arbitrations that are not seated in Singapore.34 Although the 2010 amendment expressly conferred power on the courts, a degree of restraint was also built into the provision. Parliament considered that court-ordered interim measures should support arbitration, and should not extend to procedural or evidential matters such as discovery, interrogatories or security for costs.35 Furthermore, the power will only be exercised when the arbitral tribunal or arbitral institution has no power to act, or is unable to act effectively for the time being.36 It is worth noting that, as of 30 June 2017, 63 parties have opted to seek relief from emergency arbitrators appointed under the SIAC Rules. When the court does entertain an application for interim relief, the same test used for litigation will be applied to the relief sought in aid of arbitration. For example, the test for a Mareva injunction is the same whether there is litigation or arbitration pending.37

34  Swift-Fortune Ltd v Magnifica Marine SA [2006] 2 SLR 323 per Judith Prakash J; [2006] 3 SLR 854 (CA). Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] 3 SLR 854. 35  Second Reading Speech by Law Minister K Shanmugam on the International Arbitration (Amendment) Bill, [7]. 36  s 12A(6), IAA. 37  Solvadis Commodity Chemicals GmbH v Affert Resources Pte Ltd [2014] 1 SLR(R) 174, [16].

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Section 12A(4) IAA provides that, if the case is one of urgency, the High Court may make orders as it thinks necessary for the purpose of preserving evidence or assets. This provision was the subject of judicial scrutiny in Maldives Airports Co Ltd v GMR Malé International Airport Pte Ltd. In that case, the operators of the airport sought an interim injunction against the Maldives Airports Co Ltd and the Maldives government which would prohibit them from interfering with performance of the concession agreement or taking possession of the airport pending arbitration of the dispute in Singapore. Several interesting issues came up before the Court of Appeal but the Maldives government ultimately failed on the application of the American Cyanamid38 test to the facts of the case. The court found that the balance of convenience did not warrant granting the injunction sought and the burden on the Maldives government would be too onerous and necessitate an unacceptable degree of supervision in a foreign land.39 Instead, the Court held that damages would be an adequate remedy.40 While the Singapore courts will seek to support arbitration proceedings, this power is exercised in a measured manner, with consideration for both party agreements and international elements. 3.2.1.4.  Challenges Against Arbitral Awards 3.2.1.4.1.  Appeals against Domestic Arbitral Awards There is a conditional right of appeal against arbitral awards under the AA. Section 49(5) AA stipulates that leave to appeal shall be given only if the Court is satisfied of four things. First, that the determination of the question will substantially affect the rights of one or more of the parties. Second, that the question is one which the arbitral tribunal was asked to determine. Third, that the decision of the arbitral tribunal on the question of law is obviously wrong, or the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt.41 Fourth, that it is just and proper in all the circumstances for the Court to determine the question. 3.2.1.4.2.  Applications to Set Aside International Arbitral Awards In contrast, there is no right to appeal against an award made under the IAA. Instead, the Singapore courts have consistently and regularly approached challenges against international arbitral awards with a view of upholding such awards in accordance with the ­guidance provided by the Model Law. 3.2.1.4.2.1.  Breach of Natural Justice Given that it is impossible to challenge an award on the merits in an international arbitration, a losing party will look to one of the grounds for setting aside an award under Article 34 of the Model Law or refusing enforcement under Article V of the New York ­Convention as its recourse against an award. 38 

American Cyanamid Co v Ethicon Ltd [1975] AC 396. ibid, [53], [66]–[71]. 40  ibid, [56]. 41  This is a slight variation of the English common law test found in Pioneer Shipping Ltd v BTP Tioxide Ltd (‘The Nema’) [1982] AC 724; see eg Motor Image Enterprises Pte Ltd v SCDA Architects Pte Ltd [2011] 1 SLR(R) 497. 39 

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A popular ground is section 24(b) of the IAA (its equivalent is found in section 48(1)(a)(vii) of the AA) that enables the Court to set aside an award if a breach of natural justice occurred in connection with the making of the award.42 There are two limbs to natural justice: (1) both parties have the right to be heard (audi alteram partem) and (2) the decision-maker must be impartial (nemo judex in causa sua). Failure to abide by either of these rules amounts to a breach of the rules of natural justice. This broad concept of natural justice is supplemented by the stipulation in Article 18 of the Model Law 1985 and the corresponding Section 18 of the IAA. Article 18 of the Model Law 1985 mandates that: ‘The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.’ Of note, Section 22 of the AA also expresses the same requirement: ‘The arbitral tribunal shall act fairly and impartially and shall give each party a reasonable opportunity of presenting his case.’ The Singapore courts have constantly reminded parties that the grounds for setting aside an award, whether for breach of natural justice, for excess of jurisdiction, or other Article 34 Model Law grounds, are not an appeal on the merits and should not be used as a back-door challenge to the factual or legal findings of an arbitral tribunal. AKN v ALC is a recent illustration of the Singapore courts’ narrow application of the breach of natural justice ground to set aside an arbitral award. In AKN v ALC, an application was made to challenge many findings of the tribunal on the grounds of breach of natural justice and excess of jurisdiction. Menon CJ took the opportunity to reaffirm the ground rules before dealing with each allegation. The notion of party autonomy, which is central to the fundamental principle that parties choose their arbitrators, also means that the courts will not interfere in the merits of an award. The parties have no right to a ‘correct’ decision and there is no right of appeal. The parties only have the right to a decision within the ambit of their consent to arbitrate, that is reached under a fair process.43 While the failure to consider an important pleaded issue can amount to a breach of natural justice, the inference that the arbitrator had failed to do so ‘must be shown to be clear and virtually inescapable.’ If the facts show that the arbitrator simply misunderstood the aggrieved party’s case, was mistaken as to the law, or decided not to deal with a point because he thought it was unnecessary (even if this was a mistake), there is no breach of natural justice. In addition, even if this first hurdle of proving a breach of natural justice is overcome, the complainant must still show causation between the breach and the award, and that the breach had prejudiced its rights.44 The Singapore High Court case of AYH v AYI and another (‘AYH v AYI’) held that even in cases where new issues of law and fact are introduced less than a week before the arbitration hearing, the non-introducing party must make full use of any opportunities to address the new issues and ‘cannot complain later’, alleging that there had been a breach of natural justice.45

42 

See the principles enunciated in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R)

86.

43 

AKN v ALC [2015] SGCA 18, [37]–[38]. ibid, [46]–[48]. 45  AYH v AYI and another [2015] SGHC 300. 44 

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3.2.1.4.2.2.  Public Policy The public policy ground is another commonly-invoked ground utilised by parties seeking to set aside an award under Article 34(2)(b)(ii) Model Law or resist enforcement under Article V(2) New York Convention. Case law has settled the position in Singapore, consistent with its other pro-arbitration positions. A high threshold is required in line with the spirit of the New York Convention as well as the Model Law. A party attempting to set aside the award must demonstrate that the award would ‘shock the conscience’ or be ‘clearly injurious to the public good’.46 An argument that an award is ‘perverse’ or ‘irrational’ is insufficient. There must be ‘egregious circumstances such as corruption, bribery or fraud which would violate the most basic notions of morality and justice’.47 The applicable standard of proof is the balance of probabilities.48 The same test for public policy applies when resisting enforcement of both foreign and domestic arbitral awards.49 3.2.1.4.2.3.  Enforcement of Awards Singapore is a party to the New York Convention, which is given the force of law in the IAA. This applies to enforcement of foreign awards under the New York Convention. Enforcement of awards made in Singapore, or made in a non-New York Convention, is covered by section 46 of the AA. There are no express guidelines on when a court may or may not enforce an award under the AA. Section 46 merely says that an arbitral award ‘may, with leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect.’ Similar brief language applies to an award made in Singapore in an ‘international arbitration’ under the IAA, which by section 19 IAA ‘may, by leave of the High Court or a Judge thereof, be enforced in the same manner as a judgment or order to the same effect and, where leave is given, judgment may be entered in terms of the award.’ The circumstances under which a Singapore award may be refused enforcement were examined by the Singapore Court of Appeal in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and Ors (‘Astro’).50 The dispute in Astro arose out of a failed joint venture between the Astro Group of Companies (‘Astro’) and the Lippo Group of companies (‘Lippo’). When Astro commenced arbitration in Singapore under the 2007 SIAC Rules against Lippo pursuant to the arbitration agreement in their Subscription and Shareholders’ Agreement (SSA), it also applied to join three subsidiaries of the Astro group (who were not signatories to the SSA) (‘Astro Joinder Parties’) to the arbitration. Despite Lippo’s objection, the Tribunal determined in a preliminary award that it had the power and would exercise its discretion to join the Astro Joinder Parties to the Arbitration. Lippo did not appeal the Tribunal’s preliminary

46 

BLB and another v BLC and others [2013] 4 SLR 1169, [100]. Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1, [48]. 48  Beijing Sinozonto Mining Investment Co Ltd v Goldenray Consortium (Singapore) Pte Ltd [2014] 1 SLR 814, [42]–[48]. 49  AJU v AJT [2011] SGCA 41, [36]. 50  PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and Ors [2014] 1 SLR(R) 372. 47 

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decision on jurisdiction under section 10 IAA as it could have done, but participated in the arbitration while expressly reserving its rights. The Tribunal subsequently issued its final awards (in total five awards) in favour of Astro (‘the Awards’). Lippo did not apply to set aside the Awards under Article 34 Model Law. When Astro sought to enforce the Awards in Singapore, Lippo resisted enforcement of the Awards on the basis that the Tribunal lacked jurisdiction to join the Astro Joinder Parties to the arbitration. Astro was decided in relation to the special structure of the IAA. In brief, the Court determined as follows: 1. Section 19 IAA provides for the enforcement of a Singapore award made under the IAA with the leave of the court. The corresponding domestic provision is Section 46 AA. Both of these provisions could be traced back to the English Arbitration Act of 1950 (the EAA). Section 19 provides no guidelines on when enforcement should be refused. 2. This is in contract to the express and exhaustive grounds for refusing enforcement of a foreign award in Article IV of the New York Convention, which are incorporated, with some amendments, in Section 31 IAA. These grounds are comparable to those under Article 36 of the UNCITRAL Model Law. 3. Although the IAA makes the UNCITRAL Model Law part of Singapore law, Section 3(1) IAA excludes the application of Chapter VIII of the UNCITRAL Model Law, ie Articles 35 and 36, the grounds upon which a party can rely upon to refuse enforcement through a jurisdictional challenge. 4. In resolving this discrepancy, the Court of Appeal in Astro held that this exclusion of Chapter VIII was meant to have only one set of rules governing enforcement of foreign awards under the IAA, namely the New York Convention. The exclusion of Articles 35 and 36 did not take away the Court’s discretion to refuse recognition and enforcement of awards under section 19. Aligning the Court’s discretion under section 19 IAA with the Article 36 grounds for refusing enforcement is consonant with the overarching philosophy of the UNCITRAL Model Law, which Singapore has adopted. 5. Accordingly, while acknowledging the historical roots of these particular provisions, the Court of Appeal found that the grounds for refusing enforcement of awards under Section 19 IAA should no longer be guided by English authorities but by the grounds under the Model Law.51 This harmonises yet another element in Singapore arbitration law, namely the grounds for challenge of an award made in Singapore with that of the Model Law. A broader question before the Court of Appeal in Astro was whether a party may invoke the jurisdictional challenge as a ground to refuse enforcement of an award made in Singapore under the IAA in the absence of an active attack against the tribunal’s affirmative ruling on its jurisdiction at an earlier stage (by either appealing against the preliminary ruling on jurisdiction or applying to set aside the award). The Court of Appeal adopted the ‘choice of remedies’ system derived from English common law, under which English courts permitted parties a choice of ‘passive remedies’ and ‘active remedies’ after an award is released. Under the system of ‘choice of remedies’, the right of appeal from a tribunal’s jurisdictional ruling under Article 16(3) Model Law is not a ‘one-shot remedy’ and a party is entitled to

51 

ibid, [50], [55].

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reserve its right to resist enforcement of the eventual final award on jurisdictional grounds. The Court of Appeal also found that, although the language in Article 16(3) Model Law did not expressly say so, it was understood that a party could choose not to challenge the preliminary ruling on jurisdiction at the setting aside stage and still raise that same challenge in enforcement proceedings.52 An important distinction is drawn, albeit obiter dictum, between a situation where a party is resisting enforcement (passive remedy), which is permitted even if a party has not having taken an earlier active remedy, and a situation where a party is applying to set aside an award in the same seat (active remedy) where it had failed to invoke its right under Article 16(3) Model Law to appeal to the courts before the final award was rendered. Menon CJ said the court would be surprised if a party retained the right to bring an application to set aside a final award on the merits under Art 34 on a ground which they could have raised via other active remedies before the supervising court when the arbitration process was still ongoing.53

Having cleared the first issue of whether Lippo was precluded from raising a jurisdictional objection at the enforcement stage, Lippo then went on to persuade the Court of Appeal that the joinder of the Astro Joinder Parties was wrongful, since it was based on a mistaken reading of the SIAC Rules 2007 by the tribunal. The Awards rendered in favour of the Astro Joinder Parties were refused enforcement. The Astro case continues to attract attention. Enforcement of the Awards have been refused in Indonesia, but have been permitted at first instance and on appeal in Hong Kong. The Astro case does not signal a less pro-arbitration trend in Singapore. It merely demonstrates that the Singapore Courts will apply a principled approach to examining issues within the framework of the Model Law and the New York Convention. The Tomolugen case mentioned above illustrates the Singapore Court’s determination to uphold arbitration agreements even where doing so will entail inconvenience and procedural complexities. In Sanum Investments Ltd v Government of the Lao People’s Republic, the Singapore Court of Appeal applied a broad interpretation to the dispute resolution clause in the PRC-Laos BIT, to give practical effect to an arbitration clause in line with the object of investor protection in the BIT.54

3.3.  Other Factors There are a number of different dispute resolution options available for parties in Singapore. There are local institutions (ie SIAC and SCMA), global institutions (ie ICDR, ICC, ICSID and WIPO) and alternatives to arbitration. There are the traditional alternatives to arbitration, such as mediation, which is serviced by the SMC and SIMC, which have complemented arbitration since their respective dates of establishment in 1997 and 2014. While both SMC and SIMC provide mediation services and parties are free to choose which forum to conduct mediation, SMC focuses on domestic commercial disputes and SIMC focuses on international commercial disputes. SIMC also works closely with SIAC to

52  53  54 

ibid, [109]. ibid, [130]. Sanum Investments Ltd v Government of the Lao People’s Republic [2016] SGCA 57, [150].

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integrate mediation and arbitration, providing an Arbitration-Mediation-Arbitration protocol (Arb-Med-Arb or AMA). In Arb-Med-Arb, parties first refer disputes to arbitration which is adjourned while mediation is attempted (before a different person who acts as mediator). If parties are able to settle their dispute through mediation, the settlement is then recorded as a consent award. In recording the settlement as a consent award, parties are able to take advantage of the enforceability of such mediation settlements as arbitral awards under the New York Convention. If parties are unable to settle their dispute through mediation, the arbitration proceedings will continue. While other institutes and jurisdictions (such as the ICDR, ICC and HKIAC) have also recognised and supported the use of Arb-Med-Arb, SIMC’s AMA protocol can be distinguished by its clarity, certainty of the process and institutional support from both the SIMC and SIAC. In the context of commercial courts, Singapore has also seen interesting developments in light of the recent launch of the SICC on 5 January 2015. The Singaporean courts’ approach to arbitration has been described in detail above—as supervisory insofar as it upholds arbitration agreements and assists the arbitral process in line with global standards of curial review. The question is often asked whether the SICC will be a competitor to arbitration. Dispute resolution under the SICC amalgamates features from both Singapore court litigation and international commercial arbitration. The panel of judges includes both Singapore High Court judges and international judges. The SICC incorporates the following attractive features from international commercial arbitration: more flexible evidentiary and procedural rules,55 the ability of foreign counsel of suitable standing to appear before the SICC56 and that foreign law may be determined on the basis of submissions, rather than having to be pleaded and proven as fact in the proceedings.57 At the same time, the SICC retains many elements from Singapore court litigation: a structure for joinder of third parties,58 an appellate structure that is already in place, the ability to hear disputes that may be deemed inarbitrable and reported proceedings (with the possibility of redaction in appropriate cases) that would develop a body of jurisprudence and allow for transparency. There are enough differences between international arbitration and the SICC to offer parties a real choice. In fact, London is an example of how a successful commercial court can exist harmoniously with arbitration centres and other dispute resolution centres. Accordingly, as noted by Justice Quentin Loh, arbitrators should not think of the SICC cannibalizing their work. Instead they should look upon it as an integral part of a vibrant dispute resolution hub. Just as mediation or adjudication or other forms of ADR complement arbitration, the SICC will do likewise for disputes that do not sit well with the private consensual dispute resolution process.59

55 

O 110, r 23, Rules of Court (‘RoC’). O 110, r 32, RoC. O 110, r 25, RoC. 58  O 110, r 9, RoC. 59  Quote extracted from Michael Hwang, ‘Commercial Courts and International Arbitration—Competitors or Partners?’ (2015) 31 Arbitration International 193–212. 56  57 

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This also neatly summarises Singapore’s approach towards creating a holistic and interactive dispute resolution hub that can cater to any and all cross-border commercial dispute needs.

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements As noted above, Singapore’s approach towards arbitration has been to ensure that it stays in line with global trends while also developing other modes of dispute resolution in order to provide comprehensive dispute resolution services as a hub for cross-border commercial transactions. The reform patterns and development discourse described above in section 3 have been brought about through collective legislative, judicial and institutional efforts. The IAA has been updated at various times to reflect the amendments made to the Model Law and the Singapore courts have interpreted cases according to the Model Law, moving away from the historical ties that Singapore’s arbitration law had with English arbitration law. Ad hoc arbitration had been popular long before the SIAC became prominent and continues to be used in certain sectors, such as the maritime industry. However, institutions such as SIAC and SCMA have been the focal point for reforms and change. The creation of the SIMC and the AMA protocol it developed with SIAC are further evidence of institutiondriven progress.

3.4.2.  Top-down Versus Bottom-up Reform It may be thought from the foregoing account that arbitration reform in Singapore has essentially been led from the top, that is, by government initiatives with active judicial support. However, the government and Parliament have a practice of consulting the private sector before laws are passed effecting changes to the arbitration regime. The Law Reform Committee of the Singapore Academy of Law comprises judges, practitioners and academics. One of the studies it commissioned led to a change in the law permitting appeals from negative jurisdictional rulings by arbitral tribunals. Other landmark changes are similarly preceded by working committees that draw on expertise from the judiciary, the bar and the academia. The features of the SICC were first crystallised in a multi-jurisdictional committee of judges and practitioners.

3.4.3.  Special Considerations The arbitration community at large also often has a chance to express (and has frequently expressed) its views on proposed legislative changes. For example, prior to the 2012 amendments to the IAA, on 21 October 2011, the Ministry of Law released two public consultation papers dealing with the proposed amendments to the IAA and the proposed enactment of a Foreign Limitation Periods Act. The public consultation provided feedback from various stakeholders, such as arbitrators, practitioners in international and local law firms, academics and SIAC. Institutional reforms are also implemented after broad consultation. SIAC, too, has a practice of taking feedback from arbitrators and practitioners worldwide as part of its consultation process before releasing any new version of its Rules.

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4.  The Future 4.1.  Legislative, Judicial and Institutional Reform The trajectory of Singaporean arbitration is quite promising given the determination of the Singapore arbitration community, within the public and private sectors, to keep it an effective and desirable choice for contracting parties. The law and practice of arbitration do not stand still, nor should they as there is always room for improvement and adjustments to be made in response to commercial needs. There are still issues which might still be addressed in the near future. There is debate whether the present dual-regime of domestic and international arbitration should be merged into one statute. Some favour separate domestic and international arbitration statutes. Others argue for a single arbitration statute for simplicity and harmony, with provisions clearly carved out where it is desired that domestic arbitration should differ from international arbitration. Other topics that are under consideration are the test for interim measures by the tribunal and third party funding.

4.2.  Enhancing Competitiveness, Independence and Professionalism Such debates can only benefit from the perspectives of a wide range of stakeholders in international arbitration, both within and outside Singapore. Accordingly, in order to maintain the position that arbitration reform in Singapore should serve to attract different crossborder commercial disputants by establishing both a variety of different options for dispute resolution and a safe, efficient and effective seat, future developments should keep in mind the ‘London Principles’. As Menon CJ has stated, ‘the London Principles serve as a blueprint for nascent arbitration jurisdictions and as a yardstick for the more established ones and in this way, they advance the internationality of arbitration’.60 The Principles are to maintain:   1. A clear, effective, modern international arbitration law which recognizes and respects the parties’ choice of arbitration as the method for settlement of their disputes;  2. An independent judiciary, demonstrably experienced in international commercial arbitration and respectful of the parties’ choice of arbitration;   3. Sophisticated and skilled practitioners to run and support the arbitrations taking place;   4. A commitment to the education of counsel, arbitrators, the judiciary, experts, users and students of the character and autonomy of international commercial arbitration;   5. A clear right for parties to be represented at arbitration by party representatives of their choice;   6. Easy accessibility and adequate safety and protection of the participants;   7. Adequate facilities for the provision of services to international commercial arbitration;

60  The Honourable Chief Justice Sundaresh Menon’s Patron’s Address at the Chartered Institute of Arbitrators London Centenary Conference, 2 July 2015.

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  8. Professional and other norms which embrace a diversity of legal and cultural traditions and the developing norms of international ethical principles governing the behaviour of arbitrators and counsel;   9. Adherence to international treaties and agreements governing and impacting the ready recognition and enforcement of foreign arbitration agreements, orders and awards; and 10. Arbitrator immunity.61 While Singapore already has fulfilled many of these safe seat principles, this was not always the case. In Menon CJ’s Patron’s Address at the Chartered Institute of Arbitrators (CIArb) London Centenary Conference,62 he recalled a case in which he acted as junior counsel for the applicant who requested an injunction enjoining lawyers from a New York firm from acting or appearing as counsel for the respondents in a Singapore-seated arbitration.63 The injunction was granted, contradicting Principle 5 above which grants parties the freedom to choose their party representatives. Over time, Singapore legislation was amended to reflect the freedom of the parties to choose counsel for international arbitrations and liberalise the international arbitration industry.64 Taking this historical lesson in mind, there are always ways in which current arbitration law and practice can be improved upon. Any prospective reforms should maintain these fundamental principles in refining the current arbitration regime in Singapore.

5. Conclusion Law reform is a continuing process. When problems with current laws or legislation surface, they do not always get addressed promptly for a variety of reasons. The legislature may have other priorities for example, or the solutions take time to work through. The arbitration regime in Singapore has benefited from a unity of purpose in the judiciary, the executive and the legislature. The goal of having a top-class arbitration infrastructure receives close attention from the Ministry of Law and the Attorney-General’s Chambers, which monitor judicial pronouncements and take the temperature of the private sector through consultations and conferences. Arbitrators and practitioners have ample opportunities to give feedback to law-makers. In some instances, it can even be said that the approach is ­pro-active in anticipating weaknesses before they become problems and in striving to calibrate functioning laws. Singapore’s acceptance of third party funding, after years of wariness over the potential moral hazards posed by champerty and maintenance, shows its commitment to keep up with international trends and users’ preferences. Its track record of timely and agile legislative changes suggests that Singapore will not keep still in ensuring that its arbitration framework continues to evolve. In this regard, we can be certain that change is the only constant.

61 

Peter Goldsmith, ‘The London Principles 2015’ (2015) 81(4) Arbitration 407. On 2 July 2015. 63  Turner (East Asia) Pte Ltd v Builders Federal (Hong Kong) Ltd & Anor [1988] SLR 1037. 64  Amendments to the Legal Profession Act were made in 1992 and 2004. 62 

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8 Philippine Arbitration Reform: Fresh Breathing Space from Congested Litigation ARTHUR P AUTEA

1. Introduction Not long after the Philippines became a republic in 1946, Congress passed the first ­Arbitration Law in 1953, Republic Act No 876 (RA 876): ‘An Act to Authorize the Making of Arbitration and Submission Agreements, to Provide for the Appointment of Arbitrators and the Procedure for Arbitration in Civil Controversies’. The title of the law announces its coverage—civil controversies. A reading of the law shows that it does not cover regulatory arbitration in administrative agencies, a typical example of which is the arbitration for the settlement of conflicts under the Philippine Mining Act.1 In addition, there was a provision in RA 876 that expressly excluded employment- or labour-related disputes from its coverage. Section 3 of RA 876 instead provided for the excluded disputes to be handled by the Court of Industrial Relations (CIR). The CIR was abolished in 1974 by Presidential Decree No 442,2 more popularly known as the ‘Labor Code of the Philippines’.3 It was replaced by the National Labor Relations Commission (NLRC) which now has exclusive jurisdiction to hear and determine employment-related disputes.4 This chapter accordingly does not deal with the arbitration of employment-related disputes. The resolution of the latter type of disputes by the NLRC is not covered by the same law that covers commercial arbitration, but is instead covered by a

1  Republic Act No 7942 created a panel of arbitrators composed of members of the Philippine Bar in good standing and licensed mining engineers (or professionals in a related field) from within the Department of Environment and Natural Resources to hear and decide disputes involving (1) rights to mining areas, (2) mineral agreements or permits, (3) surface owners, occupants and claimholders/concessionaires, and (4) other disputes pending before Department and the Mines and Geosciences Bureau. 2  Presidential Decree No 442, Art 337. 3  Officially titled ‘A Decree Instituting a Labor Code, Thereby Revising and Consolidating Labor and Social Laws to Afford Protection to Labor, Promote Employment and Human Resources Development and Insure Industrial Peace Based on Social Justice’. 4  Presidential Decree No 442, Art 338.

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completely different set of laws and rules, where the NLRC functions more as an administrative tribunal and not as an arbitral institution. Although RA 876 may be considered as the first law on commercial arbitration, it was preceded by a handful of arbitration-related provisions found in Republic Act No 386,5 more popularly known as the ‘Civil Code of the Philippines’, which took effect in 1950. The statutory provisions relating to arbitration in the Civil Code6 enunciate only a few general principles, such as the following articles: Art 2044. Any stipulation that the arbitrators’ award or decision shall be final, is valid, without prejudice to Articles 2038,7 2039,8 and 2040.9 Art 2045. Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect.

Other than these few general principles, there are no other provisions in the Civil Code specifically about arbitration. The nature of arbitration contemplated in RA 876 is ad hoc in nature. While RA 876 does not expressly say so, it covers domestic arbitration only. From the passage of RA 876 in 1953, the Philippines did not have any specific law to govern international and foreign arbitration until 2004 when Congress passed Republic Act No 9285 (RA 9285),10 otherwise known as the ‘Alternative Dispute Resolution Act of 2004’. The ADR Act of 2004 did not repeal RA 876 and, in fact, provided in its Section 32 that ‘domestic arbitration shall continue to be governed by Republic Act No. 876’. Though the Philippines did not have a specific law on international and foreign arbitration until 2004, as of 31 December 1965, the Philippines had already acceded to the 1958 New York Convention.11 The Supreme Court noted in the case of National Union Fire Insurance Company of Pittsburg PA v Stolt-Nielsen Philippines Inc12 that ‘arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction. … Republic Act No 876 (The Arbitration Law) also expressly authorises arbitration of domestic disputes. Foreign arbitration as a system of settling commercial disputes of an international character was likewise recognised when the Philippines adhered to the United Nations Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958, under the 10 May 1965 Resolution No 71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state.’ To date, RA 876, the ADR Act of 2004 and the New York Convention are the fundamental laws and rules that govern the conduct of commercial arbitration in the Philippines.

5 

Officially titled ‘An Act to Ordain and Institute the Civil Code of the Philippines’. Arts 2042–46. 7  Art 2038 deals with the effects of mistake, fraud, violence, intimidation, undue influence, or falsity of documents in the vitiation of consent. 8  Art 2039 deals with the effect of the discovery of new documents. 9  Art 2040 deals with the effect on compromise reached without knowledge of a prior judgment having been rendered on the same dispute. 10 Officially titled ‘An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the ­Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes’. 11  Officially titled ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’. Done at New York, 10 June 1958. 12  National Union Fire Insurance Company of Pittsburg PA v Stolt-Nielsen Philippines Inc 184 SCRA 682 (1990). 6 

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2. Background 2.1.  Legislative and Regulatory Framework RA 876 contemplates ad hoc domestic arbitration. It is silent on institutional arbitration. As a result, procedural problems, which may be routinely addressed within the framework of institutional arbitration, arising in an arbitration governed by RA 876, require judicial recourse. Thus, from 1953 onwards to 2004, commercial arbitration proceedings failed to move smoothly and could easily be derailed by stumbling blocks along the path, much like a toddler beginning to learn to walk who could easily trip and fall. When the ADR Act was enacted in 2004, institutional arbitration was conferred statutory recognition. Section 26 provides that where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to have agreed to the procedure under such arbitration rules for the selection and appointment of arbitrators.

This provision lessened the dependence on the courts for the appointment of arbitrators where the parties failed to agree because it also provides that ‘Appointing Authority’ as used in the Model Law shall mean ‘the person or institution named in the arbitration agreement as the appointing authority, or the regular arbitration institution under whose rules the arbitration is agreed to be conducted.’ In addition, the ADR Act of 2004 adopted the 1985 Model Law in its entirety by providing that international commercial arbitration shall be governed by the Model Law on International Commercial Arbitration (‘the Model Law’) adopted by the United Nations Commission on International Trade Law on 21 June 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 40/72 approved on 11 December 1985.

With the wholesale adoption of the 1985 Model Law, a dual-track mechanism was put in place under which different arbitral procedures and different standards of judicial review applied to domestic arbitration and international/foreign arbitration. In 2009 the Department of Justice issued Department Circular No 98 (series 2009) promulgating the ‘Implementing Rules and Regulations of the Alternative Dispute Resolution Act of 2004’ (IRR), pursuant to Section 52 of the ADR Act of 2004, in order to prescribe the procedures and guidelines for its implementation. It is not unusual for an office in the executive branch (in this case, the Department of Justice) to issue implementing rules and regulations for the implementation of an act of Congress or the legislature (in this case, the ADR Act of 2004), although not all legislative acts have implementing rules and regulations. It is usually the case that the implementing rules and regulations reproduce the provisions of the legislation to be implemented and, in addition, add more provisions to address specific requirements and details for the implementation of the law. That is why all implementing rules and regulations are always lengthier than the law that they seek to implement. The IRR of the ADR Act of 2004 supplied, as far as possible, whatever little details might still be missing in order to concretise the use of arbitration as an alternative system for dispute resolution.

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Also in 2009 the ‘Special Rules of Court on Alternative Dispute Resolution’, otherwise known as the Special ADR Rules (SADR), took effect. It was issued by the Supreme Court to govern the following 12 cases: (a) relief on the issue of existence, validity or enforceability of the arbitration agreement; (b) referral to ADR; (c) interim measures of protection; (d) appointment of arbitrator; (e) challenge to appointment of arbitrator; (f) termination of mandate of arbitrator; (g) assistance in taking evidence; (h) confirmation, correction or vacation of award in domestic arbitration; (i) recognition and enforcement or setting aside of an award in international commercial arbitration; (j) recognition and enforcement of a foreign arbitral award; (k) confidentiality/protective orders; and (l) deposit and enforcement of mediated settlement agreements.13

2.2.  Institutional Framework 2.2.1.  Construction Industry Arbitration Commission In 1985 the first institutional arbitration system debuted in the Philippines. It was exclusively limited to construction disputes. Executive Order No 1008 (EO 1008),14 otherwise known as the ‘Construction Industry Arbitration Law’, was issued by the President of the Philippines on 4 February 1985 at the time when he exercised executive and legislative powers. It created the Construction Industry Arbitration Commission (CIAC)15 and vested it with original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts.16 The CIAC has all the general features of an arbitration institution with the capability to conduct an institutional-style construction arbitration from start to finish. It is governed and run by three commissioners, consisting of a chairperson and two members,17 who also serve as the appointing authority,18 supported by a secretariat and adequate administrative staff to assist in the discharge of the functions of the CIAC and to take care of the day-today requirements of the institution.19 It has its own office and hearing rooms. It has its own rules for the conduct of arbitration of construction disputes, presently known as the ‘Revised Rules of Procedure Governing Construction Arbitration’ (CIAC Rules). It has a pool of accredited arbitrators20 from various disciplines involved in the construction industry. It also has its own source of funds to finance its operation.21 By virtue of the completeness of the institutional set-up in the arbitration of construction disputes since 1985, construction arbitration gained a head-start over general commercial

13 

SADR, Rule 1.1. Officially titled ‘Creating an Arbitration Machinery in the Construction Industry in the Philippines’. 15  EO 1008, s 3. 16  ibid, s 4. 17  ibid, s 5. 18  ibid, s 12. 19  ibid, s 11. 20  CIAC Rules, s 8.2. 21  EO 1008, ss 13, 16 and 17. 14 

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arbitration in the institutional settlement of arbitrable disputes. Beginning from the 1990s, the arbitration cases that reached the Supreme Court originated largely from construction arbitration within the CIAC framework.

2.2.2.  Establishment of an Institutional System for Commercial Arbitration Generally In 1996, 11 years after the organisation of the CIAC as an institutional arbitration centre for the settlement of construction disputes, an arbitration institution for the settlement of commercial disputes in general was established—the Philippine Dispute Resolution Center Inc (PDRCI). It is a purely private, non-stock and non-profit corporation. At the time that the PDRCI was founded, RA 876 was still the only Arbitration Law in the Philippines for general commercial arbitration. As RA 876 was geared towards ad hoc domestic arbitration, PDRCI did not draw any direct benefit from RA 876 that could help PDRCI develop and expand as an arbitration institution. As a result, it took time for PDRCI to grow its wings to be able to take off. The PDRCI had to start from scratch to raise funds and build a membership base. It was no easy feat for PDRCI because it was trying to promote alternative dispute resolution in an environment which the Philippine Supreme Court has itself described as ‘litigious’ in nature.22 In a culture where the popular instinct is to go to court for the resolution of disputes, it was (and remains) a herculean task to introduce institutional arbitration. It was a slow teething process but it eventually bore fruit through the passage of time as the PDRCI emerged as the only fully functioning arbitration centre with the capability to conduct institutional as well as ad hoc arbitration proceedings. Thus, at present, there are two institutional arbitration centres in the Philippines: (1) CIAC, which is specifically focused on construction disputes, and (2) PDRCI, which caters to general commercial arbitration and, at the same time, renders administrative assistance to ad hoc arbitration. How one makes it to the list of arbitrators in these two arbitration centres, and the extent of independence that the arbitrators can exert in the resolution of disputes, will be discussed below.

2.3.  Judicial Framework Ad hoc domestic arbitration under RA 876 had several roles reserved for the courts, such as (1) enforcement of arbitration agreements,23 (2) referral of disputes from courts to arbitration,24 (3) appointment25 and challenge26 of arbitrators, (4) interim relief,27 and (5) enforcement, vacation and correction of arbitral awards.28 Section 6 provides that ‘the court

22  In the cases of Urbano v Chavez, GR No 87977, 19 March 1990, and Co v Regional Trial Court of Pasig, GR No 88578, 19 March 1990, the Supreme Court took notice of the ‘litigious character of most Filipinos as demonstrated by the number of cases filed in the courts daily’. 23  RA 876, s 6. 24  ibid, s 7. 25  ibid, s 8. 26  ibid, s 11. 27  ibid, s 14. 28  ibid, ss 23–25.

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shall decide all motions, petitions or applications filed under the provisions of this Act, within ten days after such motions, petitions, or applications have been heard by it.’ Unfortunately, under the regime of RA 876, the 10-day limit was honoured more in the breach than in the observance due largely to the fact that arbitration-related cases were grouped together with the general caseload of the courts. Thus, in practice, arbitration-related cases did not actually enjoy any priority over the other cases in the regular caseload of the courts. The net effect was that whenever some arbitration-related incidents spilled over into the courts, whether the incident happened before the commencement of arbitration (such as when a party questions the validity of the arbitration agreement) or during the arbitration proceedings (such as when a party questions the jurisdiction of the arbitral tribunal to decide certain issues and to grant certain relief), the arbitration process slowed down. A change for the better happened in the court system in relation to arbitration after the passage of the ADR Act of 2004. While the ADR Act of 2004 maintained RA 876 to continue to govern domestic arbitration,29 it adopted the entire 1985 Model Law to govern international commercial arbitration,30 and thereby put in place a dual-track mechanism. In domestic arbitration, the defects in RA 876 were remedied by the Supreme Court (this will be further discussed in the next paragraph). In international commercial arbitration, for the first time the Model Law enabled the arbitral tribunal seated in the Philippines to determine and exercise its jurisdiction in the conduct of arbitration.31 In several provisions scattered in the ADR Act of 2004, Congress prompted the Supreme Court to formulate Rules of Procedure. In its Section 2 (Declaration of Policy), it is provided that this Act shall be without prejudice to the adoption by the Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any combination thereof as a means of achieving speedy and efficient means of resolving cases pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may approve from time to time.

Similar provisions are found in Sections 40, 41, 42, 43, 45 and 46, all of them paving the way for the Supreme Court to promulgate Rules of Procedure in support of the ADR Act of 2004. This gave rise to the SADR which finally took effect in 2009. As will be further discussed below, the SADR instituted summary proceedings in disposing of all arbitration-related cases except in the matter of enforcement or resistance to enforcement of arbitral awards32 and limited the extent of the power of judicial review over arbitral awards.33 Hence, ­arbitration-related cases in courts have virtually taken a distinct track of their own separate from the regular caseload of the courts.

29 

The ADR Act of 2004, s 32. ibid, s 19. 31  Model Law, Art 16. 32  SADR, Rule 1.3 obligates courts to conduct summary proceedings in handling issues on (a) relief on the issue of existence, validity, or enforceability of the arbitration agreement; (b) referral to ADR; (c) interim measures of protection; (d) appointment of arbitrator; (e) challenge to appointment of arbitrator; (f) termination of mandate of arbitrator; (g) assistance in taking evidence; (h) confidentiality/protective orders; and (i) deposit and enforcement of mediated settlement agreements. 33  SADR, Rule 19.7. 30 

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The significant difference between the 10-day limit rule under RA 87634 and the summary proceedings rule under the SADR35 lies in the source of the rules. It was the Congress that provided for the 10-day limit when the rule was incorporated as Section 6 of RA 876. However, Congress did not provide any sanction in the event that a court fails to decide an arbitration-related issue within the 10-day period. In contrast, the conduct of summary proceedings under the SADR was imposed by the Supreme Court which exercises disciplinary powers over all judges. By and large, the provisions of the SADR prepared by the Supreme Court have created an arbitration environment with a supportive judiciary. This will be further threshed out below in the discussion of specific provisions of the SADR.

3. Reform 3.1.  Legislative and Regulatory Initiatives The ADR Act of 2004 declared the following legislative policy to support ADR: (1) The State shall actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes; (2) The State shall encourage and actively promote the use of ADR as an important means to achieve speedy and impartial justice and declog court dockets; (3) The State shall provide means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases; and (4) The State shall enlist active private sector participation in the settlement of disputes through ADR.36

The ADR Act of 2004 provided the structural support which was wanting during the regime of the 1953-vintage RA 876. First, it recognised the confidential nature of arbitration by giving statutory protection to confidentiality.37 Second, the potential for delay arising from applications by a respondent for judicial intervention was reduced. For instance, previously in domestic arbitration, if an arbitrator rejected a challenge and the respondent renewed the challenge in court, RA 876 provided that ‘while the challenging incident is discussed before the court, the hearing on arbitration shall be suspended, and it shall be continued immediately after the court has delivered an order on the challenging incident.’38 This suspension of arbitral proceedings was removed by the ADR Act of 2004. The present rule makes Article 13 of the Model Law, which is applicable to international arbitration, likewise applicable to domestic arbitration39 with the

34 

RA 876, s 6. SADR, Rule 1.3. 36  The ADR Act of 2004, s 2. 37  ibid, s 23. 38  RA 876, s 11. 39  The ADR Act of 2004, s 33. 35 

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result that, where the challenge has been elevated to the court, ‘the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.’ Third, the ADR Act of 2004 opened the door for international practice. The door is not yet wide open, but it is no longer barred shut, as it was before the passage of the law in 2004 when the practice of dispute resolution was limited to local lawyers. At present, in international arbitration conducted in the Philippines, a party may be represented by any person of his choice.40 Fourth, it made the New York Convention an integral part of municipal law. In the case of Tuna Processing Inc v Philippine Kingford,41 the Supreme Court affirmed that the New York Convention, having been incorporated into the ADR Act of 2004, is already part of municipal law. As will be discussed in greater detail below, the Philippine Supreme Court made use of this provision, making the New York Convention a part of municipal law, to make it a whole lot easier to enforce a foreign arbitral award in the Philippines. Most importantly, the ADR Act of 2004 adopted the 1985 Model Law in its entirety as a component part of the dispute resolution system.42 RA 876 of 1953 governs domestic arbitration but there was no counterpart for international commercial arbitration. The ADR Act of 2004, 50 years later, expressly provided that international commercial arbitration shall henceforth be governed by the Model Law. Hence, the Philippines began to count itself in the company of its neighbours in the region as a Model Law country. There is empirical evidence that the passage of the ADR Act of 2004 is gradually pushing arbitration to the limelight. Consider the following. Eminent arbitration practitioners, not only in the Asia-Pacific region but also beyond, have begun to be appointed as arbitrators in arbitration seated in the Philippines, or in foreign arbitration where the dispute originated in the Philippines. By way of illustration, in 2004, there was an arbitration of a dispute involving universal banks in the Philippines locked in dispute over a share purchase agreement for the purchase of a credit card business. The arbitration was conducted under ICC Rules. Two of the three arbitrators in the tribunal that rendered the award were not from the Philippines and these two are well-known and well-respected international arbitrators. The award became the subject of a leading case in the Philippine Supreme Court in the matter of assailing an arbitral award.43 In 2015 there were two international arbitration cases which involved the Philippine government and private water concessionaires. The root of the dispute can be traced to the previous decision of the Philippine government to privatise the operation of the water system in the premier city, Metro Manila. The bidding was won by two private concessionaires which divided the area of operation between the two of them into two 40  ibid, s 22. While s 22 permits that a party may be represented by any person of his choice for his legal representation in international arbitration conducted in the Philippines, there is a limitation. It provides that ‘such representative, unless authorized to the practice of law in the Philippines, shall not be authorized to appear as counsel in any Philippine court, or any other quasi-judicial body whether or not such appearance is in relation to the arbitration in which he appears.’ 41  667 SCRA 287 (2012). 42  The ADR Act of 2004, s 19. 43  Equitable PCI Banking Corporation v RCBC Capital Corporation 574 SCRA 858 (2008).

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sectors. Subsequently, a dispute developed between the two private concessionaires, on the one hand, and the government regulator, on the other. There were two arbitral tribunals which were constituted because each of the two private concessionaires had its own arbitration agreement with the government regulator. Again, some well-known and wellrespected international arbitrators from outside the Philippines found their way into the arbitral tribunals. These developments show that international arbitration has begun to dawn over the Philippines. Ten years ago, these developments were unheard of. Some more illustrations. Where before there was only one airport terminal in Metro Manila, now there are four. Terminal 3 became the subject of two separate foreign arbitrations—one conducted within the framework of the International Center for the Settlement of Investment Disputes in Washington DC, and the other seated in Singapore under the umbrella of the Singapore International Arbitration Centre. Global firms became involved in the legal representation of parties in these two international arbitration cases. It is possible that some of these recent and not too recent international arbitrations which were conducted in the Philippines, or which originated in the Philippines, may have had their arbitration agreements signed before the passage of the ADR Act of 2004, in which case some observers may not credit the ADR Act of 2004 as having provided the impetus that kicked off the arbitration. That may be true. However, one cannot close one’s eyes to the contribution that the ADR Act of 2004 has made in pushing international arbitration to the limelight. Ten years ago, there were contracts that carried arbitration clauses within them but they never gave rise to arbitration when the dispute arose. The reason is that the contracting parties did not choose to arbitrate the dispute, out of sheer lack of awareness of the option to arbitrate, and preferred to litigate instead. With the advent of the ADR Act of 2004, big business and small business alike became aware of the ADR option.

3.2.  Judicial Initiatives In 2009 the Philippine Supreme Court promulgated the SADR. This Supreme Court initiative was sparked by several provisions in the ADR Act of 2004 which prompted the Court to promulgate Rules of Procedure.44 The approval of the draft SADR was recommended by the Supreme Court Sub-Committee on the Rules on Alternative Dispute Resolution and was approved by the 15-member Supreme Court en banc on 1 September 2009. The SADR took effect on 30 October 2009. An important innovation of the SADR is the adoption of the policy of judicial restraint. The SADR adopts a policy implementing the competence-competence principle. It provides that the arbitral tribunal shall be accorded the first opportunity or competence to rule on the issue of whether or not it has the competence or jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, the 44 

The ADR Act of 2004, ss 2, 40–43, 45–46.

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court must exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to rule upon such issues.45

To a veteran ADR practitioner, the competence-competence principle is nothing new. It was already there in Article 16 of the 1985 Model Law, long before the Philippine Supreme Court issued the SADR: Article 16. Competence of arbitral tribunal to rule on its jurisdiction.—(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. …46

Even earlier than the 1985 Model Law was the 1976 UNCITRAL Arbitration Rules which had the competence-competence principle in its Article 21: 1. The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement.

What is significant in the adoption of the competence-competence principle by the Supreme Court of the Philippines is the incorporation of the policy of judicial restraint into the very provision that expresses competence-competence, thus: When a court is asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to rule upon such issues.47

The provision on judicial restraint is not just a motherhood statement. There is a more emphatic provision that restrains the judiciary from overreaching into the territory of alternative dispute resolution. The SADR also provides that ‘courts shall intervene only in the cases allowed by law or these Special ADR Rules’,48 which echoes a similar provision in the Model Law: Article 5. Extent of court intervention. In matters governed by this Law, no court shall intervene except where so provided in this Law.

What is not to be lost sight of in the SADR is the message behind the codification of legal provisions—the Supreme Court has taken a pro-active involvement to make domestic and international arbitration work as an effective means of resolving disputes. Thus, instead of merely reading the provision that ‘no court shall intervene except where so provided in this Law’, the judges do not see that as a plain legal provision but an order from the Supreme Court not to unduly intervene in arbitration proceedings. This was not the case under the regime of RA 876 when it prevailed for 50 years since its enactment in 1953 as the only law on arbitration. The Supreme Court did not have any dominant presence in the ADR practice then. In contrast, after the enactment of the ADR Act of 2004, it was the Supreme Court that prepared the rules of procedure which eventually became the SADR delineating a protected area for the resolution of disputes through arbitration and minimising judicial intervention in the process. 45 

SADR, Rule 2.4. 1985 Model Law. 47  SADR, Rule 2.4. 48  ibid, Rule 2.1. 46 

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To a practitioner, the SADR is the game changer. Twelve years ago, before the passage of the ADR Act of 2004, of which the SADR is a progeny, if a party objected to the jurisdiction of an arbitral tribunal, it was easy to trigger judicial intervention by questioning the jurisdiction of the tribunal before the courts, without having to raise the jurisdictional challenge before the tribunal initially. Once the court stepped in, most likely through a preliminary injunction, it had the effect of paralysing the arbitral proceedings. Now that has changed. The provision on judicial restraint presently requires the courts to give the arbitral tribunal a first crack at resolving the jurisdictional challenge. Not only that. Courts do not have a free hand now, as much as they did before, in restraining arbitral proceedings. When a party petitions a court for judicial relief from the ruling of an arbitral tribunal on a preliminary question upholding or declining its jurisdiction, the court is specifically forbidden from restraining or enjoining the arbitration proceedings during the pendency of the petition in court.49 There is more. Judicial recourse to the court shall not prevent the arbitral tribunal from continuing the proceedings and rendering an award.50 What is clear from the SADR is a pro-arbitration thrust that protects the arbitral proceedings from undue interference by the judiciary. It is encouraging to observe that the change in the legal atmosphere has been accompanied by a change in attitude on the part of trial judges. Case in point is that, under the SADR, whenever courts issue interim measures of protection in those disputes covered by arbitration agreements, at a time when the arbitral tribunal has not yet been constituted, the interim orders issued by courts are usually qualified by the phrase ‘without prejudice to any action which may be taken by the arbitral tribunal once constituted’, or words to that effect. The qualifying phrase is not simply the court’s recognition of the jurisdiction of the arbitral tribunal but an indication that the court will not immediately proceed to decide the case on the merits in order to give time for the constitution of the arbitral tribunal. The court will only proceed to hear and decide the case if the parties decide to dispense with the arbitration proceedings. This pro-arbitration attitude of the court is markedly different from the court’s predisposition before the enactment of the ADR Act of 2004.51 As a result, there are more arbitral proceedings taking place in the Philippines now than there were 10 years ago.

3.3.  Other Factors While there are more arbitral proceedings taking place now in the Philippines, the competition in the market is not high. Certainly there is competition. Certainly there are law firms competing for their share in the arbitration market. However, in the general market of law

49 

ibid, Rule 3.18(B).

50 ibid.

51 See Del Monte Corporation-USA v Court of Appeals 351 SCRA 373 (2001), where the Regional Trial Court took notice of the existence of an arbitration agreement between the parties but decided nonetheless to proceed to hear the case and refused to suspend the court proceedings in order to refer the dispute to arbitration on the ground that it ‘will not serve the ends of justice and to allow said suspension will only delay the determination of the issues, frustrate the quest of the parties for a judicious determination of their respective claims, and/or deprive and delay their rights to seek redress.’

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practice in the Philippines, arbitration at present is a small slice of the pie. Clients that find themselves facing a potential arbitration have the natural tendency to use the same law firms that they use for litigation. Staying in the comfort zone seems to be the law of the market for arbitration. It is reasonable to project that a higher level of competition in the arbitration market in the Philippines may kick off if new clients come in from outside, ie, if corporations or individuals from outside the Philippines find themselves facing arbitration seated in the Philippines. If these newcomers have no retained law firms in the Philippines, then they will be the objects of competition among law firms. But what is the likelihood that such newcomers may be found in the Philippine arbitration market? Most probably low. In the absence of statistics to show empirical data, what is happening in the Philippine arbitration market, from the point of view of practitioners, may be classified into three: 1. Foreign corporations, or subsidiaries/affiliates of foreign corporations, in the Philippines, when they include arbitration clauses in their contracts, in all likelihood, will submit to arbitration seated outside the Philippines. This category will include even those contracts where they transact with domestic corporations. 2. It is the domestic corporations transacting with other domestic corporations that will agree to submit to arbitration seated in the Philippines. 3. By way of exception to item 1 above, there is a minority of cases where foreign corporations, or their subsidiaries/affiliates, in the Philippines will agree to submit to arbitration seated in the Philippines. Given the above configuration of the market, the level of competition for a small slice of the pie is not going to be high.

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements 3.4.1.1.  Statutory Recognition of Appointing Authority At the time when the only Arbitration Law in the Philippines was RA 876 (1953), and before the passage of the ADR Act of 2004, it was problematic in an ad hoc arbitration whenever the need for an appointing authority arose and there was no appointing authority in sight except the court. If the parties could not agree on the selection of the sole arbitrator, or if no agreement was reached on the choice of the presiding arbitrator, or if an arbitrator stepped down and a replacement arbitrator had to be appointed by an appointing authority, RA 876 designated the court to discharge the function of an appointing authority in those cases.52 The problem during that bygone period was that the court lumped arbitration-related cases together with the general caseload of the court. As a consequence, the pace of arbitration proceedings suffered because they had no choice but to get dragged along with the general caseload of the court.

52 

RA 876, s 8.

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The ADR Act of 2004 solved this problem by designating the National President of the Integrated Bar of the Philippines (IBP) or his duly authorised representative as the default appointing authority in ad hoc arbitration.53 The IBP is a State-organised Bar, national in coverage, in which every Philippine lawyer is compulsorily required to be a member. It is different from bar associations organised by individual lawyers, membership in which is voluntary.54 Since the designation of the IBP National President or his duly authorised representative as the appointing authority in ad hoc arbitration, the appointment of arbitrators in ad hoc arbitrations has gotten rid of the attendant delays under RA 876. Based on the author’s personal experience when he was acting as counsel for a party, in two separate occasions when he invoked the power of the IBP National President to appoint an arbitrator pursuant to his statutory power under Section 26 of the ADR Act of 2004 because the other party was resisting the arbitration of the dispute, it did not take the IBP National President in both instances more than one month to appoint arbitrators. In contrast, on one occasion when the author acted as counsel in a case where one of the parties petitioned the court to appoint an arbitrator under Section 8 of RA 876, one year passed without the court being able to appoint an arbitrator. The court delay prompted the parties to come to an agreement in the selection of the arbitrator instead of waiting for the court to take action in appointing the arbitrator.55 The same thing happened to institutional arbitration after the passage of the ADR Act of 2004. It gave statutory recognition for the first time to the appointing authority of an arbitration institution: Section 26. Meaning of ‘Appointing Authority’.—‘Appointing Authority’ as used in the Model Law shall mean the person or institution named in the arbitration agreement as the appointing authority; or the regular arbitration institution under whose rules the arbitration is agreed to be conducted. Where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to have agreed to the procedure under such arbitration rules for the selection and appointment of arbitrators. …

In most jurisdictions where arbitration has been part of the mainstream of the dispute resolution system, the appointing authority may be routinely considered as just part of the whole dispute resolution process. In the Philippines, however, the concept of appointing authority only achieved statutory recognition when the ADR Act of 2004 adopted the Model Law to govern international commercial arbitration.56 The significance of this is that it switched on the red traffic light for the court to stop driving beyond the boundary reserved for the appointing authority, both in domestic and international arbitration, whether ad hoc or institutional. Section 26 of the ADR Act of 2004 designated the IBP

53 

The ADR Act of 2004, s 26. In the Matter of the IBP Membership Dues Delinquency of Atty Marcial A Edillon, IBP Administrative Case No MDD-1, AC No 1928, 3 August 1978; 1973 Constitution, Art X, s 5(5); Rules of Court of the Philippines, Rule 139-A; Presidential Decree No 181 (1973); Republic Act No 6397 (1971). 55  Vibelle Manufacturing Corporation v Sheridan Marketing, Inc, Special Proceedings SP7-050-MM, Regional Trial Court, National Capital Judicial Region, Branch 74, Malabon City. 56  The ADR Act of 2004, s 19. 54 

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National President as the appointing authority for ad hoc arbitration and recognised the existing appointing authority in institutional arbitration. This has greatly expedited arbitration proceedings by reducing the role of the court in the matter of appointing arbitrators. In this new environment where the appointing authority enjoys statutory recognition, the usual delay in waiting for a court to appoint an arbitrator, or the usual delay in obtaining leave of court so that the appointing authority (if it did not have statutory recognition like before) may proceed to appoint the arbitrator, has been eliminated. 3.4.1.2.  No Appeal on the Merits of Arbitral Awards Before the promulgation of the SADR, an arbitral award could be questioned on appeal in its entirety. Unlike the Model Law where the grounds to set aside an award in international arbitration are limited to six,57 and the grounds to refuse recognition of a foreign arbitral award limited to seven,58 there was a time in the Philippine legal system where an appeal from an arbitral award threw open the entire arbitral award to judicial scrutiny on questions of fact, questions of law, and mixed questions of fact and law.59 The clear implication is that the findings of an arbitrator with technical expertise on the subject may be overturned by the general knowledge of an appellate judge. This is about to change. While the SADR has maintained an appellate remedy from an arbitral award, it has outlawed any appeal questioning the merits of an arbitral award. The present rule under the SADR is that ‘an agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.’60 The power of judicial review remains but it cannot encroach on the merits of an arbitral award. Hence, in domestic arbitration, an arbitral award may be vacated in court on the basis of the following limited non-merits related grounds: 1. The arbitral award was procured through corruption, fraud or other undue means; 2. There was evident partiality or corruption in the arbitral tribunal or any of its members; 3. The arbitral tribunal was guilty of misconduct or any form of misbehaviour that has materially prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy; 4. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; 5. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter submitted to them was not made; 6. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or 7. A party to arbitration is a minor or a person judicially declared to be incompetent. 57 

Model Law, Art 34. ibid, Art 35. 59  1997 Rules of Civil Procedure, Rule 43, s 1. 60  SADR, Rule 19.7. 58 

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These grounds were already available to vacate an arbitral award under RA 876 of 1953.61 However, RA 876 co-existed with an appellate remedy that allowed questioning the merits of an arbitral award62 which has since been superseded by the SADR.63 In addition, under the SADR, it is provided that ‘in deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above.’64 This ought to preclude a court from re-examining the evaluation of the parties’ evidence by the arbitral tribunal because that is not included among the seven exclusive and limited grounds for vacating a domestic arbitral award. The rule prohibiting an appeal questioning the merits of an arbitral award applies also to arbitral awards rendered in international commercial arbitration. Therefore, the ­Philippines is now in sync with the rest of the world that has chosen to adhere to the Model Law in which the grounds to set aside an international arbitral award are exclusive and do not encroach on the merits of the arbitral award as determined by the arbitral tribunal. The determination of the merits of the dispute by the arbitral tribunal is further protected from judicial incursion by a provision in the SADR, uniformly made applicable to domestic arbitral awards, awards in international commercial arbitration seated in the Philippines, and foreign arbitral awards sought to be enforced in the Philippines, that ‘[t]he court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.’65 With this rule prohibiting an appeal questioning the merits of an arbitral award, the judicial process which used to delay the enforcement of arbitral awards has been restricted. Courts cannot look into the merits of an arbitral tribunal’s resolution of the issues raised in the arbitral proceedings. 3.4.1.3.  Foreign Arbitral Awards—Greater Adherence to the New York Convention The ADR Act of 2004 incorporated the New York Convention as part of it, and thereby made the New York Convention part of municipal law. Eight years after the passage of the ADR Act of 2004, the incorporation of the New York Convention into the law played a significant role in making it a lot easier to enforce a foreign arbitral award in the Philippines. In the 2012 case of Tuna Processing Inc v Philippine Kingford,66 the issue before the Supreme Court was: can a foreign corporation not licensed to do business in the P ­ hilippines, but which collects royalties from entities in the Philippines, sue in Philippine courts to enforce a foreign arbitral award? If that was a bar examination question before the passage of the ADR Act of 2004, the answer would have been, ‘no, a foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in the Philippines, cannot sue in Philippine courts to enforce a foreign arbitral award.’ The question would be judged on the basis of the Corporation Code of the Philippines. The Corporation Code closed the doors of Philippine courts to foreign corporations doing business in the country without a licence. It was the well-established rule that 61 

s 24. 1997 Rules of Civil Procedure, Rule 43, s 1. SADR, Rule 19.7. 64  ibid, Rule 11.4. 65  ibid, Rule 11.9 for domestic arbitral awards, Rule 12.13 for international commercial arbitration awards seated in the Philippines, and Rule 13.11 for foreign arbitral awards. 66  Tuna Processing Inc v Philippine Kingford 667 SCRA 287 (2012). 62  63 

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no foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.67

The rule is still the same but that rule changes when the foreign corporation files a case in a Philippine court in order to enforce a foreign arbitral award. The Supreme Court decided the Tuna Processing case in a manner that made it easier to enforce a foreign arbitral award in the Philippines. In that case, a co-owner of a US patent, a Philippine patent and an Indonesian patent for tuna processing, formed an alliance with five Philippine tuna processors and together they established a corporation in California with the avowed purpose to practise the processes in the US, the Philippines and Indonesia, to enforce the patents and collect royalties. A dispute arose within the newly-formed corporation which became the subject of arbitration in California. An award was eventually rendered and the winning party wanted to enforce the award in the Philippines against one of the five Philippine tuna processors. A petition for enforcement of a foreign arbitral award was filed in the Philippines. It was a typical petition that one would file in a foreign jurisdiction to enforce a foreign arbitral award under the New York Convention. The respondent sought to dismiss the petition and prevent the enforcement of a foreign arbitral award by relying on the proscription against foreign corporations alleged to be doing business without a licence and maintaining lawsuits in the Philippines.68 The Tuna Processing case led to a trailblazing doctrine where the Supreme Court laid down the rule that a foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in the Philippines, can sue in Philippine courts to enforce a foreign arbitral award. This trailblazer removed a huge stumbling block to a full adherence to the New York Convention. The Supreme Court relied on the ADR Act of 2004 which incorporated the New York Convention into a domestic law. The ADR Act of 2004 has a provision which states that ‘the New York Convention shall govern the recognition and enforcement of arbitral awards covered by the said Convention.’69 Were it not for the ADR Act of 2004, the rule would have been the other way around, preventing the enforcement of a foreign arbitral award, with the use of the traditional rule under the Corporation Code which prohibits a foreign corporation not licensed under Philippine law from maintaining or intervening in any lawsuits. The Supreme Court ruled that, in the enforcement of a foreign arbitral award, legal capacity to sue, which is normally required in all lawsuits, is not a prerequisite in the filing of a petition for the enforcement of a foreign arbitral award. The Supreme Court posed the question: ‘Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004?’

The Supreme Court resolved the question in this wise: ‘We answer in the affirmative.’ These rules are innovative in nature and they owe their existence to the ADR Act of 2004. 67 

Corporation Code of the Philippines, s 133.

69 

The ADR Act of 2004, s 42.

68 ibid.

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3.4.1.4.  Strengthening Private Sector Participation in Commercial Arbitration One of the declared legislative policies in the passage of the ADR Act of 2004 is that the State ‘shall enlist active private sector participation in the settlement of disputes through ADR’.70 Private sector participation has surfaced in the statutory definition of ADR, as follows: Alternative Dispute Resolution System’ means any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, as defined in this Act, in which a neutral third party participates to assist in the resolution of issues, which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof.71 (emphasis added)

Private sector participation in ADR may come in different forms and one of them is the appointment of individuals from the private sector as arbitrators. The SADR has significantly strengthened the authority that private individuals wield as arbitrators. It is ordinary for arbitrators to be empowered to grant interim relief. This authority exists even under RA 876: The arbitrator or arbitrators shall have the power at any time, before rendering the award, without prejudice to the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration.72

The phraseology of RA 876 leaves it to the applicant for interim relief to decide whether to obtain it from the arbitral tribunal (‘the arbitrator or arbitrators shall have the power at any time’) or from the court (‘without prejudice to the rights of any party to petition the court’). The ADR Act of 2004 modified the rule and tilted it in favour of obtaining interim relief from the arbitral tribunal as a general rule. The court retained the power to grant interim relief but only in exceptional instances: Grant of Interim Measure of Protection.—(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request.73 (emphasis added)

Thus, the general rule is that, after the constitution of the arbitral tribunal, a request for an interim measure of protection may be obtained from the arbitral tribunal. A closer reading of the provision actually makes the arbitral tribunal as the only source of interim relief after it has been constituted, because a party may only seek interim relief from the court ‘to the extent that the arbitral tribunal has no power to act or is unable to act effectively’.

70 

ibid, s 2. ibid, s 3(a). 72  RA 876, s 14. 73  The ADR Act of 2004, s 28. 71 

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In other words, the general rule is that, after the constitution of the arbitral tribunal, only the arbitral tribunal may grant interim relief. There are two exceptions to the general rule, namely: 1. The first exception is that, after the constitution of the arbitral tribunal, interim relief may be obtained from the court ‘to the extent that the tribunal has no power to act’; and 2. The second exception is that, after the constitution of the arbitral tribunal, interim relief may be obtained from the court ‘to the extent that the arbitral tribunal … is unable to act effectively’. A third instance when interim relief may be obtained from the court obviously is before the constitution of the arbitral tribunal. Eventually this is how the rule is framed in Rules 5.1 and 5.2 of the SADR: Rule 5.1. Who may ask for interim measures of protection.—A party to an arbitration agreement may petition the court for interim measures of protection. Rule 5.2. When to petition.—A petition for an interim measure of protection may be made (a) before arbitration is commenced, (b) after arbitration is commenced, but before the constitution of the arbitral tribunal, or (c) after the constitution of the arbitral tribunal and at any time during arbitral proceedings but, at this stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively. (emphasis added)

The SADR further strengthened the power of the arbitral tribunal in acting on an application for interim relief. The ADR Act of 2004 recognises the power of the arbitral tribunal to modify an interim relief granted by a court prior to the appointment of the arbitrators: It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral tribunal …74

Rule 5.13 of the SADR empowers the arbitral tribunal even to revoke an interim relief previously acted upon by the court: Rule 5.13. Modification, amendment, revision or revocation of court’s previously issued interim measure of protection.—Any court order granting or denying interim measure/s of protection is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by the arbitral tribunal as may be warranted. An interim measure of protection issued by the arbitral tribunal shall, upon its issuance be deemed to have ipso jure modified, amended, revised or revoked an interim measure of protection previously issued by the court to the extent that it is inconsistent with the subsequent interim measure of protection issued by the arbitral tribunal.

The combined effect of the ADR Act of 2004 and the SADR has immensely enhanced private sector participation in commercial arbitration. An arbitrator is vested with the authority to grant interim relief and even to revoke the prior action of a court on an application for interim relief without the arbitrator being in danger of being cited for contempt of court. This is a concrete expression of the implementation of the 1985 Model Law provision that

74 

The ADR Act of 2004, s 28.

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unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the disputes …75

The salutary effect of enhancing private sector participation in commercial arbitration— not only through the recognition of private individuals as arbitrators but in conferring upon these private individuals complete authority to grant interim and final relief protected from judicial intervention—is to pave the way for arbitration to relieve court congestion. It is the declared policy of the State to ‘encourage and actively promote the use of Alternative Dispute Resolution as an important means to achieve speedy and impartial justice and declog court dockets.’76 3.4.1.5.  Greater Access to Courts for Enforcement of Arbitral Awards Under the Rules of Court of the Philippines, a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. The rule is that payment in full of the docket fees within the prescribed period is mandatory.77 Otherwise stated, a court cannot acquire jurisdiction over a case unless the corresponding filing fee is paid. In some cases, a nominal filing fee is imposed based on the nature of the lawsuit filed. However, in many instances, the filing fee is based on the amount in dispute—the higher the amount in dispute, the higher the filing fee. Before the promulgation of the SADR the filing fee was a source of difficulty in enforcing an arbitral award through the courts. Instead of assessing a nominal fee based on the nature of the lawsuit, such as enforcement of an arbitral award, a higher filing fee was assessed based on the amount of the arbitral award. In other words, an arbitral award was treated as a collection suit. This has changed. The SADR has a provision which has capped the filing fee for the enforcement of arbitral awards.78 The highest filing fee for the enforcement of an arbitral award is pegged at Fifty Thousand Pesos for arbitral awards that exceed One Hundred Million Pesos. Rule 20.1. Filing fee in petitions or counter-petitions to confirm or enforce, vacate or set aside arbitral award or for the enforcement of a mediated settlement agreement.—The filing fee for filing a petition to confirm or enforce, vacate or set aside an arbitral award in a domestic arbitration or in an international commercial arbitration, or enforce a mediated settlement agreement shall be as follows: PhP 10,000.00—if the award does not exceed PhP 1,000,000.00 PhP 20,000.00—if the award does not exceed PhP 20,000,000.00 PhP 30,000.00—if the award does not exceed PhP 50,000,000.00 PhP 40,000.00—if the award does not exceed PhP 100,000,000.00 PhP 50,000.00—if the award exceeds PhP 100,000,000.00 The minimal filing fee payable in ‘all other actions not involving property’ shall be paid by the petitioner seeking to enforce foreign arbitral awards under the New York Convention in the Philippines.

75 

1985 Model Law, Art 17. The ADR Act of 2004, s 2. 77  Reyes v People, GR No 193034, 20 July 2015, reiterating the rule which was first announced in the case of Manchester Development Corporation v Court of Appeals, GR No 75919, 7 May 1987. 78  SADR, Rule 20.1. 76 

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3.4.1.6.  Extending the Period for Filing Petitions for Enforcement of Domestic Arbitral Awards RA 876 provides a short period of 30 days, counted from notice of the award, within which the winning party in a domestic arbitration may file a petition for enforcement.79 This short period has been extended by the SADR. The present rule is that, at any time after the lapse of 30 days from receipt by the petitioner of the arbitral award, he may petition the court to enforce the award.80 This new rule has reduced the potential for frustrating the enforcement of a domestic arbitral award by reason of prescription of the period for filing the petition. 3.4.1.7.  Strengthening Construction Arbitration in the Philippines A number of jurisdictions have more or less the same rule on what action a court should take when an arbitrable dispute is filed in court. The Model Law may be taken to express that common rule: A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.81

The counterpart rule in the Philippines is found in Section 24 of the ADR Act of 2004. It is required that a party must request the court to refer the dispute to arbitration. Otherwise stated, without the request, the court will not make the referral and will continue to hear and decide the case. The rule is different if it is a construction dispute covered by an arbitration agreement. With or without a request from a party, a court has the power to dismiss the case and refer the dispute to the CIAC to be settled in construction arbitration proceedings: Court to Dismiss Case Involving a Construction Dispute.—A Regional Trial Court before which a construction dispute is filed shall, upon becoming aware, not later than the pre-trial conference, that the parties had entered into an arbitration agreement, dismiss the case and refer the parties to arbitration to be conducted by the CIAC, unless both parties, assisted by their respective counsel, shall submit to the Regional Trial Court a written agreement exclusively for the Court, rather than the CIAC, to resolve the dispute.82 (emphasis added)

On 1 June 2015 the Office of the Court Administrator of the Supreme Court issued a circular83 addressed to all trial courts directing them to ‘review judiciously all pending civil cases for collection of sum of money to determine whether they arise from a construction dispute. In the affirmative, they shall dismiss such cases and refer the same to the CIAC.’ Under the CIAC Rules the arbitral tribunal is mandated to render an award promptly ‘within thirty days from the time the case is submitted for resolution but not more than six months from the date of signing of the terms of reference’.84 This rule is strictly enforced in 79 

RA 876, s 23. SADR, Rule 11.2. Model Law, Art 8(1). This was quoted from the 1985 version of the Model Law which is the one applicable to the Philippines. 82  The ADR Act of 2004, s 39. 83  OCA Circular No 103-2015. 84  CIAC Rules, s 16.1. 80 

81 

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the CIAC which makes construction disputes get settled a lot faster than if they were left to the courts to decide. A CIAC arbitral award in construction arbitration is executory even without an enforcement order from a court85 unlike an arbitral award in a regular commercial (nonconstruction) arbitration which requires a court order for enforcement.

3.4.2.  Top-down Versus Bottom-up Reform The ADR environment did not show any significant movement under the regime of RA 876. When Congress passed the ADR Act of 2004, which was followed by the Supreme Court’s SADR in 2009, commercial arbitration surfaced as an effective alternative for the resolution of disputes. Viewed in this light, it readily shows that it was a top-down reform which triggered arbitration as a viable alternative in the settlement of conflicts. A top-down reform is to be expected from a culture with a litigious background. Going to court for dispute resolution has been assumed for the longest time as the normal standard. The population got used to looking up to the judiciary as the only source of authority to resolve disputes. The judge’s table perched on an elevated platform higher than where the lawyers and their clients are seated is an apt illustration of what is considered as the normal order of things. There was nothing wrong with that and the population did not see anything wrong with that, so much so that even after the population exploded and the court dockets became congested, the natural solution that was thought of was to increase the number of courts—to have more of the conventional method of dispute resolution. Alternative dispute resolution was perceivable from the peripheral vision but it was in a blind spot. The order of things changed when some significant movements took place upstairs—the Executive establishing the CIAC in 1985, the Legislative enacting the ADR Act of 2004 and the Supreme Court promulgating the SADR in 2009. The structural setup that these events brought about created a favourable environment for arbitration to emerge from the blind spot and be seen as a viable solution to the problem of docket congestion in the court system.

3.4.3.  Special Considerations 3.4.3.1.  The Culture Factor The development of arbitration as an alternative system for dispute resolution may be affected by several factors. Foremost among those factors is the litigious culture of the population. There has to be a realisation among the users of the conventional court system that the solution to the present congestion in the docket of the court is not only to create more courts. It requires a reorientation of the traditional belief that the judge is the only source of authority which can resolve a dispute with binding and enforceable effect. The arbitrator can also do that and is also a solution to docket congestion. 3.4.3.2.  The Enforcement Factor This is related to the culture factor. When people go to court to litigate, the coercive nature of the court system is available to enforce the judgment of the court. There is certainty 85 

The ADR Act of 2004, s 40.

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that the winning party in the litigation will be able to force the losing party to comply with the judgment through the use of the coercive processes of the court. Not so in the case of arbitration. After waiting for the completion of arbitration proceedings, the winning party cannot rely on the arbitrator to enforce the award. The victor still has to go to court and initiate new proceedings in order to realise the fruit of victory in the arbitration. The common question of the uninitiated in arbitration is—if the ADR process will end up in the court system after all, why not just engage in the dispute resolution process all within the court system, from filing to enforcement? 3.4.3.3.  The Cost Factor Judges are appointed by the sovereign authority and their compensation comes from the appointing power. Litigants do not shoulder the cost for the compensation of the judges. In contrast, arbitrators are not appointed by the sovereign authority and their fees are shouldered by the parties. This is something new to the population. If the cost of resorting to arbitration is felt to be prohibitive by the users of the alternative system, it will affect the viability of the system.

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform The litigious culture notwithstanding, the Philippines has refused to be left behind in the trend in the ADR community. This is a far cry from before the passage of the ADR Act of 2004 when the legal community was self-contained and was feeding on the litigious culture of the population—filing a case in court for every little injury. The bane of a litigious culture is the inability of limited court resources to cope with an expanding population. It reaches a point where the population keeps increasing but the number of judges has plateaued. With the advent of alternative dispute resolution in the Philippines, courtesy of the ADR Act of 2004 and the SADR, the clogging in the court dockets found a new outlet. Some disputes have veered away from conventional dispute resolution and have detoured to alternative dispute resolution. As a result, arbitration has found a market base of its own that can sustain the development of a distinct career. This market base can only thrive if the Philippines will go along with the development in arbitration in the region and in the world. The Judiciary is a critical point here. Of the 12 types of cases covered by the SADR,86 nine are mandated to be conducted in summary proceedings while three are not, as follows: (1) Confirmation, correction or vacation of award in domestic arbitration; (2) Recognition and enforcement or setting aside of an award in international commercial arbitration, and (3) Recognition and enforcement of a foreign arbitral award. Since these three are not covered by summary proceedings, there is a need to isolate them from the general caseload of courts, otherwise they will be swallowed by the usual delay 86 

SADR, Rule 1.1.

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that characterises the overall docket of the courts. At present some courts are designated as special courts, eg, there are special courts specifically designated to handle commercial cases and there are also other special courts for family cases. Creating special courts for arbitration-related cases will certainly be beneficial for the purpose of minimising delays in the final disposition of arbitral awards. Still on the Judiciary, creating special courts for arbitration-related cases unavoidably requires special training for the judges in those special courts. The special training should not be confined to familiarising with new rules. It also entails reorientation to a new system. Arbitration is private in nature. Arbitrators are private individuals. Yet, despite the private nature of the system, there are certain portions of the arbitral award that not even the judge has the authority to overrule. Discussed elsewhere in this chapter is the novel provision in the SADR that the court shall not disturb the arbitral tribunal’s determination of facts and interpretation of law.87 If the judge, although appointed by the sovereign authority, disagrees with the determination of facts and interpretation of law made by the arbitrator, a private individual, it takes a reorientation of outlook to make the judge realise that there is a limit to his authority. The arbitration rules of the PDRCI were recently revised in order to keep up with global developments in arbitration. New provisions on appointing emergency arbitrators were put in place. The significance of keeping abreast with regional and global developments in the ADR community is that big business and small business in the Philippines have been afforded a home-based alternative for commercial arbitration. PDRCI was able to emerge from an environment populated by business people long accustomed to settling their disputes in courts. It is run by a board of trustees composed of professionals from various disciplines who have made successful careers in alternative dispute resolution. From a small group in 1996, it has managed to have its own modest facilities where it has been ably conducting commercial arbitration cases. The challenge to PDRCI is the competition posed by neighbouring arbitration centres in the Asia-Pacific region. Fortunately, during the last five-year period from 2011 to 2015, there have been large and complex arbitration cases which were referred to the PDRCI which would have otherwise gone to neighbouring arbitration centres in other countries if PDRCI failed to grow and develop. However, that should not be a source of complacency. PDRCI has to modernise and aspire to be at par with the resources of its neighbours—not only the physical facilities but also its human resources, ie, the arbitrators that it can make available to the parties. The CIAC, relatively speaking, is more or less secure in its own market base. When it was created by EO 1008 and vested with original and exclusive jurisdiction over disputes in construction projects in the Philippines, it was a masterful stroke of the pen that created its own market which until now is safely covered. The challenge to CIAC which was created in 1985 arises from the effect of the SADR which came about in 2009. By reason of the fact that construction arbitration in the Philippines was institutionalised through executive fiat in 1985,88 a distinct appellate process developed in construction

87  88 

ibid; see also n 65. EO 1008.

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arbitration awards. A CIAC arbitral award in construction arbitration is appealable to the Court of Appeals and the extent of the appeal may involve questions of fact, questions of law, or mixed questions of fact and law.89 This means that the merits of a CIAC arbitral award may be affected by the exercise of the power of judicial review. In contrast, the SADR has precluded an appeal questioning the merits of an arbitral award.90 The potential problem area lies in determining whether a CIAC arbitral award should be made subject to the new rule introduced by the SADR so as to prevent the appeal process in a CIAC arbitral award from encroaching into the merits of the award. This issue has not yet been provoked. Losing parties in CIAC arbitration continue to appeal to the Court of Appeals to question the merits of the award. The Court of Appeals continues to accept these appeals and the decisions of the Court of Appeals continue to affect the merits of CIAC arbitral awards. It seems like this practice will continue until a winning party in a CIAC arbitral award dares to oppose an appeal that will question the merits of the award.

4.2.  Enhancing Competitiveness, Independence and Professionalism At present, PDRCI’s board of trustees deliberates on applications to be considered as an accredited arbitrator. After it was organised in 1996, PDRCI began to conduct training seminars and workshops in commercial arbitration. PDRCI undertook to organise those training sessions as part of its advocacy to develop and expand the arbitration market. Lately, the training seminars and workshops have been held, not only because they are part of the advocacy of the Center, but more because there is a demand from practitioners wanting to get involved in arbitration, either as advocate or as arbitrator. At the very least in the last three years counted from 2014, PDRCI has been conducting its training seminars and workshops at a frequency of twice a year prompted by external demand, which is more frequent compared to its early years. In the field of construction arbitration, CIAC limits the appointment of arbitrators in CIAC arbitration to those who have qualified to be included in its accreditation programme. Since its creation in 1985, CIAC has had eight batches of accredited arbitrators as of 2016, which means that training seminars and workshops for accreditation take place at an average frequency of every three or four years. In addition, every accredited CIAC arbitrator is required to undergo continuing education through its Mediators and Arbitrators Continuing Education (MACE) programme. The minimum requirement is 12 credit units to be earned every two consecutive years throughout the time that an arbitrator remains accredited. Failure to meet the required number of hours may cause the suspension of one’s accreditation or may even lead to one’s exclusion from the accredited list. These training seminars and workshops conducted by PDRCI and CIAC are very important in professionalising their ranks. It is also a method of ‘policing’ their ranks in order to ensure that the ones who make it onto their lists have met the minimum requirements to be considered as qualified arbitrators. 89  90 

1997 Rules of Civil Procedure, Rule 43, s 1. SADR, Rule 19.7.

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5. Conclusion The impetus which pushed arbitration back in the radar screen needs to be sustained. There are several factors to be considered: 1. Arbitration has to remain insulated from any form of corruption. Where things stand now, arbitration is untainted. One of the grounds to vacate a domestic arbitral award is that ‘the arbitral award was procured through corruption’ and another similar ground to vacate is that there was ‘corruption in the arbitral tribunal or any of its members’.91 So far, the cases that have reached the Supreme Court on the issue of vacating domestic arbitral awards have not included one involving corruption. It is important to keep this kind of track record. 2. The legal profession and the population have to be made aware of the much faster pace of resolving disputes in arbitration than in litigation in order to attract more referrals to arbitration. It goes without saying that some in the legal profession and the population are already aware of this advantage but this awareness has to expand to a wider reach. 3. The facilities of CIAC and PDRCI have to level up to match the standards of more advanced arbitration centres in the region. Modernising the system of recording arbitration proceedings will enhance their reputation as competitive arbitration centres. 4. At present, the community of ADR practitioners in the Philippines remains small. A large segment of the legal profession requires reorientation that arbitration is a viable profession and career as much as litigation. 5. Training seminars and workshops in arbitration must continue and go beyond lectures and practical exercises. The training will not translate to increasing the number of practitioners if the market for arbitration cases does not develop and expand. The infrastructure had already been prepared by the Executive, the Legislative and the Judiciary. The next step is to create more players and stakeholders.

91 

RA 876, s 24; SADR, Rule 11.4.

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9 Arbitration in Indonesia: Largely Dependable Recognition and Enforcement SIMON BUTT

1. Introduction In May 1998, Indonesia’s second president, Soeharto, was forced from office after 32 years in power. Soon thereafter, Indonesia’s political and legal environment was reconfigured, primarily to change its authoritarian system to a democratic one. One of many early legislative reforms was Law 30 of 1999 on Arbitration and Alternative Dispute Resolution (the Arbitration Law), a key component of the restructuring undertakings Indonesia made to the International Monetary Fund (IMF), in return for a financial bailout to help restore the Indonesian economy after the 1997 Asian Economic Crisis.1 For the IMF, an impartial and competent alternative to the then-decrepit Indonesian judiciary for resolving commercial disputes was necessary if Indonesia’s economy was to be revived. After many years of relying on out-of-date colonial Codes, supplemented by threadbare judicial guidelines, Indonesia’s legal infrastructure for arbitration was updated and strengthened. Importantly, the new statute specifically prohibited Indonesian courts from taking jurisdiction over disputes the parties had agreed to resolve by arbitration. After a few rocky years, during which Indonesia’s lower courts appeared reluctant to recognise and enforce arbitral awards—particularly from foreign tribunals—the Indonesian judiciary appears to have settled into a consistent pattern of dependable recognition and enforcement.2 Though losing parties often resist enforcement or seek annulment of awards made against them, they are now rarely successful before Indonesian courts, even at first instance. This is despite the Arbitration Law providing broad discretionary grounds upon which courts can refuse to enforce, or to annul, an award. Nevertheless, the enforcement process remains time-consuming. Proceedings brought to resist or annul an award appear

1  Gary Goodpaster, ‘Law Reform in Developing Countries’ in Timothy Lindsey (ed), Law Reform in Developing and Transitional States (London and New York, Routledge, 2007) 297. 2  Karen Mills, ‘Debunking the Myth: Enforcement of Foreign Arbitral Awards in Indonesia’ (2015) 4 Lawyer Issue 4.

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to be relatively common and will usually delay enforcement, often by two years or more.3 Yet this is still less time than many commercial disputes take to make their way through the Indonesian judicial process. This chapter begins by outlining the key features of the 1999 Arbitration Law and its predecessors, before discussing early judicial resistance to the recognition and enforcement of arbitral awards. The chapter seeks to demonstrate that, even though the enforcement of arbitral awards in Indonesia is still considered problematic in some quarters, there is little evidence to suggest that domestic and foreign awards alike will not be recognised and enforced as a matter of course by Indonesian courts, except in highly exceptional circumstances. The primary remaining problem concerning enforcement is the significant delay that occurs if enforcement is challenged by a losing party.

2. Background 2.1.  Legislative and Regulatory Framework Arbitration in Indonesia has had a long history. Before 1999, arbitration was primarily governed by a patchwork of old Dutch laws, including provisions of the Civil Code and ­Indonesia’s two Codes of Civil Procedure.4 Indonesian Courts would also generally apply Article 1338 of the Civil Code, which states that ‘All agreements made in accordance with statute apply like statutes to those who made them’. In other words, parties were free to agree to anything that was not illegal under Indonesian law and could be held to those agreements. Of course, this included agreements to arbitrate in the event of a dispute. Statutes governing the Supreme Court have, since 1950, declared that parties cannot appeal an arbitral decision before that Court,5 and the 1967 Foreign Investment Law allowed investor-state dispute resolution by arbitration.6 However, the enforcement of arbitral awards, particularly foreign awards, had long been problematic, even though Indonesia ratified the International Centre for Settlement of Investment Disputes Convention in 1968 and the 1958 New York Convention in 1981.7 For several years, Indonesian courts were reluctant to enforce them, particularly against Indonesian parties, for two main reasons.

3  Tony Budidjaja, ‘Arbitration in Indonesia’ in Shahla F Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia (New York, Juris, 2013) 220. 4  More specifically, Arts 615–51 of the Reglement op de Burgerlijke Rechtsvordering (Rv) (the Civil Code that had applied to the European population during Dutch colonisation, but became applicable to Indonesians upon Indonesia’s independence), combined with provisions of Indonesia’s Civil Procedural Codes (namely, Art 377 of Het Herzeiene Indonesisch Reglement, Staatsblad (1941, No 44) (‘HIR’) and Art 705 of the Rechtsreglement Buitengewesten, Staatsblad (1917, No 127). See General Elucidation to the Arbitration Law. 5  See, for example, Law 1 of 1950 on the Supreme Court and Law 1 of 1967 on Foreign Investment, both cited in Budidjaja (n 3) 187–88. 6  As for investor state arbitration, this is now primarily governed by Art 32 of the 2007 Foreign Investment Law and the various international agreements Indonesia has signed. See Simon Butt, ‘Foreign Investment in ­Indonesia: The Problem of Legal Uncertainty’ in Vivienne Bath and Luke Nottage (eds), Foreign Investment and Dispute ­Resolution Law and Practice in Asia (New York and London, Routledge, 2011) 112. 7  Respectively, by Law 5 of 1968 and Presidential Decree 34 of 1981.

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First, there was significant confusion about whether these Conventions automatically became part of Indonesian law when they were signed and ratified. According to one view, held by many legal commentators and judges, a further act of ‘transformation’ was required before the Conventions could enter Indonesian domestic law and bind judges.8 In short, the government had not adopted the principles of these Conventions in an Indonesian legal instrument. Second, even presuming that the Conventions did form part of Indonesian law, some argued that they lacked detail and required implementing regulations to clarify the procedures by which recognition and execution would take place. This view was expressed by the Supreme Court in its cassation decision in PT Nizwar v Navigation Maritime Bulgare (1983),9 where a foreign party sought to have a 1978 London arbitration award enforced against an Indonesian party’s assets in Indonesia. The Central Jakarta District Court had recognised and ordered the enforcement of this award. PT Nizwar then appealed to the Supreme Court, which rejected the application because the applicant had not submitted a memori kasasi—that is, a document outlining the arguments of favour of the grant of cassation. While this was certainly enough to dispose of the case on technical grounds, the Court made various observations ‘in the interests of legal certainty and legal development in Indonesia in its decision’. The Court noted that the president had ratified the New York Convention, but ‘in accordance with legal practice’ in Indonesia, implementing regulations were required to stipulate whether an execution application could be made directly to a district court and, if so, which district court; or to the Supreme Court, so that it could ensure that the award did not contain matters that ‘were inconsistent with the legal order in Indonesia’. For the Supreme Court, this uncertainty meant that the District Court should not have entertained the application to enforce the award in the first place. The Supreme Court, therefore, overturned the District Court order to enforce the London award.10 Foreign awards only started to be recognised and enforced more consistently after the issuance of Supreme Court Regulation 1 of 1990 on Procedures for the Enforcement of Foreign Arbitral Awards. The Regulation set out processes for recognition and enforcement, designating the Central Jakarta District Court as the venue at which to apply for enforcement. The District Court was then to send the application to the Supreme Court for exequatur which, once issued, would be sent back to the District Court in which the losing party was domiciled or held assets for enforcement as if a court decision, using the relevant provisions of the Civil Code. Under these rules, if the losing party refused to comply with an enforcement order, the relevant district court could take action to ensure compliance, such as by seizing and auctioning property to finance damages.11 However, recognition and enforcement remained problematic in some cases. The ED & F Man (Sugar) Ltd v Yani Haryanto case (1991) is a notorious example, which has lingered

8  Simon Butt, ‘The Position of International Law within the Indonesian Legal System’ (2014) 28(1) Emory International Law Review 1. 9  Supreme Court Decision 2944K/Pdt/1983 (29 November 1984). 10  Suleman Batubara and Orinton Purba, Arbitrase Internasional: Penyelesaian Sengketa Investasi Asing Melalui ICID, UNCITRAL dan SIAC [in Indonesian] (Indonesia, Raih Asa Sukses, 2013) 181. 11  See HIR Arts 197(1), 200(1), and 225(1), referred in Simon Butt, ‘The Eksekusi of the Negara Hukum: ­Implementing Judicial Decisions in Indonesia’ in Tim Lindsey (ed), Law and Society in Indonesia (Australia, Federation Press, 1999) 247.

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in the minds of many practitioners and commentators who emphasise the unpredictability of enforcement in Indonesia.12 The facts are as follows. An Indonesian party (Haryanto) had agreed to buy sugar from a foreign importer (ED & F Man). The contract included an agreement to arbitrate disputes in London. After it was discovered that only the Indonesian government was legally permitted to import sugar in Indonesia, Haryanto sought to avoid the contract. The seller pursued arbitration in London and won an award for damages. Haryanto then sued the buyer in the Indonesian courts, seeking an order that the contract, including its arbitration clause, was void for illegality. Haryanto won, but ED & F Man appealed. Meanwhile, ED & F Man brought separate enforcement ­proceedings before the Supreme Court, which issued an order of exequatur to enforce the London award in ­Indonesia. However, the Central Jakarta District Court refused to execute the order because of ED & F Man’s pending appeal. In the event, the Supreme Court ultimately upheld Haryanto’s claims and invalidated the contract, holding that an arbitration clause could not be severed if the contract was void ab initio. As mentioned, Indonesia’s current Arbitration Law was enacted in 1999. It revokes and replaces many of the Code provisions under which arbitrations had been previously held.13 The Law is not based on the UNCITRAL Model Law on International Commercial Arbitration. The Law applies to arbitration stipulated in an arbitration agreement made in writing and signed by the parties to the dispute (Articles 1(1), 4(2) and 9(1)), though it appears that parties can, by agreement, also choose to arbitrate after a dispute has arisen (Article 9). To bind the parties, the agreement to arbitrate must ‘clearly express the intention that all disputes or differences of opinion that arise or may arise from the legal relationship between the parties will be resolved using arbitration’ (Article 2). Only commercial disputes can be arbitrated (Article 5(1)). Parties can arbitrate domestically or internationally (Article 34(1)) and can choose the law to be applied to resolve their disputes (Article 56(2)). A formal agreement to arbitrate gives an arbitrator power to make binding decisions concerning the rights and obligations of the parties (Article 4(1)). Critically, a district court has no jurisdiction to adjudicate a dispute involving parties already bound by an arbitration agreement (Article 3). The bulk of the Law covers procedural matters, such as default arbitration procedures, which can be used if parties do not choose their own procedure (see Articles 27–51).14 These include rules about notification of intent to arbitrate and appointment and removal of arbitrators (see Articles 12–23).15 Also specified is that arbitrations are closed to the public (Article 27) and are to be held in Indonesian unless the parties agree to use a different language (Article 28). In summary, Indonesia has not followed the UNCITRAL Model Law on International Commercial Arbitration. Its 1999 Arbitration and Alternative Dispute Resolution Law ­covers both domestic and international arbitration, though the Law distinguishes between

12  ED & F Man (Sugar) Ltd v Yani Haryanto (No 2) [1991] 1 Lloyd’s Rep 429. This description of the facts and decision drawn from Mills (n 2). 13  The General Elucidation to the Law itself concedes that the legal bases for arbitration in Indonesia had long been out of date. In particular, the General Elucidation mentions Art 617, which prohibited women from working as arbiters. 14  Though an arbitration taking place at an arbitration institution will usually employ the procedures of that institution by default (Art 34(2)). 15  The parties can choose their arbitrators, but if they cannot decide, then the chairperson of the relevant district court is to appoint an arbiter or arbiters (Art 13(1)).

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them in some matters. For example, as discussed below, different procedures apply for the registration and enforcement of domestic awards compared with international awards. In addition, provisions in the Law concerning arbitration procedures relate only to domestic arbitration.

2.2.  Institutional Framework Parties are free to choose ad hoc or institutional arbitration to resolve their disputes in ­Indonesia. The primary domestic arbitration institution is the Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia (BANI)), established in 1977 by the ­Indonesian Chamber of Commerce. It has offices in Indonesia’s capital city, Jakarta, and in other larger centres, including Surabaya, Bandung, Pontianak, Denpasar, Medan, Palembang and Batam. Compared to the judiciary, however, BANI hears very few d ­ isputes. According to one estimate, only 250 matters were submitted to BANI between 2007 and 2012.16 Smaller bodies have been established to provide arbitration services for various types of disputes, but they tend to hear even fewer cases than BANI. They include the Indonesian Shariah Arbitration Board (Badan Arbitrase Syariah Nasional (Basyarnas)), which handles disputes about commercial matters relating to Islamic law; the Muamalat ­Arbitration Board (Badan Arbitrase Arbitrase Muamalat (BAMUI)); the Capital Market Arbitration Board (Badan Arbitrase Pasar Modal Indonesia, (BAPMI));17 the Venture Capital ­Arbitration Board (Badan Arbitrase Ventura Indonesia (BAVI));18 and the Indonesian Commodities Arbitration Body (Badan Arbitrase Berjangka Komoditi (BAKTI). Many companies, Indonesian and foreign, prefer to arbitrate outside of Indonesia, usually in Singapore, given its very strong reputation for professional dispute resolution, particularly in institutions such as the Singapore International Arbitration Centre (SIAC), and its close proximity to Indonesia. Arbitration offshore also allows companies to avoid Indonesia’s judiciary, which, as discussed below, has a poor reputation for competence and integrity.

2.3.  Judicial Framework 2.3.1.  Registration and Enforcement Indonesia signed the New York Convention (1958) on 7 October 1981. It was ratified soon thereafter by Presidential Decision 34 of 1981. However, as mentioned, the Convention was not enforced by the Indonesian judiciary until the Supreme Court issued Regulation 1 of

16  Jared Heath, ‘Dispute Resolution in Indonesia: Arbitration vs. Litigation’, Mondaq, 9 November 2014, available online: www.mondaq.com/australia/x/352526/Arbitration+Dispute+Resolution/Dispute+resolution+in+In donesia+arbitration+vs+litigation. 17  This Board was established in 2002, but as of 2013 had not heard any arbitration (only mediation): ‘Inilah Cara Badan Arbitrase Kurangi Sengketa’ [in Indonesian], Hukumonline, 7 November 2013, available online: www. hukumonline.com/berita/baca/lt527b79ff53406/inilah-cara-badan-arbitrase-kurangi-sengketa. 18  ‘Empat Lembaga Alternatif Penyelesaian Sengketa Keuangan Siap Beroperasi’ [in Indonesian], Hukumonline, 28 April 2015, available online: www.hukumonline.com/berita/baca/lt553f580b5aab9/empat-lembaga-alternatifpenyelesaian-sengketa-keuangan-siap-beroperasi.

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1990 on Procedures for the Enforcement of Foreign Arbitral Awards. As discussed below, Indonesia’s courts now appear to routinely enforce the awards registered with them, though appeals are common, which often makes the process time-consuming and costly. The 1999 Law establishes different procedures for the registration and enforcement of domestic awards compared with international awards. According to Article 59(1) of the Law, domestic awards must be registered with the registrar of the relevant district court by the arbiter(s) or their proxy within 30 days of the award being handed down.19 If ­Article 59(1) is not followed, then the decision cannot be enforced (Article 59(4)). Once registered, the domestic award is final and binds the parties (Article 60)—it cannot be appealed or reviewed (Elucidation to Article 60)—and, if one of the parties does not comply with the award, it can be enforced by order of the district court chairperson, on the request of the other party (Article 61). This enforcement order must be issued within 30 days of the execution application being made by the party seeking enforcement (Article 62(1)). Though the chairperson is not to re-examine the dispute, before ordering execution he or she must first establish that the: 1. parties agreed to arbitrate (Article 4); 2. dispute between the parties is a ‘commercial’ one (Article 5); and 3. award ‘does not breach morality and public order’ (Article 62(2)). If any of these conditions are not met, then the chairperson must refuse to execute. This refusal is not subject to appeal (Article 62(3)). If the chairperson orders execution, this is to follow the Indonesian laws governing enforcement of judicial decisions in civil cases (Article 64). As for international awards, only the Central Jakarta District Court has jurisdiction to recognise and order their enforcement (Article 65). They will be enforceable only if they: 1. were handed down by an arbitrator or tribunal in a country which is a party to an international agreement about the recognition and enforcement of international awards to which Indonesia is also a party (Article 66(a)); 2. relate to ‘commercial law’ as understood by reference to Indonesian law, which includes trade, banking, finance, investment, industry and intellectual property (Article 66(b) and its Elucidation); 3. do not ‘conflict with public order’ (Article 66(c)); 4. have the exequatur of the Supreme Court of Indonesia (for international awards involving the Indonesian state as a party) or the Central Jakarta District Court chairperson (for other international awards) (Articles 66(d) and (e)). An application for enforcement can be made only after the award is registered by the arbiter(s) or their proxy with the Central Jakarta District Court registrar (Article 67). The application must include: 1. the original award or a certified copy of it, and an official Indonesian translation of it;

19  Though it seems that the courts are willing to allow either of the parties to seek to register the award: Timur Sukirno, Andi Yusuf Kadir and Reno Hirdarisvita, ‘Indonesia’ in Baker & McKenzie (eds), The Baker & McKenzie International Arbitration Yearbook 2011–2012 (New York, Juris, 2012).

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2. the original or a certified copy of the contract under which the parties agreed to arbitrate, and an official translation of it; and 3. a statement from an Indonesian diplomatic representative in the country the international award was issued, declaring that that country is bound by an agreement about the recognition and enforcement of international awards to which Indonesia is also a party. A refusal to recognise and enforce can be appealed to the Supreme Court (Article 68(2)), which has 90 days to decide the appeal (Article 68(3)). However, a Central Jakarta District Court Chief Justice decision that recognises and orders the enforcement of an international award cannot be appealed (Article 68(1)). Once the Chief Justice has ordered enforcement of the award, the order is conveyed to the district court with jurisdiction over the place of the debtor’s domicile or assets for implementation in accordance with Indonesian civil procedural law.20

2.3.2. Annulment It is also possible to seek annulment of awards, both domestic and foreign, on three alternative fraud-related grounds established in Article 70: 1. The documents used during the arbitration hearing are later discovered to be false. 2. After the award has been made, a determinative document hidden by one of the parties is discovered. 3. The award was made on the basis of deception by one party to the dispute. An annulment application must be lodged with the chairperson of the relevant district court within 30 days of the registration of the award with the court (Articles 71 and 72(1)). The grounds must be established to the satisfaction of a court (Elucidation to Article 70), though it appears that separate judicial proceedings need not be brought for this purpose.21 This decision about annulment can then be appealed to the Supreme Court (Article 72(3)). This summary reveals important differences between the rules for enforcement of domestic awards compared with international awards. First, there is no time limit within which an international award must be registered after it has been handed down, whereas domestic awards must be registered within 30 days. (One explanation for imposing no time limit might be that the Law requires completion of various additional administrative processes, such as translation and diplomatic ‘certification’. This can take significant time, particularly given that the Indonesian embassies and consulates are notoriously slow in confirming that Indonesia and the seat of the arbitration are both bound by the same international agreement on recognition and enforcement of foreign awards.22 However, whether these additional administrative requirements are the reason for this is doubtful, because a longer time limit—of, say, 60 or 90 days—to accommodate these additional steps

20  Karen Mills, ‘Enforcement of Arbitral Awards in Indonesia’ (2000) 3(6) International Arbitration Law Review 192. 21  Constitutional Court Decision 15/PUU-XII/2014, cited in Andi Yusuf Kadir and Putri Anita Rahmaniar, ‘Indonesia’ in Baker & McKenzie (eds), The Baker & McKenzie International Arbitration Yearbook 2014–2015 (New York, Juris, 2016) 181. 22  Mills (n 2).

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could have been imposed, rather than no limit at all.) Regardless, whether an award is classified as ‘domestic’ or ‘international’ can be determinative if this 30-day period has elapsed. If the award is classified as domestic, the award becomes unenforceable, but if international, then registration and enforcement is still possible. Although Indonesian courts have issued inconsistent decisions, classification appears to depend on where the arbitration is held, not on the nationality of the parties or the applicable law.23 Second, the Law specifies that, once registered, domestic awards have the same effect on the parties as would a final and conclusive court judgment. By contrast, the Law does not expressly attribute the same legal force to international awards, though it does state that registered international awards ‘are to be’ implemented by the relevant district court. Presumably, then, both international and domestic awards have the same legal status, despite these textual differences. As discussed in the following section, the Indonesian courts have been largely supportive of arbitration in recent years in the sense that they have, for the most part, reliably registered and enforced awards, both domestic and international.

3. Reform 3.1.  Legislative and Regulatory Initiatives Though occasionally Indonesian practitioners call upon the Indonesian Parliament to adopt the Model Law, the issue seems unlikely to receive any legislative attention in the foreseeable future. There is, at present, no perceptible momentum for such a reform, and, even if there was, the Indonesian national legislative process is cumbersome and notoriously slow—even for the passage of draft laws that are deemed to be of a high priority.

3.2.  Judicial Initiatives 3.2.1.  Arbitration as an Alternative to Judicial Process As mentioned at the outset, arbitration is a popular means for dispute resolution in ­Indonesia, primarily because many businesses do not think that most Indonesian courts can resolve commercial disputes professionally—that is, impartially or competently. ­Indonesia was an authoritarian state for Soeharto’s 32 years in power (1966–98). Although ­Indonesian g­ overnment officials consistently maintained that Indonesia was a ‘law state’ (negara hukum), all of the most fundamental aspects of the ‘rule of law’ were absent, including the separation of powers and its system of checks and balances between the judiciary, legislature and executive.24 Suharto’s New Order tightly controlled the courts and was able

23 

Budidjaja (n 3) 209–11. See, for example, International Commission of Jurists (ICJ), Ruler’s Law: Mission to Indonesia: The Report of the International Commission of Jurists (Geneva, ICJ, 1999); ICJ and the Netherlands Institute of Human Rights, Indonesia and the Rule of Law: Twenty Years of ‘New Order’ Government: A Study, ed Hans Thoolen (London, 24 

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to, in essence, dictate the decisions it wanted.25 The government obtained this control by using its power, held primarily by the Ministry of Justice but also by the Religious Affairs and Defence and Security Ministries, to administer the courts and judges—particularly their pay, promotions, transfers and dismissals. A critical aspect of the post-Soeharto reform of the Indonesian legal system was the reconfiguration, through constitutional and statutory change, of the judicial system to improve judicial independence of government. In 2004, Indonesia’s Supreme Court, and the courts in the judicial hierarchy below it, were made institutionally independent of government, under the so-called ‘one roof ’ (satu atap) reforms. These reforms appear to have removed the Court’s dependence on government. However, many problems were not effectively addressed by the reforms and render Indonesia’s judicial system a largely inadequate forum for the impartial resolution of disputes.26 3.2.1.1. Cost Of course, litigation is costly in most countries, but in Indonesia it can be particularly expensive. While the courts typically order the losing party to pay ‘court fees’, this is usually a rather trifling sum, usually no more than a few hundred US$. However, in Indonesia, like in many other civil law countries, each party is responsible for covering their own legal costs—lawyers’ fees and the costs associated with calling witnesses—even if they win. Many Indonesian lawyers require payment of a large up-front payment to handle a case from start to finish. This is a significant disadvantage for litigants with very strong cases but insufficient funds to pursue civil claims, particularly against better-resourced opponents. 3.2.1.2. Complexity While the Indonesian courts appear to have a reputation in some circles for taking excessive time to resolve cases, in reality most Indonesian courts dispose of their cases relatively quickly. Nevertheless, Indonesia’s judicial system is often criticised for being inordinately complex, providing four levels of appeal, with the grounds to lodge an appeal easily satisfied. In most types of cases, including relatively small commercial disputes, parties can often appeal a first instance decision to a provincial high court, and then before the

Frances Pinter, 1987); DS Lev, ‘Judicial Authority and the Struggle for an Indonesian Rechtsstaat’ (1978) 13 Law and Society Review 37; Tim Lindsey, ‘Indonesia: Devaluing Asian Values, Rewriting Rule of Law’ in RP P ­ eerenboom (ed), Asian Discourses of Rule of Law (London and New York, RoutledgeCurzon, 2004); Tim Lindsey (ed), ­Indonesia: Law and Society 2nd edn (Australia, Federation Press, 2008); DS Lev, ‘Judicial Institutions and Legal Culture in Indonesia’ in Claire Holt (ed), Culture and Politics in Indonesia (New York, Cornell University Press, 1972) 246. 25  Sebastiaan Pompe, The Indonesian Supreme Court: A Study of Institutional Collapse (New York, Cornell Southeast Asia Program Publications, 2005). 26 Simon Butt and Tim Lindsey, ‘Unfinished Business: Law Reform, Governance and the Courts in Post-­ Soeharto Indonesia’ in Mirjam Kunkler and Alfred Stepan (eds), Democracy and Islam in Indonesia (New York: Columbia University Press, 2013) 168; Konsorsium Reformasi Hukum Nasional and Lembaga Kajian dan Advokasi untuk Independensi Peradilan, Menuju Independensi Kekuasaan Kehakiman: Position Paper [in Indonesian] (Jarkarta, Indonesian Center for Environmental Law, 1999); Ali Aspandi, Menggugat Sistem Hukum Peradilan Indonesia Yang Penuh Ketidakpastian [in Indonesian] (Indonesia, Lembaga Kajian Strategis Hukum Indonesia dan Lutfansah Mediatama, 2002); Mahkamah Agung, Blueprint for the Reform of the Supreme Court of Indonesia (Indonesia, Supreme Court of Indonesia, 2003).

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Indonesian Supreme Court on cassation (kasasi). It is also possible for the case to be ­‘reopened’ at least once by the Supreme Court for re-examination. Parties, particularly those involved in high-value commercial disputes, tend to exhaust all avenues of appeal as a matter of course. This means that, even if one obtains a favourable decision in the lower courts, it is very likely that one will need to defend oneself on appeal, at least once. 3.2.1.3.  Unpredictable Judicial Decisions Indonesia follows the civil law tradition and thus has no formal system of precedent. This can make predicting judicial outcomes difficult, and makes favourable previous decisions unreliable as an indicator of how subsequent decisions will be decided. As a practical matter, judges will generally attempt to follow ‘landmark’ decisions of the Supreme Court. However, until recently, relatively few Supreme Court decisions were published and therefore available, even to other Indonesian courts. Furthermore, many of these landmark decisions do not outline all relevant facts and competing legal arguments. Most Supreme Court decisions therefore provide very little guidance on how lower courts should apply them. 3.2.1.4.  Judicial Corruption This decades-old problem has been admitted by senior judges, including chief justices of both the Supreme and Constitutional Courts, and even Susilo Bambang Yudhoyono, Indonesia’s president from 2004 until 2014. The Indonesian press commonly reports it. International bodies, including the World Bank, the United Nations and Transparency International, have all identified corruption as a significant impediment to fair and impartial judicial dispute settlement in Indonesia. 3.2.1.5.  Judicial Competence Judges are generally said to be unfamiliar with sophisticated commercial transactions. In the words of one senior Indonesian advocate: [T]he Indonesian court system does not provide effective and efficient recourses to resolve commercial dispute. … The national court system is understandably regarded with trepidation by foreign investors. Their most frequent complaints are that judges are generally unfamiliar with sophisticated commercial transactions …27

3.2.1.6.  Enforcement Problems Indonesian judicial decisions are notoriously difficult to enforce, often requiring a separate judicial order compelling the losing party to comply. This not only adds complexity and cost; it can also provide another opportunity for judges and court officials to solicit bribes. The Indonesian media commonly contains reports about litigants who have won cases but then cannot enforce them, either because a court refuses to issue an enforcement order or

27  Tony Budidjaja, ‘The Future of Indonesia’s Legal Profession: A Lawyer’s Perspective’, Jakarta Post, 11 April 2013, available online: www.thejakartapost.com/news/2013/04/11/the-future-indonesia-s-legal-profession-alawyer-s-perspective.html.

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a senior judge issues a directive (surat sakti) ordering a lower court not to enforce. Even though such directives are of questionable legality,28 lower courts appear to have followed them as a matter of course. 3.2.1.7.  Perception of ‘Home Advantage’ for Indonesian Parties Some foreign companies fear that Indonesian courts might treat them unfairly in commercial disputes. This is probably due to the previous judicial dependence on government and to several high-profile and controversial decisions against foreign companies.29

3.2.2.  Judicial Approach to Enforcement and Annulment The Arbitration Law contains various provisions confirming that, if the parties have agreed to arbitrate, the judiciary’s task becomes simply to enforce any award arising from that arbitration. For example, Article 11 states: (1) The existence of a written arbitration agreement eliminates the rights of the parties to submit the resolution of the dispute or difference of opinion contained in the agreement to the District Court. (2) The District Court must refuse to and must not interfere in any dispute settlement which has been determined by arbitration, except in particular cases determined in this Law.

Article 10 of the Law also seeks to close off a particular avenue for judicial interference, by providing that agreements to arbitrate are severable from the main contract in which those agreements are contained (Article 10). This provision appears to be intended to prevent courts from ‘taking over’ disputes where one party argues that, because the contract as a whole is invalid, so too is its arbitration clause. Article 10 means that the dispute between the parties can still be resolved by arbitration, even if the contract containing the arbitration agreement itself is of questionable validity. Nevertheless, as mentioned, the Law gives some scope to judges to avoid both international and domestic awards that would contravene ‘public order’. It also allows judges to reject awards that do not relate to ‘commerce’ and were not made in countries which are not parties to international agreements on recognising and enforcing awards to which Indonesia is also a party. These grounds have all been used by Indonesian courts as bases to refuse to enforce foreign arbitral decisions. Awards can also be annulled under Article 70 if parties can prove that it was marred or obtained by fraud. While Article 70 appears to cast the fraud grounds as an exhaustive list, the General Elucidation to the Arbitration Law does not. It refers to these grounds as being included ‘amongst others’ that are not specified. As we shall see, the General Elucidation has been used as a basis to annul a foreign arbitral award, at least once. Commentators have different views about the extent to which Indonesia’s courts use or have used this scope to avoid recognising arbitral awards. Some emphasise that most awards are now enforced almost as a matter of course and that these exceptions are

28  Simon Butt, ‘Surat Sakti: The Decline of the Authority of Judicial Decisions in Indonesia’ in Lindsey (ed) (n 24) 346. 29  David Linnan, ‘Commercial Law Enforcement in Indonesia: The Manulife Case’ in Lindsey (ed) (n 24) 596.

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rarely used.30 Others point to several decisions in which awards have not been enforced or have been annulled and conclude that, unfortunately, there is ‘great uncertainty as to the ambit of these exceptions and how the Indonesian courts will apply them’.31 Yet others still have argued, quite bluntly, that Indonesia’s courts have been ‘hostile’ towards enforcing foreign arbitral awards.32 Most of these commentators discuss some or all of the following cases to reach these conclusions.

3.2.3.  Public Policy Particularly contentious have been the judicial interpretation and use of the ‘public order’ ground, not least because the concept of public order is a nebulous one. The 1999 Arbitration Law does not define the concept. Supreme Court Regulation 1 of 1990 appears to provide the only definition of the concept in the context of arbitration, but hardly adds clarity. Article 4(2) states that: ‘Exequatur will not be granted if the foreign award clearly contradicts the fundamental norms of the whole legal system and the community in Indonesia (public order).’ Practitioners complain that the result of there being no clear definition of the concept is significant uncertainty about the enforceability of any given foreign award.33 However, it appears that very few arbitral awards have been defeated on this ground. Many of the cases in which the ‘defence’ has been successfully raised appear to have involved an arbitral award or order that relates to ongoing litigation in Indonesia. For example, in two cases involving the Bankers Trust Company and Bankers Trust International Plc,34 the Jakarta District Court held that enforcing a foreign award would breach public policy, if related litigation about the contract under which arbitration had taken place had not been finally resolved in ­Indonesia.35 This decision was upheld on appeal to the Supreme Court. Similar issues were at play in Astro Nusantara International BV (Astro) PT Ayunda Prima Mitra.36 The parties had commenced arbitration in Singapore and the tribunal had issued an award favourable to Astro which included an anti-suit injunction ordering the parties to refrain from pursuing litigation in the Indonesian courts because the subject matter of the dispute fell under an arbitration agreement included in the contract between the parties. However, Ayunda had already brought proceedings in the South Jakarta District Court and refused to comply with the injunction, preferring to continue with the litigation. Astro then sought to enforce the award in the Central Jakarta District Court. Astro was unsuccessful there and on appeal to the Supreme Court.37 According to the Supreme Court:

30 

Mills (n 2). Todung Mulya Lubis and Maurice Burke, ‘International Arbitration Developments in Indonesia’ Jakarta Post (10 December 2004); Budidjaja (n 3); Tony Budidjaja, Public Policy as Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral Awards in Indonesia (Indonesia, Tatanusa, 2002). 32  Fifi Junita, ‘Experience of Practical Problems of Foreign Arbitral Awards Enforcement in Indonesia’ (2008) 5 Macquarie Journal of Business Law 369. 33  Budidjaja (n 3) 218; ibid. 34  In the first case, the defendant was PT Mayora Indah Tbk; in the second, the defendant was PT Jakarta International Hotels and Development (see Central Jakarta District Court Decisions 01 and 02/Pdt/Arb.Int/1999/ PN.JKT.PST). 35  Budidjaja (n 3) 219; Sukirno, Kadir and Hirdarisvita (n 19) 263. 36  12/PDT.ARB.INT/2011/PN.JKT.PST (27 May 2010). 37 Central Jakarta District Court decision 01K/Pdt.Sus/2010. See also Sukirno, Kadir and Hirdarisvita (n 19) 264. 31 

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The order in the arbitral award to stop the judicial process in Indonesia breaches the principle of sovereignty of the Republic of Indonesia. No foreign power can interfere with legal processes that are already underway in Indonesia. This clearly breaches public order in Indonesia.38

It seems quite likely in this case that the Supreme Court misunderstood the nature of antisuit injunctions. These are orders to parties to cease legal action in another jurisdiction, not orders to foreign courts. In other words, the arbitration order would have been directed at Ayunda to stop it proceeding with its civil litigation in Indonesia, not at the Central Jakarta District Court to stop it hearing the case.

3.2.4.  Annulment of Foreign Awards? Perhaps the most notorious case where an Indonesian court annulled a foreign award was Karaha Bodas.39 This involved a contract for the production and distribution of thermal energy between KBC, a largely foreign-owned company, and Indonesia’s state-owned oil and electricity companies (primarily, Pertamina). Soeharto had suspended the project by decree when the 1997 economic crisis hit. Arbitration was conducted in Switzerland. The state-owned enterprises were found to bear government related risks and KBC was awarded US$ 260 million. Though the award was successfully enforced against their assets overseas, and had been registered in Indonesia, Pertamina applied to the Central Jakarta District Court to annul the award on various grounds, including that it was against public policy. In particular, Pertamina argued that the award ‘disregarded and contravened the prevailing regulations in Indonesia which were issued at the request of the IMF in order to save the country which was in a state of economic and monetary crisis’.40 The District Court annulled the award on various grounds. Amongst its holdings was that the General Elucidation of the 1999 Arbitration Law, by not confining the grounds upon which the Court could refuse to enforce an award to those mentioned in Article 70, allowed the Court to consider whether an arbitral accorded with the ‘public interest’, and to annul it if it did not, even though the 1999 Arbitration Law only expressly mentions ‘public order’, and only as a ground to refuse to enforce an award.41 This was legally controversial, not least because an Elucidation must not ‘add’ to or fundamentally alter the text of the statute it purports to elucidate. By using the General Elucidation in this way, the Court’s interpretation seemed to do precisely this—it essentially added a ground to Article 70. This decision sent shockwaves through the international investor community with interests in Indonesia. They became concerned that the decision indicated that it would not be possible to enforce in Indonesia a foreign award against the Indonesian state, at least if the dispute arose out of regulatory changes in Indonesia. The Supreme Court overturned this decision on appeal, however.42 After reviewing key provisions of the 1999 Law and even the New York Convention, the Supreme Court held that the District Court ‘had no jurisdiction to examine and decide the claim for annulment made by the applicant’.43 A further appeal

38 

Supreme Court decision 877K/Pdt.Sus/2012 (26 March 2013). This case is discussed at length in Noah Rubins, ‘The Enforcement and Annulment of International Arbitration Awards in Indonesia’ (2004) 20 American University International Law Review 359. 40  Frans Winata,‘Indonesia Country Report on Public Policy for IBA APAG’, International Bar Association, available online: www.ibanet.org/Document/Default.aspx?DocumentUid=35A890AC-0D36-4953-BC10-22E1BF3F89AD. 41  District Court of Central Jakarta Decision 86/Pdt.G/2002/PN.JKT.PST. 42 01/Banding/Wasit-Int/2002. 43  ibid, 43. 39 

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against the decision was dismissed. This decision is now widely regarded as a ‘landmark’, standing for the principle that a district court cannot annul an international arbitration award. This, subsequent jurisprudence suggests, can be done only by the courts in the country where the award was issued.44

3.2.5.  Tort or Contract? Another argument that debtors commonly use in an attempt to avoid enforcement of an adverse arbitration is that the dispute was not ‘commercial’ in the sense required by Indonesia, but rather was a matter of tort. As mentioned, awards must be ‘commercial’ in order to be enforceable under the 1999 Arbitration Law. The argument was successful at first instance in at least one early case, where a Jakarta District Court refused to enforce a domestic award, issued by BANI, on grounds that the dispute was a tort claim, rather than a commercial contractual dispute. The parties settled before the case could be appealed before the Supreme Court, so the correctness of this decision could not be tested.45 In 2005, the Supreme Court sought to close off this tactic, issuing guidelines to district courts, which underlined that district courts lack jurisdiction to hear disputes between parties bound by an arbitration agreement, even if based on tort.46

3.3.  Other Factors As mentioned above, Indonesia has a main national arbitration body—BANI. Many sectorspecific bodies have also been established to help resolve particular types of disputes.

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements As mentioned, reform of Indonesia’s legal framework for arbitration and the enforcement of arbitral awards is unlikely for the foreseeable future.

3.4.2.  Top-down Versus Bottom-up Reform Though many practitioners appear to have seen Indonesia’s legal infrastructure for arbitration as inadequate for many decades, it was not until after Soeharto’s fall that the 1999 ­Arbitration Law was enacted. This appears to have been a largely top-down reform— inspired by the IMF and government concerns to provide an alternative to the ailing judicial system.

44 

Sukirno, Kadir and Hirdarisvita (n 19) 260. Karen Mills, ‘Enforcement of Arbitral Awards in Indonesia & Other Issues of Judicial Involvement in Arbitration’ (2006) 4 Transnational Dispute Management, available online: www.transnational-dispute-management. com/article.asp?key=804; Lubis and Burke (n 31). 46  Sukirno, Kadir and Hirdarisvita (n 19) 260. 45 

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3.4.3.  Special Considerations As mentioned, reform of Indonesia’s arbitration system does not appear to be imminent.

4.  The Future 4.1.  Legislative, Judicial and Institutional Reform No significant changes are envisaged in the foreseeable future.

4.2.  Enhancing Competitiveness, Independence and Professionalism No major initiatives are envisaged in the foreseeable future.

5. Conclusion It is often said that arbitration is now becoming a popular means by which to resolve international commercial disputes that arise in Indonesia.47 However, the choice to arbitrate is not one made primarily to avoid the costs and time of litigation, as may be the case in other countries. While both of these factors are at play in Indonesia, more fundamental concerns drive the popularity of arbitration, at least in resolving disputes between private sector commercial entities. These concerns arise largely from perceived inadequacies of the judicial system. In the first few years after the enactment of Indonesia’s 1999 Arbitration Law, it seemed that many Indonesian courts were unwilling to relinquish their monopoly on dispute resolution. And requiring the judiciary’s involvement for enforcement appeared to defeat at least some of the purposes of developing a strong arbitration system in Indonesia— avoiding notoriously high levels of corruption and lack of knowledge about complicated commercial transactions amongst Indonesia’s judiciary. Indeed, some untoward judicial practices are thought to have been responsible for the early first-instance decisions refusing to enforce or annul high-value international arbitral awards.48 However, to its great credit, the Supreme Court appears to have been relatively consistent in recognising and enforcing foreign awards on appeal. This appears to be at least one factor contributing

47  Tony Budidjaja, ‘Indonesia’ in The Asia-Pacific Arbitration Review 2016 (London, Law Business Research, 2016). However, some commentators argue that take-up of commercial arbitration is not so high amongst domestic Indonesian enterprises, some of which view arbitration as ‘more complicated, more time-consuming and more expensive than court litigation. Many Indonesian business and legal people also express concern about the lack of court support for enforcement of the arbitral award and the possibility of annulment of the arbitral agreement or awards by the court’: see ibid. 48  Mills (n 45).

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to the increasing trend of recognising and enforcing foreign awards in Indonesia.49 The Indonesian courts appear now to recognise and enforce once the formal requirements for registration have been met. However, one significant problem remains: it appears to be still quite common for parties losing in arbitration proceedings to attempt to resist enforcement before Indonesia’s courts, even if they think they will probably lose on appeal.50 The vagueness of the public policy exception is often said to be the main culprit: its vagueness leads some practitioners to argue that it encourages losing parties to challenge enforcement, particularly if the award involves significant sums of money.51 Though there have been very few, if any, calls for reform of the 1999 Arbitration Law since its enactment, including along the lines of the Model Law, perhaps adding a clear definition of the concept would be a useful starting point.

49 

Heath (n 16). Arbitrase Seharusnya Dipatuhi’ [in Indonesian], Hukumonline, 31 March 2010, available online: www.hukumonline.com/berita/baca/lt4bb37cbb9b46f/putusan-arbitrase-seharusnya-dipatuhi. 51  Budidjaja (n 31). 50  ‘Putusan

10 Arbitration Law and Practice in Vietnam: Fundamental Changes Over the Past 20 Years and Potential for the Future DANG XUAN HOP

1. Introduction From a closed economy, over the past 20 years, Vietnam has made significant efforts in transforming itself into a market driven economy. Vietnam is now regarded as a rising economy in Asia and increasingly an attractive destination for foreign investment. A key factor in this development is the significant reforms that have taken place in the Vietnamese legal system and institutions over the last 25 years.1 Many new laws and regulations have been enacted, government practices have been improving and the judiciary has also been transforming itself, all in a concerted effort to enhance the Vietnamese investment and legal environments. In this process, arbitration law and practice in Vietnam have also experienced fundamental changes over the last 20 years. Arbitration was first viewed with much skepticism in the early 1990s in Decree 116 of 1994. Then, it was recognised in the 2003 Ordinance on Commercial Arbitration (OCA)2 and has eventually been entrenched and reinforced in the 2010 Law on Commercial Arbitration (LCA).3 From a rather inactive institution in the 1990s, the Vietnam International Arbitration Centre (VIAC) is now a busy and active arbitration centre with 155 cases received in 2016, half of which involved foreign parties. The VIAC continues to enhance the professionalism of its staff and services, with more experienced arbitrators and more efficient proceedings, winning the trust and respect of the community. 2015 was the first year in which no VIAC award was set aside by the courts, notwithstanding 13 applications had been made. This chapter will give a snapshot of such development of arbitration law and practice in Vietnam over the last 20 years, with some prognosis regarding future development. 1  Dang X Hop, ‘The Vietnamese Legal System, the Past 25 Years, the Present and the Future’ in Ann Black and Gary Bell (eds), Law and Legal Institutions in Asia (Cambridge, Cambridge University Press, 2011). 2  Ordinance No 08/2003/PL-UBTVQH11 on Commercial Arbitration, 25 February 2003. 3  Law No 54/2010/QH12 on Commercial Arbitration, 17 June 2010.

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There are very good reasons to believe that, with continuing efforts from the stakeholders in Vietnam, the arbitration system in Vietnam will continue to develop into a dynamic and interesting market.

2. Background 2.1.  Legislative and Regulatory Framework 2.1.1.  The Early Days: Decree 116 in 19944 The history of commercial arbitration in Vietnam in fact goes back to as early as 1963 when the Government of the then North Vietnam passed Decree 59/CP to establish the Foreign Trade Arbitration Council to resolve contractual trade disputes between Vietnamese parties and foreign parties. Even then during the war time, North Vietnam was conducting a significant amount of trade with foreign countries, mainly from Eastern Europe, to export farming products and import industrial goods, including for military needs. Although most of such transactions were conducted between government-owned entities of North ­Vietnam and its sister socialist states, disputes were inevitable. Decree 59/CP was passed that year to set up the Foreign Trade Arbitration Council to deal with such expected disputes. Albeit brief, this Decree provided for all the essentials of a good arbitration system including the right of the parties to appoint arbitrators from a panel, the appointment of a third arbitrator to chair the tribunal, the right of the parties to legal representation, the right of the tribunal to order interim relief and in particular the finality and enforceability of the award.5 Unfortunately, due to the war and the subsequent closed economy of Vietnam, Decree 59/CP and the Foreign Trade Council did not fulfil their intended mission, except for handling a small number of trading disputes between Vietnamese state-owned enterprises and their counterparties from Eastern Europe. As a result, the concept of international commercial arbitration as we know it today was not known in Vietnam until Vietnam started her economic reforms in the late 1980s. This was when the economy of the eastern bloc countries, including in particular the former Soviet Union, was declining and their support for Vietnam was reducing rapidly. The Vietnamese Government quickly realised that it was then imperative to transform its closed economy to a market-driven economy, especially allowing private business activities and foreign investment. Therefore, one of the first steps of economic reform in Vietnam was the enactment of the 1987 Law on Foreign Investment allowing foreign investors to invest in Vietnam, including in the form of joint ventures with Vietnamese parties.6 The Vietnamese law-makers realised that in order to attract foreign investors, arbitration had to be one of the possible dispute resolution mechanisms in joint venture contracts. Hence, Article 25

4  5  6 

Decree 116/CP on organization and operation of economic arbitration, 5 September 1994. Decree 59/CP of the Government Council of the Democratic Republic of Vietnam, 30 April 1964. Law No 4/HDNN8 on Foreign Investment in Vietnam, 29 December 1987.

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of the 1987 Law on Foreign Investment provided that disputes between foreign parties or foreign invested companies with Vietnamese parties could be resolved by arbitration in Vietnam or elsewhere as agreed by the parties. This prompted the need for an arbitration system to be established in Vietnam. This led to Decision 204/TTg of the Vietnamese Prime Minister in 1993 to establish the VIAC7 and publish arbitration rules at the VIAC. In fact, this Decision specifically stated that awards issued by arbitral tribunals at the VIAC would be final and could not be appealed before a court of law. However, before any significant arbitration activities could develop based on this Decision, in 1994, the Vietnamese Government issued Decree 116/CP regulating ‘economic arbitration activities’ in Vietnam in general. While Decree 116 provided in some detail for the establishment of arbitration tribunals, conduct of arbitration proceedings and issue of arbitral awards, it essentially thwarted the development of arbitration by providing that if a party refuses to honour an arbitral award, the other party will need to start a court proceeding for the dispute to be resolved by the court de novo. In other words, under Decree 116, arbitral awards were not final and enforceable, which made the whole arbitration proceeding rather futile. Compared to the spirit of Decision 204/TTg of the Prime Minister in 1993, Decree 116/CP presented itself as a major setback for arbitration activities. While Decree 116/CP recognised the concept of commercial arbitration in Vietnam, it showed a lack of confidence in arbitration as a dispute resolution mechanism. This was actually not hard to understand at such a time when Vietnam had just started to open its economy to the outside world and a lot of caution was being exercised with respect to new concepts and institutions from the western world. For such reasons, arbitration in Vietnam did not see much development for about 10 years after Decree 116/CP. Arbitration between foreign parties and Vietnamese parties would tend to take place at typical foreign arbitration institutions in developed jurisdictions such as Singapore (SIAC), Hong Kong (HKIAC), England (LCIA) or France (ICC). The VIAC had only six cases in 1993 and 16 cases in 2003 while the Vietnamese courts continued to be overloaded with tens of thousands of cases a year. After this situation continued for a number of years, the Vietnamese business community started to voice concerns about the costs, inconvenience and other difficulties in having to arbitrate overseas and showed a real need for an effective domestic arbitration system. It then became clear to the Vietnamese law-makers that an effective legal framework for arbitration inside Vietnam had to be established in order to cater for this need. This led to the enactment of the OCA in 2003.

2.1.2.  The Fundamental Shift: The OCA in 2003 The main author of the OCA, Professor Luu Van Dat, a former legal officer at the Ministry of Trade, well recognised the necessity for an effective arbitration system in order to facilitate international investment and trading activities. The OCA was drafted with this objective in mind. When it was enacted in 2003, it laid the first key cornerstone for arbitration in Vietnam by providing that arbitral awards were enforceable and could only be

7  Decision 204/TTg of the Prime Minister on the organisation of the Vietnam International Arbitration Centre, 28 April 1993.

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set aside on certain grounds.8 This fundamentally changed the situation that had existed hitherto under Decree 116/CP and, as subsequent history has shown, was a key factor in boosting arbitration activities after 2003. Apart from this important provision, the OCA provided for a number of procedural rules regarding both domestic and international commercial arbitration (both ad hoc and institutional), taking into account provisions of the UNCITRAL Model Law (the Model Law) and the laws of other jurisdictions, which Professor Luu Van Dat and his team had studied in detail.9 Most of the provisions of the OCA applied equally to both domestic and international arbitrations, with some added provisions specially designed for arbitrations ‘with foreign elements’ such as the freedom to agree on the language of arbitration, the applicable law or the venue in Vietnam or overseas.10 Building such foundations, the OCA did create a strong impetus for the development of arbitration in Vietnam. Following the OCA’s enactment, the VIAC’s caseload saw a gradual increase after 2003, with 63 cases being received in 2010.11 Supported by the VIAC and the Ministry of Justice, a number of seminars and training courses on arbitration were held to raise the awareness of the community on arbitration. Government officials and businesses became more familiar with the concept of arbitration. The VIAC’s presence and practice became more well-known by the community. Vietnamese contracting parties inserted VIAC arbitration clauses into their contracts more frequently and started to propose VIAC as one of the arbitration options in their contracts with foreign partners. However, the OCA still contained a number of issues which reflected some residual skepticism towards arbitration. For example, foreign arbitrators were not allowed and even domestic arbitrators needed to have certain prescribed qualifications such as having a university degree and work experience of at least five years in his or her field of university study. Arbitral tribunals could not issue interim relief. In an institutional arbitration, the parties could only choose arbitrators from the list of the arbitration institution but not outside the list. In an ad hoc arbitration, where there is no agreement on the sole or presiding arbitrator, the court would be the only appointing authority. This means that the parties could not agree on some other neutral appointing authority such as an arbitration institution which, in practice, is often in a better position than the courts to appoint an arbitrator. These are just a few examples of the shortcomings of the OCA.12 Therefore, while the OCA did lay some important foundations allowing the arbitration system to start to develop in Vietnam in the middle 2000s, the issues that existed in the OCA and the then residual lack of familiarity and confidence in arbitration meant that the development was still rather modest. Many foreign investors still did not have sufficient confidence to choose to arbitrate in Vietnam and insisted on overseas arbitration in their contracts with Vietnamese counterparties. The domestic business community and the legal profession showed a real demand for a stronger arbitration legal system in Vietnam.13

8 

Arts 54 and 57 of the OCA. While the OCA, and later the LCA, incorporated a number of provisions from the Model Law, they still bear a number of differences from the Model Law and hence Vietnam is not regarded as a Model Law jurisdiction. 10  Art 49 of the OCA. 11  See the VIAC caseload statistics [in Vietnamese]: www.viac.org.vn. 12  Dang X Hop, ‘Towards a Stronger Arbitration Regime for Vietnam’ (2007) 3(1) Asian International Arbitration Journal 80–98. 13 ibid. 9 

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As a result, five years after the OCA was enacted, the Vietnamese law-makers and arbitration community agreed that a new arbitration law needed to be in place to take arbitration in Vietnam to a new level.

2.1.3.  Entrenching and Reinforcing Arbitration: The LCA in 2010 After about five years of implementing the OCA, it was recognised that a new law was required to boost the development of the arbitration system in Vietnam. The Vietnamese Government put the Vietnam Lawyers Association in charge of leading this work as it was believed that the Vietnam Lawyers Association could mobilise the knowledge and experience of all the lawyers nationwide to this task. A drafting committee was then set up in about 2008 and after two years of drafting, with reference to arbitration laws and practice from many jurisdictions including the Model Law, the draft LCA was produced and submitted to various Government bodies for review and comments before eventually being submitted to the National Assembly for final review and enactment. Building up on the positive foundations laid by the OCA, the LCA embodied a number of significant improvements, enhancing the autonomy of the parties, expanding the powers of tribunals and strengthening the enforceability of awards. For example, foreign arbitrators are now allowed. Effectively, there are no longer any required qualifications for arbitrators because they can be chosen by the parties as long as they have the ‘high expertise and rich practical experience’.14 Tribunals can issue interim relief and parties in ad hoc arbitration are free to agree on an appointing authority other than the courts. Grounds for setting aside awards are also more limited compared to the OCA and the possibility to use foreign languages and foreign laws in proceedings were clarified and reinforced.15 As a result, the use of arbitration in Vietnam has seen a significant increase following the effectiveness of the LCA. The caseload at the VIAC continued to increase, up to 155 cases in 2016 and is predicted to increase further in 2017. While there had been concerns about many arbitral awards being set aside by the courts in previous years, 2015 saw no VIAC award being set aside by Vietnamese courts. It seems evident that the community and the legal institutions, including the judiciary, have now placed much more confidence in the arbitration system in Vietnam.

2.2.  Institutional Framework The LCA allows both ad hoc and institutional arbitration. However, as a matter of practice, institutional arbitration is still the main form of arbitration. Vietnam currently has in total 15 arbitration institutions, with the VIAC being the dominant one with offices in both Hanoi and Ho Chi Minh City. With a history going back to its predecessor in 1963 and being affiliated with the Vietnam Chamber of Commerce and Industry (VCCI), the VIAC enjoys a strong reputation and a high degree of recognition by the local business

14 

Art 12.1(c) of the LCA. Dang X Hop, ‘Legislative Changes on International Commercial Arbitration in Vietnam’, paper presented at the SIAF Conference on the future for international arbitration, Singapore, June 2011. 15 

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community, especially state-owned enterprises which form a large membership of the VCCI. Over the years, the VIAC has developed a very strong network of arbitration practitioners in Vietnam, and has created a panel of about 150 local and foreign arbitrators with knowledge and experience in domestic and international disputes. These include Government officials, retired judges, lawyers, other professionals and academics. Supported by the VCCI, the Government and also international organisations, the VIAC has done a very large amount of work in promoting arbitration in Vietnam over the past two decades, including drafting legislation, educating the community and working with Government bodies and the courts to enhance their understanding of and support for arbitration. The VIAC often takes the lead in organising workshops and other training courses at universities, in conjunction with the Government or foreign arbitration institutions. As a result, the VIAC is recognised as the dominant arbitration institution in Vietnam and is often regarded as the first choice for contracting parties when they agree to arbitrate in Vietnam. As mentioned above, the VIAC received 155 cases in 2016 and this is expected to continue increasing in years to come. The other arbitration institutions in Vietnam are mostly privately owned such as the Pacific International Arbitration Centre (PIAC), the Vietnam Financial and Banking ­Arbitration Centre (VIFIBAR), the Financial and Commercial Centre for Arbitration (FCCA) and Saigon Commercial Arbitration Centre (SCAC). Compared to the VIAC, they are much less active. Except for the PIAC which has a panel of about 100 arbitrators, the panels for most other centres are generally limited to about 10 arbitrators.16 Their caseload is also quite limited, compared to that of the VIAC. It seems quite difficult for these institutions to compete with the VIAC, given the strong reputation and recognition that the VIAC has gained in the community both inside and outside Vietnam. The LCA also allows foreign arbitration institutions to set up representative offices or branches in Vietnam to promote or conduct their arbitration activities in Vietnam.17 However, so far, no foreign arbitration institutions have opened offices in Vietnam, notwithstanding many regional and international arbitration institutions have a number of cases related to Vietnam. It seems that foreign arbitral institutions see no real need to establish a permanent presence in Vietnam. It suffices for them to work in conjunction with local organisations such as the VIAC if they wish to conduct any training or promotion activities in Vietnam.

2.3.  Judicial Framework Arbitration activities in Vietnam are subject to the supervisory jurisdiction of Vietnamese provincial courts. The LCA supports the party autonomy by allowing the contracting ­parties to select by agreement the court to have jurisdiction over their arbitration proceeding. In the absence of such an agreed choice, the LCA designates certain courts as having jurisdiction. For example, the court with jurisdiction to appoint arbitrators is the local

16  See the statistics from the website of the Ministry of Justice of Vietnam [in Vietnamese]: http://bttp.moj.gov. vn/qt/tintuc/Pages/trong-tai-thuong-mai.aspx?ItemID=49. 17  Arts 73 to 79 of the LCA.

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court where the defendant is located. The court with jurisdiction to hear challenges against the decision of an arbitral tribunal is the local court where the decision of the tribunal is made.18 Depending on the matter, the court could comprise one single judge or three judges, often being judges in the economic division specifically in charge of arbitrationrelated matters. The decision of the court is often final and cannot be appealed against.19 Arbitration-related cases before Vietnamese courts mainly concern applications to set aside domestic awards or enforce foreign arbitral awards. Cases concerning validity of arbitration agreements or jurisdictional challenges exist but are less common. According to a report by the Judicial Research Institute of the Supreme Court, up to 2014, 52 applications had been made to enforce foreign arbitral awards in Vietnam. Out of these, 23 applications had been granted, 24 applications were rejected and the rest were still ongoing. This report also highlights that the three main reasons for refusing enforcement of arbitral awards were the lack of capacity of the Vietnamese signatory in signing the contract, the lack of proper notice to the respondent and the enforcement of the award would be ‘contrary to fundamental principles of Vietnamese law’.20 There has been a general perception that Vietnamese courts were not sufficiently supportive of enforcement of foreign arbitral awards. The strongest criticism arose out of the refusal by the Vietnamese Supreme Court to enforce a foreign arbitral award in the case of Tyco Services Singapore Pty Ltd v Leighton Contractors (VN) Ltd21 which involved a dispute over a construction contract for a hotel in Vietnam. The refusal of the Court was partly on the ground that construction was not a ‘commercial activity’ as narrowly defined under the Vietnamese Commercial Law and that the claimant had not obtained a licence to operate in Vietnam and so enforcing the award would be ‘contrary to fundamental principles of Vietnamese law’.22 This case was one of the main reasons for the general perception that it was generally difficult to enforce a foreign arbitral award in Vietnam under the New York Convention. In a more recent case Strategic Think Tank LLC and 260 Architects v Sudico,23 the Hanoi Court refused to enforce an SIAC award arising out of a construction design contract on the ground that the works by the contractor did not meet the requirements of Vietnamese construction law and were not approved by the Vietnamese authorities as required by law. Enforcing the award therefore would be ‘contrary to fundamental principles of Vietnamese law’.24 In the case of Ecom Argoin Industrial Corp Ltd v 19 May Textile

18 

Art 7 of the LCA. Arts 44.4 and 71.10 of the LCA. 20 Judicial Research Academy, ‘The Practice of Enforcement of Foreign Arbitral Awards in Vietnam— Recommendations’, paper presented at the Conference on 20 years of implementing the New York Convention 1958 on recognition and enforcement of foreign arbitral award, organised by the Ministry of Justice, Hanoi, 21 November 2014. 21  Decision No 2/PTDS dated 21 January 2003 of the Appellate Court in Ho Chi Minh City, to be found in Do Van Dai and Tran Hoang Hai, Collection of Vietnamese Courts’ Judgments and Decisions on Commercial Arbitration [In Vietnamese: Tuyển tập các bản án, quyết định của Tòa án Việt Nam về trọng tài thương mại, NXB Lao Động] (Vietnam, Labour Publishing House, 2010) 244–52. 22  Richard Garnett and Kien Cuong Nguyen, ‘Enforcement of Arbitral Awards in Vietnam’ (2006) 2(2) Asian International Arbitration Journal 137–50. 23  Decision No 08/2015/QDPT-KDTM dated 12 August 2015 of the Hanoi City People’s Court. 24  Nguyen Huyen Cuong, ‘The Practice of Enforcement of Foreign Arbitral Awards in Hanoi Courts—Recommendations’, paper presented at the Conference on 20 years of implementing the New York Convention 1958 on recognition and enforcement of foreign arbitral award, organised by the Ministry of Justice, Hanoi, 21 November 2014. 19 

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Company of Hanoi Ltd in 2014,25 the Appellate Court refused to enforce a foreign arbitral award of the International Cotton Association (ICA) on the ground that the representative of the respondent who signed the contract did not have capacity and the respondent did not receive proper notice of the arbitration proceeding.26 This situation has continued up to now, creating the general perception that it is difficult to enforce foreign arbitral awards in Vietnam. One can only await new developments by the Vietnamese legislature or a new strong decision of the Vietnamese courts showing a firm, supportive approach towards enforcement of foreign arbitral awards. As regards domestic arbitral awards, notwithstanding the OCA and the LCA have made it clear that awards are enforceable unless set aside on limited grounds, Vietnamese courts over the past few years have set aside a number of awards based on rather technical grounds. However, thanks to the hard work by the VIAC, Government bodies and the legal community as a whole, Vietnamese courts have become more and more supportive of arbitration over the years. In 2015, no VIAC award was set aside notwithstanding 13 applications were made. This will be discussed further in section 3.2 below.

3. Reform 3.1.  Legislative and Regulatory Initiatives As described above, arbitration law and practice in Vietnam have gone through some transformative reforms over the last 2 decades. Vietnam is not regarded as a Model Law jurisdiction because there are some differences between the LCA and the Model Law. Nevertheless, the arbitration legal framework of Vietnam is generally consistent with international standards in material respects, creating a solid platform for the development of arbitration activities in Vietnam. Since the enactment of the LCA, there have been no further significant legislative developments in this area.27 Vietnamese law-makers and the legal, business and arbitration communities seem to hold the consensus that the legal framework is practically adequate for developing domestic arbitration activities to meet the needs of the local business communities at the moment. For this reason, it seems unlikely that the Vietnamese law-makers would contemplate any significant legislative changes in this regard in the near future. As mentioned above, the drafting committee of the LCA carefully considered each provision of the Model Law as well as arbitration laws of other developed jurisdictions, regionally and internationally, to decide whether they should or should not be incorporated into the LCA in the then prevailing circumstances of Vietnam. In that context, the Model Law and laws of developed jurisdictions such as Singapore, England or France all

25 

Decision No 31/2014/QDPT-KDTM dated 10 June 2014 of the Appellate Court in Ho Chi Minh City.

26 ibid.

27  The Government issued Decree 63/2011/ND-CP, 28 July 2011, which only provided some guidelines on establishment of arbitration centres, but did not provide any significant substantive rules on arbitration.

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had a strong impact on the LCA. However, not all of their rules were incorporated into the LCA.28 For example, the LCA does not specify, as does the Model Law, that the court is the final appointing authority if an arbitration institution fails to appoint an arbitrator as the parties have agreed. As another example, the LCA does not allow for documentary ­arbitration without the need for the hearing as in the Model Law.29 The LCA also prescribes a very short time limit for tribunals to publish awards within 30 days from the conclusion of the last hearing.30 Such time limit does not exist in the Model Law.

3.2.  Judicial Initiatives For many years, there have been concerns about the willingness of Vietnamese courts in enforcing arbitral awards, both foreign and domestic. This problem was in existence throughout the life of the OCA and continued even under the LCA. For example, under the OCA, a court may set aside a domestic arbitral award if the signatory of the arbitration agreement does not have capacity. This ground was frequently invoked by the disgruntled party and then upheld by the court as a ground for setting aside an award. In the collection of Vietnamese court decisions regarding arbitration matters by Dr Do Van Dai and Dr Tran Hoang Hai,31 one can find a number of court decisions setting aside arbitral awards on this ground. Take, for example, the case of Thu Do II Company v PT Vindoexim (Indonesia)32 in 2005, which concerned a sales of goods contract between PT Vindoexim, an Indonesian company, and Thu Do II Company, a Vietnamese company. The contract was signed by a Mr Hung, a director of PT Vindoexim. An arbitral tribunal found that Thu Do II had breached the contract and ordered Thu Do II to pay compensation to PT Vindoexim. Thu Do II applied to the Hanoi Court to set aside the award on the ground that Mr Hung did not have the capacity to represent PT Vindoexim and therefore the arbitration agreement was void. The Court found that Mr Hung was not named in the constituent documents of PT Vindoexim as the legal representative and hence the Court was not satisfied that Mr Hung had the capacity to represent PT Vindoexim. Whilst the Chairman of PT Vindoexim subsequently ratified in writing the actions of Mr Hung, the Court considered that the ratification could not change the fact that Mr Hung did not have authority at the time of signing the contract. On that basis, the Court set aside the arbitral award. The above finding of the court is questionable for two reasons. First, while PT Vindoexim is an Indonesian company, the capacity of Mr Hung as a director of PT Vindoexim was not examined based on Indonesian law. Instead, it seems that the Court simply applied a rule of Vietnamese company law that a person cannot represent a company if his name is not referred to in the constituent documents or he is not otherwise duly authorised in writing.

28 Dang X Hop, ‘The 2010 LCA of Vietnam compared to the 2006 Model Law’, paper presented in the Conference on the UNCITRAL Model Law on International Commercial Arbitration in Asia, National University of Singapore, Singapore, 29 May 2015. 29 ibid. 30  Art 61.3 of the LCA. 31  Do Van Dai and Tran Hoang Hai, Collection of Vietnamese Courts’ Judgments and Decisions on Commercial Arbitration [In Vietnamese: Tuyển tập các bản án, quyết định của Tòa án Việt Nam về trọng tài thương mại, NXB Lao Động] (Vietnam, Labour Publishing House, 2010). 32  Decision No 02/2005/XQDTT-ST dated 11 May 2005 of Hanoi People’s Court.

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Second, the Court did not give any weight to the fact that the Chairman of PT Vindoexim ratified the actions of Mr Hung. It is difficult to understand why such ratification was not sufficient to rectify any defect in the authority of Mr Hung. So this case demonstrates a concern that the court may be too quick in setting aside arbitral awards. However, recent developments may give hope that the above issue may be one of the past. Thanks to the development of the legal framework on arbitration, the training and promotion activities by the VIAC and the Government and the development of the economy in general, the situation has been positively changing. The year 2014 saw the famous case of Vinalines v SK Engineering & Construction33 in which Vinalines, a major state-owned shipping company, was ordered by a VIAC tribunal to pay SK E&C, a Korean contractor, about three million US dollars in compensation. After the award was issued, Vinalines sought help from the Prime Minister and applied to the Hanoi People’s Court to have the award set aside. There was much publicity about this case and the arbitration community eagerly awaited the court’s judgment.34 Eventually, the Hanoi People’s Court decided not to set aside the award. This gave a strong boost to the confidence of the community in the arbitration system and the judicial support for it. As has been mentioned, no VIAC arbitral award was set aside in 2015 notwithstanding 13 applications were made. This gives one good reasons for believing that, going forward, the judiciary will be more and more supportive of arbitration. In addition, on 20 March 2014, the Judges’ Council of the People’s Supreme Court of Vietnam passed Resolution No 01/2014/NQ-HDTP to provide detailed guidelines on the implementation of some specific articles in the Law on Commercial Arbitration of 2010. This Resolution 01 shows a supportive attitude from the Court towards arbitration. For example, Resolution 01 addresses situations where the parties have agreed on both courts and arbitration as possible dispute resolution mechanisms. This is in fact a common occurrence in Vietnam where commercial parties, without legal advice, often include both arbitration and courts in their contracts. In such cases, Resolution 01 allows the dispute to be arbitrated if the arbitration proceeding is commenced prior to or shortly after the court proceeding. Specifically, Article 2.4(a) of Resolution 01 provides that where a court receives a dispute, it must, within five working days, ascertain whether an arbitration proceeding has been started on such dispute and if so, it must decline jurisdiction.35 This is a positive provision indicating a pro-arbitration attitude on the part of Vietnamese courts.

3.3.  Other Factors The LCA allows the establishment and operation of both domestic and foreign arbitration centres in Vietnam. While no foreign arbitration centres have an established presence in Vietnam, as above mentioned, there are currently 15 domestic arbitration centres and

33 

Decision No 09 of the Hanoi People’s Court dated 03 October 2014. For example, VNExpress, ‘Vinalines chính thức thua vụ kiện 3 triệu USD’ [in Vietnamese], 13 October 2014, available online: http://kinhdoanh.vnexpress.net/tin-tuc/doanh-nghiep/vinalines-chinh-thuc-thua-vu-kien-3trieu-usd-3092571.html. 35  Dang X Hop, ‘Vietnam Supreme Court Passed New Arbitration Resolution’ (2015) 1 Asia Pacific Arbitration Reporter. 34 

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the VIAC is by far the leading one with the highest caseload. In fact, the dominant market position of the VIAC practically means that there is little competition among the domestic arbitration centres. As mentioned above, the choice of VIAC has become the norm for many contracting parties in Vietnam, especially in light of the continuing overload of the national court system and the absence of any other alternative dispute resolution mechanism. While the Government recently enacted regulations to formalise commercial mediation,36 it will take some time before this can become another common mechanism of alternative dispute resolution. According to the statistics provided by the VIAC, for the past few years, about half of the disputes at the VIAC involve foreign parties.37 In 2011, this was 61 per cent (out of 83 disputes in total) and in 2015 this was 37 per cent (out of 146 in total). Most of these disputes are trading disputes (76 out of 146 in 2015) and construction (21 out of 146 in 2015). The average time for resolving a dispute is about four months and the shortest case in 2015 took only just over three weeks and the longest case took 10 months. The average value for each dispute is slightly less than half a million USD in 2015 and about the same in 2016. In short, the VIAC is a fairly busy arbitral institution and its workload is expected to continue increasing in coming years. However, the VIAC has to compete with foreign arbitration centres. Although no foreign arbitration centre has established a permanent presence in Vietnam, many disputes with Vietnamese parties are resolved in these centres. For example, in 2015 alone, the SIAC had 271 cases including 19 cases involving Vietnamese parties.38 Many of these disputes involve large claims between major contracting parties. For that reason, Vietnam in general and the VIAC in particular have a lot to do to deal with such competition against regional and international arbitration institutions. Notwithstanding the difficulties with enforcing foreign arbitral awards as above mentioned, foreign investors in major transactions in Vietnam still prefer to arbitrate outside Vietnam, at a regional or international arbitration institution in a developed neutral jurisdiction. This is unlikely to change until the VIAC has really transformed itself into a truly an international arbitral institution and the judicial environment in Vietnam shows much more support to arbitration. This will be examined further below.

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements As has been demonstrated above, the changes in the arbitration system in Vietnam have been brought about by the collective efforts of all the institutions, starting with the ­legislature in passing the laws such as the OCA and then the LCA, the courts with their increasing support in recognising and enforcing arbitral awards, the strong work by the arbitration institutions such as the VIAC in promoting arbitration and finally the legal and business communities in using and strengthening the system. Now that the LCA as passed

36 

Decree 22/2017/ND-CP on commercial mediation, 24 February 2017. (n 11). 38  Singapore International Arbitration Centre, ‘Annual Report 2015’, available online: www.siac.org.sg/images/ stories/articles/annual_report/SIAC_Annual_Report_2015.pdf. 37 

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by the legislature already creates a strong legal framework, it is up to the institutions and the community to develop the arbitration system on that basis, and for the courts to recognise and support the work products by refusing to set aside awards except on legitimate grounds. A lot more work is required to raise the public awareness of the arbitration system so that it is used more by the community. In that sense, training institutions should also promote the training of arbitration in their curriculum. Such collective and concerted efforts will increasingly strengthen the arbitration regime in Vietnam in the coming years.

3.4.2.  Top-down Versus Bottom-up Reform Vietnam’s arbitration law and practice have gone through a number of transformative changes over the last 20 years. This is the result of both macro policy factors and more micro efforts from the arbitration, legal and business communities. From a macro policy perspective, the open door policy means that Vietnam needed to have laws and institutions attractive to foreign investors and trading partners. After almost a decade without an effective and reliable arbitration system, Vietnam saw that most foreign contracting parties would insist on taking disputes to foreign arbitration institutions, given the Vietnamese courts were overloaded and in any event perceived to be not sufficiently experienced in commercial dispute resolution. At the same time, foreign arbitral awards would need to be recognised and enforced by Vietnamese courts and for quite some time, Vietnamese courts were perceived to be not willing to enforce arbitral awards.39 All this contributed to the legal risks for transactions with Vietnamese parties, which ultimately would increase the transaction costs for doing business in Vietnam. From that perspective, Vietnamese law makers recognised that effective and reliable arbitration laws and institutions were required. In addition, as the economy became more integrated into the outside world, the Government and businesses became better acquainted with international commercial and legal practices, including having more familiarity and trust in international commercial arbitration as a standard and effective means of dispute resolution. All this led to the enactment of the OCA in 2003 and then the LCA in 2010. At a more micro level, the development of the arbitration law and practice in Vietnam for the past two decades has been largely attributable to the tireless efforts of the arbitration community in Vietnam, led by the VIAC, as well as Government officials, judges, lawyers, businesses, academics and others who were supportive of arbitration. The Vietnamese Lawyers Association led the drafting of the LCA with strong contributions from the VIAC team, lawyers, Government officials, academics as well as the business community. There was a strong consensus among all the stakeholders that Vietnam needed to have an effective arbitration system in order to avoid the need to refer most commercial disputes to foreign arbitration, creating a new market for arbitrators and lawyers, enhancing the enforceability of contracts in Vietnam and ultimately making Vietnam a more attractive place for business partners. A lot of efforts were made to persuade National Assembly delegates to accept the new concepts introduced into the LCA such as the presence of foreign arbitrators, use of foreign law or the issue of interim relief by arbitral tribunals. Following the effectiveness

39 

(n 22).

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of the OCA and the LCA, a large number of seminars, conferences and training courses were held to educate the business communities on the benefits of arbitration under the LCA. A number of international organisations provided funds to Vietnam in this cause. At the same time, for the last 10 years, arbitration has become a more popular subject in law schools with more and more students participating in international and domestic arbitration moots. All these contributed to the development of the arbitration system as a whole, making it a fairly dynamic market in Vietnam over the last few years.

3.4.3.  Special Considerations As has been shown, the above changes in arbitration in Vietnam did not take place overnight. Instead, it took a number of years for the political system to accept the concept of arbitration as an effective form of private adjudication. For example, while Decree 116 in 1994 recognised the concept of arbitration, it demonstrated no faith in this institution and hence did not provide for the finality and enforceability of arbitral awards. This fundamental issue was remedied in the OCA in 2003. However, having done that, the OCA still did not recognise fully the concept of party autonomy in arbitration and did not give sufficient powers to the tribunals. For example, as mentioned above, foreign arbitrators were not allowed under the OCA. Even domestic arbitrators had to satisfy a number of conditions such as having a university qualification and a number of years of experience matching the field of university training. Tribunals could not grant interim relief and parties in ad hoc arbitration could not choose a neutral appointing authority to appoint arbitrators.40 It is likely that the authors of the OCA realised its shortcomings. However, it seems that it was merely impossible to introduce such concepts, albeit regarded as universally standard, into the OCA in a political climate when law-makers had not yet been convinced of the propriety and effectiveness of arbitration. This was changed seven years later when the LCA was enacted and the drafting committee was able to convince the National Assembly to accept new concepts such as allowing foreign arbitrators. While the LCA still requires arbitrators to have a university qualification and working experience, it provides that those with special expertise may also be chosen by the parties in ‘special cases’.41 The true effect of this provision is that the LCA fully recognises the autonomy of the parties in choosing arbitrators, although expressed in a rather peculiar manner. As another example, in the OCA, the tribunal could not order interim relief, while in the LCA, tribunals could give interim relief relatively similarly as provided in the Model Law. So the laws have come a long way in providing for party autonomy and other basic rules required for a good arbitration system, creating a good foundation for further developments. It is now up to the arbitration community to give full effect to this spirit of the law. Stronger actions by the arbitral institutions such as the VIAC, the courts and the community as a whole will be required to bring about qualitative changes in the arbitration system.

40  41 

(n 12). Art 20.1 of the LCA.

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4.  The Future 4.1.  Legislative, Judicial and Institutional Reform As mentioned above, it seems unlikely that Vietnam will have any major legislative reforms in arbitration in the next few years. The LCA is now generally regarded as being fairly comprehensive and consistent with international standards, forming a solid ground for the development of arbitration practice. While there are still some gaps compared to the Model Law and the laws of other jurisdictions,42 there is no compelling reason for making significant changes to the LCA at the moment and there is no possibility that Vietnam will consider adopting the 1985 or 2006 Model Law. There is also unlikely to be any major policy or legislative changes in the area of enforcement of foreign arbitral awards. Instead, it is generally believed that focus should be put on the enhancement of the arbitration institutions and practices, as well as harnessing more support from the judiciary, Government and business communities. In particular, the national courts should show stronger support towards arbitration with clear decisions upholding arbitral awards, domestic and foreign, in order to remove the long-standing perception of the lack of judicial support for arbitration in Vietnam. In that context, it is likely that the arbitration practices in Vietnam and the operations of the VIAC will continue to be strengthened in the next five years and beyond. Much more work will be required to encourage businesses to use arbitration. In 2015, only one per cent of domestic commercial disputes in Vietnam were referred to the VIAC.43 This figure leaves ample room for growth for the arbitration market in Vietnam. The VIAC will certainly have to continue their current efforts in expanding their market and the arbitration activities in general in years to come. In addition, the VIAC’s operations will need to be more internationalised by attracting more disputes with foreign parties, appointing foreign arbitrators to hear cases alongside Vietnamese arbitrators and foreign lawyers to represent disputing parties. At the moment, the list of arbitrators at the VIAC has only about 20 foreign arbitrators while it has over 100 Vietnamese arbitrators. This means that most tribunals would comprise of three Vietnamese nationals. While this may be said to help reduce the cost, it is not conducive to the development of a truly international arbitration centre. The VIAC had only three cases with foreign arbitrators in 2014 and two cases in 2015. It had only four cases applying foreign laws in 2014 and two cases in 2015. These numbers are still quite modest and need to be enhanced significantly in order to convince international contracting parties to refer their disputes to the VIAC.

4.2.  Enhancing Competitiveness, Independence and Professionalism To this end, it is important that the VIAC expands its list to include more foreign arbitrators and actively seeks having foreign arbitrators sitting together with local arbitrators so that 42 

(n 28).

43 Vietnam

International Arbitration Centre, ‘2015 Annual Report’, available online: www.apragbali2016. baniarbitration.org/filepaper/VIAC_2015AnnualReport_APRAG.pdf.

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local arbitrators are exposed to a more internationally professional environment. This will help develop a pool of professional arbitrators who will act as one of the leading forces in driving the arbitration system forward. More work will be required by the VIAC to increase not only the number of cases, but also the average value of each dispute beyond the current level of half a million US dollars per case. Current efforts in obtaining judicial and government support should be maintained in order to reinforce the confidence of the community in arbitration. Until then, it still remains difficult for the VIAC to compete against its neighbouring counterparts such as the SIAC or HKIAC, especially with large value and high profile disputes, as already mentioned above. Training institutions also play an important part in the promotion of arbitration. Not every law school in Vietnam currently has international commercial arbitration as a ­subject in its curriculum. The teaching of this subject often depends on the availability of external visiting faculty who are arbitration practitioners. Law schools in Vietnam should recruit and foster academics specialised in arbitration in order to entrench this module in their curriculum, rather than depending on outside resources. They should also encourage arbitration mooting activities by students in competitions both inside and outside Vietnam. Such activities will greatly contribute to the development of the arbitration regime in Vietnam.

5. Conclusion After 20 years, Vietnam has achieved a fairly satisfactory legal framework for arbitration. While Vietnam is not recognised as a Model Law jurisdiction, the LCA contains a number of hallmarks of the Model Law and is generally regarded by the community in Vietnam as sufficiently adequate for the near- and medium-term development of arbitration activities. Increasing judicial support, wider recognition by the business community, a developing legal profession and a growing pool of experienced arbitrators are all the essential factors which Vietnam has partly achieved and needs to continue to develop and reinforce. In order to facilitate further development, the Government should take stronger steps in promoting arbitration activities, raising awareness in business communities, especially the state-owned sector, encouraging the use of arbitration in domestic and international commercial contracts. Judges should also be trained and encouraged to support arbitration. At a more micro level, the VIAC should maintain its leading role in driving arbitration activities, having more foreign arbitrators actually hearing cases at the VIAC, training arbitrators as well as lawyers in arbitration proceedings, with the ultimate aim of having a pool of experienced, international standard arbitrators and arbitration lawyers in Vietnam. The legal profession and law schools should also join in promoting arbitration activities among the legal, business and academic communities. All such concerted efforts will certainly bring about positive results for the developments of the arbitration system in Vietnam in the near future.

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11 Arbitration Reform in India: Challenges and Opportunities HIRO NARAINDAS ARAGAKI

1. Introduction At first glance, India has all the makings of a regional standard-bearer for international commercial arbitration. As of 2016, it was the seventh largest and one of the fastest growing economies in the world. English is widely spoken and serves as the official language for the Supreme Court and the High Courts, as well for national and state legislation.1 The country has a robust and sophisticated services sector that includes top notch legal talent, with many key players having either practised or pursued advanced degrees in jurisdictions such as the US and the UK. And major Indian cities such as Delhi and Mumbai have the necessary infrastructure to serve as an attractive hub for arbitration, including non-stop flights to major cities around the globe and world-class facilities. Nonetheless, India has seen remarkably little tangible progress toward arbitration reform, which is especially surprising given that it was one of the very early adopters of the Model Law and only the seventh nation-state to ratify the New York Convention. Even Indian parties and counsel appear uniformly reluctant to choose India as a seat for international commercial arbitration, and despite a positive shift in judicial attitudes since 2012 India still seems unable to shake its reputation as an ‘arbitration-unfriendly’ jurisdiction.2 Singapore and Hong Kong have meanwhile catapulted to the top of Asia’s international commercial arbitration scene in much less time, which begs the question of why India has trailed behind. This chapter will attempt to answer this question and suggest some ways forward. To outsiders, the biggest challenge for arbitration reform in India has been the courts. For many decades the courts have been perceived as undermining Model Law values such as party autonomy by intervening too much in the arbitral process—for example, by setting aside or refusing to enforce arbitral awards for reasons going to the merits. Until recently, the courts have also taken the position that it was not necessary to interpret India’s arbitration statute in light of the Model Law on which it was based, such as by consulting

1 

Constitution of India, 1949, s 348. Gary B Born, International Commercial Arbitration 2nd edn (Alpen aan den Rijn, Kluwer Law International, 2014); Christopher Gardner, ‘Arbitration in India: The Challenges of the 21st Century’ (September 2011) 16(2) Arbitration News 51–53. 2 

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international commentary or the judgments of other national courts.3 This somewhat heterodox interpretative approach produced several surprising decisions that, for a time, put India squarely at odds with the international arbitration community. To insiders, the problems run deeper. India is unique in that greater than 90 per cent of all arbitrations are estimated to be administered ad hoc. As a result, there has been almost no meaningful institutional oversight or promotion of the arbitral process. More so than individual arbitrators, institutions are better placed to stay informed about and adapt to new developments, international best practices and end-user feedback. They promulgate uniform rules that help ensure predictability, transparency and consistent treatment. Many of these quality control and standard-setting benefits are lost in a system dominated by uncoordinated actors. India also suffers from backlogged courts, a weak rule of law environment and the lack of a professional cadre of arbitrators and advocates who specialise in arbitration. Given these realities, the concern is that no end of top-down reforms in the form of legislation or decisions from the apex court will produce meaningful and sustainable reform. Attention must also be paid, in other words, to laying foundations for change from the bottom-up. Happily, recent developments have cast a ray of hope on an otherwise stymied reform ­trajectory. The seminal 2012 case of Bharat Aluminium Co (‘BALCO’) v Kaiser Aluminium Technological Services (2012) 9 SCC 552 and subsequent decisions have signalled a sea-change in judicial attitudes toward arbitration. The year 2015 saw comprehensive reforms to India’s 20-year old arbitration act. And despite the prevailing view internationally that a seat in India is to be avoided at all costs, among domestic industry clients there appears to be a growing optimism about the future of arbitration in India.4 It remains to be seen, however, whether India will fulfil the ambition harboured by many that it should develop into a global arbitration hub. A word on terminology. The terms ‘domestic arbitration’ and ‘foreign arbitration’ will be used primarily in a geographic sense, to refer to arbitrations seated within and outside India, respectively. By contrast, the term international commercial arbitration (ICA) will be used to mean a commercial arbitration involving at least one non-Indian party, and the term ‘non-international arbitration’ to mean any arbitration in which all parties are Indian.5 It is therefore possible for an ICA to be a domestic arbitration and for a noninternational arbitration to be a foreign one.

2. Background If there has been one enduring theme in Indian arbitration law reform until recently, it can be summed up in the expression, ‘two steps forward, one step backward.’ That is, the legislature has tended to introduce modern, international developments such as the Model Law framework only to be undermined by an activist judiciary with the common

3 

Konkan Railway Corporation Ltd & Anor v Rani Construction Pvt (2002) 2 SCC 388, [9]. Waterhouse Coopers India, ‘Corporate Attitudes & Practices Toward Arbitration in India’, 2013, 19, available online: www.pwc.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-towards-arbitration-in-india.pdf. It noted that 82 per cent of companies experienced with Indian arbitration indicated a willingness to continue using it. 5  UNCITRAL Secretariat, Explanatory Note on the Model Law on International Commercial Arbitration, 1985, paras 9 and 14, which distinguishes among domestic, foreign, international and non-international arbitration. 4  Price

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law power not just to interpret but also to make law. The other distinctive feature of the Indian arbitration landscape that will be examined below is the conspicuous absence of any influential institutional players.

2.1.  Legislative and Regulatory Framework 2.1.1.  National Legislation After the fall of the Soviet Union and the liberalisation of India’s economy in the early 1990s, the Government of India sought to promote international trade and inflows of foreign direct investment. To do so, it needed to allay concerns about India’s ability to provide a business-friendly environment that respected the rule of law, including access to efficient and fair procedures for the resolution of commercial disputes. Arbitration reform thereby became a top priority in the push to open up the Indian market, resulting in the passage of the Arbitration & Conciliation Act (ACA) in 1996. As more recently amended in 2015, the ACA remains the governing legislation for commercial arbitration in India. One of the chief purposes of the ACA was to ‘minimise the supervisory role of the courts in the arbitral process,’6 which is consistent with the spirit of the Model Law to strike a balance between party autonomy and court supervision.7 Another purpose was to create a comprehensive statutory framework for ‘domestic arbitration, international commercial arbitration, [and] enforcement of foreign arbitral awards.’8 Part I of the ACA (sections 1 to 43) is based on the 1985 version of the Model Law but applies to all domestic arbitrations whether or not they are ICAs. Recall that the Model Law was originally intended to promote uniformity and best practices only for ICA, leaving states free to regulate non-commercial arbitrations and arbitrations between their own nationals in the way they saw fit.9 By contrast, Part I’s broader scope of application reflects a ‘single track’ approach that extends the Model Law’s respect for party autonomy to all arbitrations taking place in India—that is, even to those without a cross-border aspect, where India’s regulatory interests are arguably greater.10 This has been a significant source of tension within Indian arbitration law especially as to issues of enforcement, and may explain why some courts have intervened in ways not expressly authorised by the ACA.11 6  Law Commission of India, 246th Report on the Amendments to the Arbitration and Conciliation Act of 1996, 2014, 4; Arbitration & Conciliation Act 1996 (‘ACA’), s 5 (prohibiting courts from interfering with the arbitration process ‘except where so provided’). 7  UNCITRAL Secretariat (n 5) paras 14–16. 8  ACA, Preamble. Prior to 1996, domestic and foreign arbitrations were governed by separate acts: The Arbitration Act, 1940, which applied only to domestic arbitration and envisioned a substantial role for the courts in regulating the arbitration process; the Arbitration (Protocol and Convention) Act 1937, which applied to Geneva Convention awards; and the Foreign Awards (Recognition and Enforcement) Act 1961, which was passed to govern awards under the New York Convention. 9  UNCITRAL Model Law on International Commercial Arbitration 1985, s 1(3). 10  This is not inconsistent with the Model Law’s approach. UNCITRAL Secretariat (n 5) 17. One important exception to Part I’s dual track approach is s 28, which provides that with respect to non-international arbitration, the arbitrator(s) ‘shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India.’ With respect to ICA, however, Part I follows the corresponding Model Law provision that allows parties to choose the substantive law governing their dispute. 11  Fali S Nariman, ‘National Report for India (2015)’ in Jan Paulsson and Lise Bosman (eds), ICCA International Handbook on Commercial Arbitration: India (Alphen aan den Rijn, Kluwer Law International, 2015, last updated February 2017) 53–54.

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Part II (sections 44 to 60) governs the recognition and enforcement of foreign arbitral awards. Chapter 1 implements the New York Convention and Chapter 2 implements the Geneva Convention. India ratified the former in 1960; however, it extends recognition and enforcement only to awards made in a reciprocating territory listed in the Central Government’s Official Gazette.12 Significantly, only 48 of the 156 contracting states (including Australia, China, Hong Kong, Singapore, the UK and the US) have so far been gazetted.13 Notable exceptions include Canada, New Zealand and the UAE.

2.1.2.  Other Sources of Arbitration Law The Central Government has on occasion established statutory arbitration schemes that are not governed by the ACA. For example, the Industrial Disputes Act 1947 provides for voluntary reference of industrial disputes to arbitration. As amended, the Aircraft Act 1934 likewise establishes a mandatory arbitration scheme for certain private actions against the Central Government that are not regulated by the ACA. Other Acts of Parliament, such as the Atomic Energy Act 1962, provide special procedures for voluntary arbitration that are inconsistent with, but do not expressly displace, the ACA. The Indian Constitution gives state legislatures concurrent law-making power in the field of arbitration, and a number of states have regulated the use of arbitration in specific contexts such as rent-control and housing matters. Jammu and Kashmir is currently the only state with a standalone arbitration act.14 Finally, the judiciary has played an important role defining the limits of arbitrability, and thus of arbitration law. The ACA provides for awards to be refused enforcement if their subject matter is not ‘capable of settlement by arbitration’, yet it fails to define what those subject matters are.15 Courts have filled this gap by declaring certain matters such as antitrust, welfare, divorce, guardianship, criminal offenses, insolvency and winding up, probate, and intellectual property infringement to be non-arbitrable.16

2.2.  Institutional Framework One of the most striking features of the Indian arbitration landscape is that it is almost entirely ad hoc rather than institutional. Although reliable empirical data on the matter are lacking, by several accounts upwards of 90 per cent of all arbitrations taking place in India are ad hoc.17 This is in contrast to the prevailing practice internationally and is in tension with the Model Law approach of promoting uniform expectations across jurisdictions. 12  ACA, s 44(b). There do not, however, appear to be any reported cases in which enforcement was refused on this ground. 13  See Nishith Desai Associates, ‘Enforcement of Arbitral Awards’, May 2016, 4, fn 4 available online: www. nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf. 14  Jammu and Kashmir Conciliation and Arbitration Act 1997. The ACA displaces the Jammu and Kashmir Act only with respect to ICA, whether foreign or domestic. 15  ACA, ss 34(2)(b)(i), 48(2)(a). 16 See A Ayyasamy v A Paramasivam & Ors (2016) 10 SCC 386. I thank Ishana Tripathi for bringing this case to my attention. 17  Naren Karunakaran, ‘How India Inc. Is Coping with Ineffective Ad-Hoc Arbitration and Paving Way for a New Trend’ The Economic Times (9 September 2015, available online: http://economictimes.indiatimes.com/news/ company/corporate-trends/how-india-inc-is-coping-with-ineffective-ad-hoc-arbitration-and-paving-way-for-

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2.2.1.  Ad Hoc Arbitration in India The prevalence of ad hoc arbitration has been perceived as a major roadblock to modernisation and reform, for several reasons. Institutions provide a number of distinct advantages that are lost in an ad hoc system. First, by providing an administrative buffer between neutrals and end-users, they are better equipped to manage cases, control fees and costs, police conflicts of interest, and hold arbitrators accountable for misconduct. Second, the vast majority of ad hoc arbitrators are former judges who, accustomed to technical rules of procedure and the slow pace of litigation in India, may be ill-equipped to serve parties who wish to realise the benefits traditionally ascribed to arbitration.18 Third, ad hoc arbitrators typically charge on a per sitting basis, which encourages liberal adjournments and a practice of holding multiple short hearings rather than reserving blocks of day-long sessions.19 As a result, expenses can quickly spiral out of control. There are reports of cases in which the remuneration of the arbitrators alone (not including costs and attorneys’ fees) exceeded the amount in controversy.20 By one estimate, retired judges charge anywhere from Rs 10 million (approximately US$ 1,500) to Rs 50 million (approximately USD $7,500) per day excluding expenses.21 In high-stakes cases it is not uncommon for such expenses to include first class travel and hearings in five star hotels.22 By contrast, institutions typically set limits on arbitrator remuneration and administrative costs, and provide hearing facilities at a modest rate. These and other shortcomings of the ad hoc system have increasingly led to calls for institutional reform.

2.2.2.  Indian Arbitration Institutions Although the institutional arbitration market in India remains miniscule, there appears to be no shortage of provider institutions, some private and others affiliated with High Courts.23 One of the oldest and most widely used private providers is the Indian Council on Arbitration, which has been in existence for five decades. Others include the FCCI Arbitration and Conciliation Tribunal (FACT) established in 1952, the Nani Palkhivala Arbitration Centre established in 2005, and the Indian Merchants Chamber Suresh Kotak International Arbitration Centre established in 2014. Arbitral institutions affiliated with High Courts include the Delhi International Arbitration Centre (DAC) established in 2009 and the

a-new-trend/articleshow/47996642.cms; Ajay Thomas, ‘LCIA India: Strengthening the Institutional Arbitration Movement in the World’s Largest Democracy’ IBA Arbitration News 18, no 1 (2013), 139, available online: www. dittmar.fi/sites/default/files/publications/IBA_Arbitration_News_February_2013_.pdf. 18 Promod Nair, ‘A Sixty Month Makeover: Reinventing India as an ‘Arbitration Friendly’ Jurisdiction’, Kluwer Arbitration Blog, 10 May 2011, available online: http://kluwerarbitrationblog.com/2011/05/10/ reinventing-india-as-an-arbitration-friendly-jurisdiction/. 19  Thana Singh v Central Bureau of Narcotics (2013) 2 SCC 590 [5]; Parliament of India, Lok Sabha Debates Vol XIV, Sixth Session, 2015/1937 (Saka), No 16, 156. 20 Ashok Kapur, ‘Alternative or Merely Alternate’ The Statesman (14 January 2016) available online: www. thestatesman.com/law/alternative-or-merely-alternate-116365.html; Union of India v MS Singh Builders (2009) 4 SCC 523, [11]. 21  Karunakaran (n 17). 22  Parliament of India (n 19); KN Bhat, ‘Ad-Hoc Arbitration or Institutional Arbitration—Which Is Better for India?’ (2009) 43(4) Indian Council of Arbitration Quarterly 6. 23  The Srikrishna Committee estimates that there are over 30 such institutions: see Justice Srikrishna Committee (2017), Working Paper on Institutional Arbitration Reforms in India, 8, available online: www.icaindia.co.in/ HLC-Working-Paper-on-Institutional-Arbitration-Reforms.pdf.

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Arbitration and Conciliation Centre—Bengaluru established in 2012. Finally, examples of public-private partnerships include the International Centre for Alternative Dispute Resolution (ICADR), founded as an autonomous organisation in 1995 by the Ministry of Law and Justice in Delhi, and the new Mumbai Centre for International Arbitration (MCIA), launched in October 2016 as a joint initiative between the Government of Maharashtra and various business and legal interests. There is currently no centralised legislation regulating arbitral institutions in India. As a result, provider institutions are self-regulating. Most have a governing body, have promulgated their own arbitration rules, and maintain a panel of arbitrators. A minimum of 15 years’ practical experience is a typical prerequisite to admission on a panel and, unlike the practice at established international institutions such as the London Court of International Arbitration (LCIA) or the Singapore International Arbitration Centre (SIAC), parties are typically not free to choose arbitrators from outside the panel.24 Importantly, arbitral institutions also publish fee schedules and cap arbitrators’ fees according to the value of the claim or counterclaim, thereby promoting transparency and minimising incentives for adjournments and delays. Although caseload statistics are difficult to substantiate and are not always complete, Indian arbitral institutions appear to be handling a respectable number of matters. For instance, the DAC reports having received more than 900 cases between 2009 and 2016, or approximately 130 cases per year.25 By comparison, in 2012 (roughly the midpoint of this period) the Vienna International Arbitration Centre and SIAC reported a caseload of 70 and 235, respectively.26 The number of case filings may also be growing at a modest rate. For example, at the Indian Council on Arbitration there were 49 new filings (five of which were international) in 2011–12; by 2014–15, there were 63 new filings (12 of which were international).27

2.3.  Judicial Framework India has long been considered an arbitration-unfriendly jurisdiction, in large part due to the perception of excessive judicial intervention. But is this perception entirely accurate? In some respects it is not, since courts have sometimes taken a surprisingly laissez-faire approach—for example, by permitting arbitrators with clear conflicts of interest to serve in government contract cases, as described in section 3.3.2.2 below. 24  ICA Rules of Arbitration & Conciliation, Rules 10 and 12 (allowing only Chairperson of Arbitration Committee to appoint arbitrator from outside the panel). 25  Delhi International Arbitration Centre, ‘About Us’, available online: www.dacdelhi.org/topics.aspx?mid=1. By contrast, the Chief Justice of India reported in 2016 that ICADR had handled only 20 arbitrations over a period of 20 years: Harisankar K Sathyapalan and Madhu Sivaraman, ‘A Lot Is Still to Be Done For India to Fulfil Its International Arbitration Ambitions’ The Wire (2 November 2016) available online: https://thewire.in/77002/ international-arbitration-india/. 26  Markus Altenkirch and Jan Frohloff, ‘Global Arbitration Cases Still Rise—Arbitral Institutions’ Caseload Statistics for 2015’, Global Arbitration News, 25 August 2016, available online: https://globalarbitrationnews.com/ global-arbitration-cases-still-rise-arbitral-institutions-caseload-statistics-2015. By comparison, the caseloads of LCIA and ICC were 277 and 759, respectively. 27 Indian Council of Arbitration, Annual Report 2011–2012, 12–13, available online: http://icaindia.co.in/ ica-annual.pdf; Indian Council of Arbitration, Annual Report 2014–15, 18, available online: www.icaindia.co.in/ annual-report2015.pdf.

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There are at least two ways to assess the scope of judicial interference. One is to look at objective criteria such as the rate at which courts enforce arbitral awards and agreements or the ease of prosecuting enforcement. Another is to look at whether courts interpret and apply arbitration law in ways that either enhance or diminish support for arbitration. To the extent the Indian courts have earned their reputation for interventionism, it appears to be less because of their enforcement record and more because they have interpreted the ACA in ways that tend to undermine Model Law values.

2.3.1.  Ease and Rate of Enforcement Anecdotal evidence suggests that the time required to enforce an award in India is substantial.28 There are published cases in which the enforcement proceedings took on the order of 10 years.29 The infamous White Industries Australia Ltd v Republic of India arbitration brought pursuant to the Australia-India BIT, for example, concerned an underlying action to enforce a commercial arbitration award that had been pending for nine years with no end in sight—a delay, moreover, that India defended as quite foreseeable given the well-known backlog in its national courts.30 And as of 2015, it was reported that one of the seven New York Convention enforcement actions still pending in the Indian courts originated as far back as 1983.31 Enforcement rates paint a more mixed picture. In a study of enforcement actions decided between 1996 and 2007, Sumeet Kachwaha found that of the 565 challenges in the High Courts, 94 (or 16.63 per cent) were granted, while of the 16 challenges in the Supreme Court, five (or 31.25 per cent) were granted. Of the 17 challenges to the enforcement of foreign awards in both the High Courts and the Supreme Court, only one (or 5.88 per cent) was granted.32 In both contexts, in other words, enforcement was granted far more often than it was denied, at a rate that is surprisingly comparable (or perhaps even more favourable) to the rate of enforcement in more developed arbitration jurisdictions such as the US.33 This suggests to Kachwaha, at least, that ‘Indian courts do restrain themselves from interfering with arbitral awards’ and that ‘India qualifies as an arbitration-friendly jurisdiction.’34

28 One expert ventures to guess that it takes approximately two to six years to enforce domestic awards and two to three years to enforce foreign awards: Sumeet Kachwaha, Arbitration Guide: India (New Delhi, IBA Arbitration Committee, June 2016) 24, available online: www.ibanet.org/Document/Default. aspx?DocumentUid=1CF8C452-D4C3-4043-90F6-6F39B1B628B2. 29  Phulchand Exports v OOO Patriot (2011) 10 SCC 300, [7], [9] (arbitration originally filed in 2000); Renusagar Power v General Electric (1993) Supp. 1 SCC 644, [16], [17] (arbitration originally filed in 1986). 30  White Industries Australia Ltd v Republic of India, UNCITRAL, Final Award, 30 November 2011 (J William Rowley, President; Charles N Brower, Christopher Lau), paras 4.3.9 and 10.4.12, available online: www.italaw.com/ sites/default/files/case-documents/ita0906.pdf. 31  United States Department of State, India Investment Climate Statement 2015, May 2015, 10, available online: www.state.gov/documents/organization/241807.pdf. 32  Sumeet Kachwaha, ‘Enforcement of Arbitration Awards in India’ (2008) 4(1) Asian International Arbitration Journal 73–74, 81. 33 Christopher A Whytock, ‘The Arbitration-Litigation Relationship in Transnational Dispute Resolution: Empirical Insights from the US Federal Courts’ (2009) 2 World Arbitration & Mediation Review 42 (finding that the ‘enforcement rate in published decisions [from US federal courts] since 1970 is less than 75 percent, and has decreased from approximately 83 percent in the 1990s to about 68% in the 2000s.’). 34  Kachwaha (n 32) 82. Here it may be asked whether enforcement rates vary depending on whether an Indian or foreign party seeks enforcement. Although there does not appear to be a definitive answer to this question, as to arbitration-related litigation generally Fali Nariman notes that foreign parties won more than half of the time in

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2.3.2.  Judicial Law-making As noted above, the Model Law affords great deference to party autonomy and strives to keep judicial intervention to a minimum. Yet in a common law jurisdiction such as India, wherein judges actually make law through the system of stare decisis, courts have the potential to vitiate these objectives. Three key examples of such judicial law-making are considered below. 2.3.2.1.  Appointment of Arbitrators Where the parties fail to agree on a sole arbitrator or the chairperson in an ad hoc arbitration, the ACA provides for the Chief Justice of the High Court (or a person designated by him) to make the appointment.35 This is largely an administrative function that simply requires the appointing judge to select a neutral decision-maker and honour any arbitrator qualifications stipulated by the parties.36 Nonetheless, in SBP & Co v Patel Engineering Ltd, a seven-member bench of the Supreme Court of India (SCI) held that the appointment of arbitrators was a judicial rather than an administrative function. This, in turn, would require the Chief Justice to make certain threshold determinations—for example, whether the court has jurisdiction to hear the application and whether there is a valid arbitration agreement between the parties.37 Patel Engineering has been blamed for creating unnecessary delays at the appointment stage.38 More importantly, it effectively undermines the kompetenz-kompetenz doctrine enshrined in section 16 of the ACA because once the Chief Justice passes on the validity of the arbitration agreement the arbitrators are no longer free to do so.39 Finally, as the Law Commission of India (LCI) pointed out, if the power of appointment under section 11 is a judicial power, the same must be true of the power to refer a case to arbitration since the scope and nature of judicial intervention should not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding before a judicial authority in the face of such an arbitration agreement.40

The logical implication of Patel Engineering is therefore that courts should engage in a similar wide-ranging inquiry when they are asked to refer a case to arbitration under section 8.

reported High Court and SCI arbitration cases over a roughly 60-year period: Fali S Nariman, ‘Ten Steps to Salvage Arbitration in India: The First LCIA-India Arbitration Lecture’ (2011) 27(2) Arbitration International 118. This leads Nariman to conclude that there is no perceptible anti-foreigner bias. 35 

In ICA cases, the Chief Justice of the SCI makes the appointment: ACA, s 11(9). ACA, s 11(8). 37  SBP & Co v Patel Engineering & Anor (2005) 8 SCC 618, [38]. 38  By some estimates the appointment process alone can take anywhere from six months to a year or more: Aditya Kurian, ‘Arbitration Reform In India: A Look At The Hong Kong Model’, Kluwer Arbitration Blog, 28 July 2015, available online: http://kluwerarbitrationblog.com/2015/07/28/arbitration-reform-in-india-a-look-at-thehong-kong-model/. 39  Nakul Dewan, ‘Arbitration in India: An Unenjoyable Litigating Jamboree!’ (2007) 3(1) Asian International Arbitration Journal 111. 40  Law Commission of India (n 6) 20. There are no reported cases to this effect, however. 36 

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2.3.2.2.  The Public Policy Defence In keeping with the Model Law and the New York Convention, the ACA provides for arbitral awards to be set aside or refused enforcement if they are in conflict with the ‘public policy of India.’41 The trouble is that Indian courts have interpreted this broadly, to include mere errors of law. Thus, in Oil & Natural Gas Corp v SAW Pipes, the SCI held that a domestic award violates Indian public policy for purposes of section 34 if it is ‘contrary to (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal.’42 As to the fourth head, the Court noted that mere errors of law are insufficient; the ‘[i]llegality must go to the root of the matter and if the illegality is of a trivial nature it cannot be held that the award is against public policy.’43 Nonetheless, in applying this ostensibly deferential standard to the case at hand, the Court effectively conducted something more akin to ‘second look’ review.44 The case has accordingly attracted its fair share of criticism both within and outside of India.45 In Phulchand Exports Ltd v OOO Patriot, the SCI went one step further by holding that foreign awards, too, would be refused enforcement if they were ‘patently illegal’ under Indian law.46 Happily, recent reforms discussed in section 3.3.1 below have since clarified that SAW Pipes’s broad interpretation of public policy applies at most to domestic awards between Indian parties, not to ICA or foreign awards. 2.3.2.3. The Bhatia Problem Judicial intervention at the reference or enforcement stages of the type discussed above, while problematic, is nonetheless common across many jurisdictions. But in the landmark case of Bhatia International v Bulk Trading SA (2002) 4 SCC 105 the SCI opened the door to an entirely new and distinctive type of court interference that went a long way toward cementing India’s arbitration-unfriendly reputation. In Bhatia, the claimant in an ICC arbitration seated in Paris sought an injunction from the Indian courts in order to prevent the respondent from disposing of business assets 41 

ACA, ss 34, 48. Oil & Natural Gas Corp v SAW Pipes (2005) 5 SCC 705, [33]. 43  ibid, [34]. 44  For example, it held that the award was contrary to the Indian Contract Act because it required ONGC to prove actual loss despite the existence of a liquidated damages clause, and contrary to the parties’ contract because it awarded interest on ‘disputed claim[s].’ See ibid, [73], [79]. 45  Kachwaha (n 32). Some have attempted to defend SAW Pipes on the ground that it is the natural right of Indian courts to set aside domestic awards that are contrary to Indian law: Sidharth Sharma, ‘Public Policy Under the Indian Arbitration Act in Defence of the Indian Supreme Court’s Judgment in ONGC v. Saw Pipes’ (2009) 26(1) Journal of International Arbitration 133–47; Amelia C Rendeiro, ‘Indian Arbitration and “Public Policy”’ (February 2011) 89(3) Texas Law Review 699–728. The defence may be sound as to a case like SAW Pipes, which involved a dispute between two Indian nationals. In such cases, ACA s 28 specifically provides that the tribunal ‘shall decide the dispute … in accordance with the substantive law for the time being in force in India.’ The problem is that the SAW Pipes judgment is not limited on its face to such disputes and applies equally to domestic ICA awards. Thus, in McDermott International v Burn Standard Company Ltd & Ors (2006) 11 SCC 181, the SCI applied the logic of SAW Pipes to just such an award. 46  Phulchand (n 29) [13]. Notably, the SCI considered whether certain provisions in the parties’ contract were void or unconscionable under the Indian Contract Act, thereby implying that garden variety legal error would be sufficient to refuse enforcement even of a foreign arbitral award. But it ultimately enforced the award finding no patent illegality: see Phulchand (n 29) [29], [31]. 42 

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located in India. The problem was that there was no basis for the injunction since Part II of the ACA, which governs foreign arbitrations, does not provide for interim relief; the only provision for interim relief is contained in Part I (relating to domestic arbitration).47 The SCI nonetheless awarded the relief requested. This result is not surprising in itself since interim relief for foreign-seated arbitrations is contemplated by the Model Law48 and granting the requested injunction in Bhatia arguably reflected a pro-arbitration stance. What is surprising was Bhatia’s ratio decidendi. Taking an excessively literal approach that flew in the face of accepted international arbitration norms, Bhatia held that Part I was not in fact limited to domestic arbitrations: unless the parties expressly or impliedly indicated otherwise, it applied in its entirety to foreign arbitrations as well. In so doing, Bhatia essentially collapsed the distinction between domestic and foreign arbitrations, thereby allowing Indian courts to intervene to the same degree in both.49 This created a number of problems. First, because Part I empowers Indian courts to set aside domestic arbitration awards, the implication of Bhatia was that Indian courts could also set aside foreign awards. The SCI took this implication to its logical conclusion in Venture Global v Satyam Computers Services Ltd (2008) 4 SCC 190. There, an Indian company initiated an LCIA arbitration in London against a US company. The arbitrator found in favour of the Indian company, which promptly sought enforcement and recognition of the award in the US. Meanwhile, the US company filed suit in an Indian district court seeking to set aside the award under Part I of the ACA. In any other jurisdiction this would have been an extraordinary request given that international law reserves the power to set aside an arbitral award to courts of the country in which the award was issued; all other courts only have the power to refuse recognition.50 But in view of Bhatia, the SCI was compelled to conclude that an award issued in London could be set aside in India. Second, Bhatia made it possible for Indian courts to appoint arbitrators even in foreignseated arbitrations—a prerogative typically reserved under international law to courts of the seat. In two subsequent cases, the SCI held that even where the parties arguably contemplated a foreign seat, Indian courts could step in to appoint an arbitrator unless the agreement expressly or impliedly excluded Part I.51 The mere fact that the parties had selected foreign law to govern the arbitration agreement was deemed insufficient for this purpose.

3. Reform Recent years have seen a series of forward-looking judicial and legislative reforms. For example, the SCI took a dramatic turn in 2012 when it decided Bharat Aluminium 47 

ACA, s 2(2). Model Law, ss 1(2), 9. Notably, the ACA did not follow the Model Law on this point. Dru Miller, ‘Indian Court Expands Its Jurisdiction over Foreign Arbitral Panels’ (2014) 6 Yearbook on Arbitration and Mediation 328–36. 50  New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards, 1958, Art V(1)(e); Model Law, s 1(2). The distinction is not trivial: an award once set aside is rendered unenforceable in any jurisdiction. By contrast, when an award that is refused recognition in one jurisdiction, it does not preclude the possibility of enforcement and recognition in others. 51  Indtel Technical Services v Atkins Rail Ltd (2008) 10 SCC 308, [28]; Citation Infowares Limited v Equinox Corporation (2009) 7 SCC 220, [20]. 48  49 

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Co (‘BALCO’) v Kaiser Aluminium Technological Services.52 BALCO reversed the problem created by Bhatia and has been widely hailed as a harbinger of increasingly pro-arbitration judicial attitudes. BALCO was closely followed by legislative amendments to the ACA, which helped fill numerous gaps and undo some problematic judicial law-making. Although these changes are not without their critics, they have generated a renewed sense of optimism about India’s potential to evolve into an international arbitration hub.

3.1.  Judicial Initiatives The following sections provide a brief sketch of the veritable sea-change in the wake of BALCO and subsequent pro-arbitration judicial decisions.

3.1.1.  Cutting Back Judicial Intervention in Foreign Arbitrations: The BALCO Judgment BALCO involved a contract between an Indian and a foreign party for the supply and installation of a computer system. Although the contract was governed by Indian law, the seat of the arbitration was London and the arbitration agreement was governed by English law. After the tribunal issued two awards, the Indian party filed applications in the Indian courts to set them aside, relying on the SCI’s controversial judgments in Bhatia and Venture Global. On appeal, a five-judge bench of the SCI was specially constituted to reconsider Bhatia and its progeny. It held (correctly) that foreign awards could be set aside only by courts of the country ‘in which, or under the law of which, that award was made’,53 thereby overruling Bhatia and Venture Global with prospective effect.54 BALCO is notable for several reasons. On the positive side, by holding that the various supervisory powers granted to the Indian courts under Part I do not apply to arbitrations seated abroad, it restored the clear distinction that international law draws between the treatment of foreign versus domestic arbitrations. It did so, moreover, by explicitly embracing the need to interpret the ACA in light of the Model Law and its associated international jurisprudence.55 Unlike earlier decisions such as Konkan Railway Corporation Ltd & Anor v Rani Construction Pvt, which saw no role for that jurisprudence,56 the decision in BALCO took pains to examine the Model Law’s travaux préparatoires, other international instruments such as the New York Convention, commentary from luminaries in the field such as Alan Redfern, and decisions of national courts.57 This, in turn, has helped allay the concerns of foreign parties who have long feared the Indian judiciary’s interventionism in the arbitration process, especially with regard to enforcing foreign arbitral awards against Indian parties.

52 

Bharat Aluminium Co (‘BALCO’) v Kaiser Aluminium Technological Services (2012) 9 SCC 552. ibid, [171]–[172]. 54  ibid, [239]–[241]. Arbitration agreements entered prior thereto are still governed by Bhatia. 55  ibid, [58]–[61]. (‘The aim and the objective of the Arbitration Act, 1996 is to give effect to the UNCITRAL Model Law.’). This led one commentator to claim that ‘BALCO has set the tone for the Model Law to be viewed as the sole driving force and the over-arching primer to the [ACA].’: Sujoy Chatterjee, ‘Judicial Import of the Model Law: How Far Is Too Far?’ (2015) 4(1) Indian Journal of Arbitration Law 23. 56  Konkan Railway Corporation Ltd & Anor v Rani Construction Pvt (2002) 2 SCC 388, [9]. 57  BALCO (n 52) [80]–[101]. BALCO did not explicitly overrule Konkan Railway, however. 53 

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3.1.2.  Further Developments: Public Policy and the Arbitrability of Fraud Claims The pro-arbitration trend set by BALCO has largely been continued in subsequent decisions on a range of subjects. For example, in Shri Lal Mahal v Progetto Grano Spa the SCI held that ‘public policy’ as a ground for refusing enforcement of foreign awards must be given a narrower meaning that excludes patent illegality or other error of Indian law.58 Shri Lal Mahal thus overruled Phulchand, which had extended patent illegality review (originally announced in SAW Pipes as a ground for setting aside domestic awards under section 34) to foreign awards. It remains to be seen whether Shri Lal Mahal’s forward-looking approach to the enforcement of foreign awards will endure or whether it is just another moment in India’s ‘two steps forward, one step backward’ reform dynamic.59 Another example has to do with the arbitrability of claims involving allegations of fraud, financial malpractice or collusion. Although courts have traditionally considered such claims to be non-arbitrable, in a series of recent decisions the SCI clarified that there is no per se bar to referring fraud claims in domestic or foreign arbitrations.60 In doing so the SCI emphasised the importance of following the ACA’s text—which does not expressly exclude fraud or other substantive claims from being arbitrated—and of limiting the scope of judicial arbitrability exceptions to matters that are truly ‘incapable of settlement by arbitration.’61 These decisions therefore reflect a decidedly more modern and expansive view of arbitration as the functional equivalent of courts of law, at least as to matters in personam.

3.2.  Other Factors: The Competitive Arbitration Market Despite the increasingly vocal criticism of ad hoc arbitration in India and the undeniable value-added promised by its institutional alternative, the market for arbitration services has (despite many good efforts) continued to cleave to a quasi-feudal model in which the retired judge qua arbitrator reigns more or less freely without any institutional oversight or support. What are the possible causes of this stagnation in the competitive arbitration market? One common explanation is the lack of an effective legal framework for encouraging the use of institutional arbitration. As many have noted, the ACA is ‘institutional arbitrationagnostic’62 in the sense that, although it contemplates the use of institutional arbitration 58 

Shri Lal Mahal v Progetto Grano Spa (2014) 2 SCC 433, [25]. There are some indications of the latter. In two subsequent decisions, the SCI took another expansive reading of the phrase ‘public policy’ that would appear to justify setting aside even foreign awards on the basis that they are arbitrary or capricious, contrary to natural justice, or contrary to the Wednesbury principle of reasonableness: ONGC v Western Geco Int’l Ltd (2014) 9 SCC 263, [35]–[39]; Associate Builders v Delhi Development Authority (2015) 3 SCC 49, [12]; see also Law Commission of India (2015), Supplementary to Report 246 on Amendments to Arbitration and Conciliation Act 1996, 18–19. 60  Swiss Timing Limited v Organizing Committee, Commonwealth Games 2010, Delhi (2014) 6 SCC 677; World Sport Group (Mauritius) v MSM Satellite Ltd (2014) 11 SCC 639; Ayyasamy (n 16). 61  In the context of fraud, such matters would include ‘very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced,’ or ‘those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate.’: see Ayyasamy (n 16). 62  Law Commission of India (n 6) 6. 59 

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it stops short of explicitly promoting it. For example, unlike the Singapore International Arbitration Act, the ACA did not (until recently, as explained below) permit delegating to private institutions the power to appoint arbitrators under section 11; only judges could make such an appointment.63 It stands to reason that when parties cannot agree on an arbitrator, judges are apt to make an appointment from the ranks of people much like themselves—former judges who, as it happens, tend overwhelmingly to arbitrate without any institutional affiliation. Another explanation may be that companies surveyed seem to prefer ad hoc over institutional arbitration regardless of their experience level with ­arbitration.64 Finally, some blame a widespread misconception that ad hoc arbitration is more economical than its institutional alternative. Whatever the cause for the persistence of ad hoc arbitration, the end result appears to be that even when Indian parties prefer institutional administration, they choose to take their business abroad.65 According to a 2011 survey conducted by Ernst & Young, upwards of 50 per cent of respondents indicated a willingness to arbitrate before foreign institutions such as SIAC or LCIA London, while fewer than 30 per cent indicated a willingness to arbitrate at home-grown institutions such as the Indian Council on Arbitration.66 Available empirical data appear to bear this out. For example, between 2001 and 2012 SIAC saw a tenfold increase in filings involving Indian parties, with the result that in 2013 Indians outnumbered any other nationality in new SIAC filings (85 out of 259).67 Although cases submitted to SIAC or LCIA do not need to take place (or even be seated) outside India, at minimum these trends do not bode well for the development of a robust Indian arbitration services industry. Seeking to capitalise on this perceived turn to foreign providers, several international arbitration institutions have attempted more aggressive inroads into the Indian market. For example, SIAC opened a liaison office in Mumbai in 2013 and more recently announced the opening of another office in the Gujarat International Finance Tec-City.68 These offices are designed to develop connections with local businesses and to raise awareness about arbitration services offered through SIAC’s headquarters in Singapore rather than to administer arbitrations in India. In 2009 LCIA went one step further by establishing an Indian subsidiary, LCIA India, ‘[with] the idea of bringing London quality to Indian

63  Singapore International Arbitration Act 1994, s 8(2). As explained in s 2.3.2.1 above, as the appointment power has been construed by the SCI to be a judicial rather than an administrative power, the Chief Justice is precluded from delegating it to private institutions. 64  Price Waterhouse Coopers India (n 4) 12. 65  This is especially so for ICA. See Karunakaran (n 17). 66  Ernst & Young, Changing Face of Arbitration in India: A Study by Fraud Investigation & Dispute Services, 2011, 9. The foreword, available online at: www.ey.com/in/en/services/assurance/fraud-investigation---disputeservices/fids---changing-face-of-arbitration-in-india, states that the respondents (sample size n = 68) included ‘general counsels at large companies, attorneys of various organizations in India, and senior partners of domestic and international law firms.’ Of the foreign institutions other than SIAC and LCIA London, HKIAC was favoured by eight per cent followed by the Permanent Court of Arbitration in The Hague, by six per cent. Of the domestic institutions other than ICA, DAC was favoured by 11 per cent and ICADR by nine per cent. 34 per cent of the respondents indicated a willingness to use LCIA India, a now-defunct domestic subsidiary of a foreign institutional provider: see ibid, 9. 67 Singapore International Arbitration Centre, ‘SIAC Mumbai Office’, available online: www.siac.org. sg/2014-11-03-13-33-43/about-us/siac-mumbai-office. 68 Singapore International Arbitration Centre, ‘SIAC Signs Memorandum of Agreement with GIFT’, 3 June 2016, available online: www.siac.org.sg/113-resources/press-releases/press-release-2016/486-siac-signsmemorandum-of-agreement-with-gift.

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parties at Indian rates.’69 Through its office in Delhi, LCIA India administered arbitrations, established a panel of arbitrators, and promulgated special LCIA India Rules that adapted the LCIA Rules to local laws and practice. The Ernst & Young survey reported that users preferred LCIA India over all other Indian arbitral institutions.70 But by May 2016 LCIA India had shuttered, thereby dashing the hopes of those who saw it as a harbinger of change in India’s largely ad hoc arbitration market.71 Setting aside the institutional landscape, what does the competitive market for individual arbitrators look like? Although retired judges have a near monopoly, nothing prohibits lawyers and non-lawyers from also serving as an arbitrator. For example, there are no official barriers to entry such as licensure (including admission to the bar) or other qualifications or training (including a law degree). Advocates and industry experts make up a respectable portion of many private institutional arbitration panels. Of the 258 arbitrators on the DAC’s panel as of 2016, for instance, only 132 (or 51 per cent) are former judges.72 Nor do there appear to be any restrictions on foreigners serving as arbitrators in India, other than a requirement of a limited time work or business visa.73

3.3.  Legislative and Regulatory Initiatives Although the ACA was well intentioned and widely hailed as ushering in a new, proarbitration legal regime, dissatisfaction with the practical operation of the Act seemed to surface almost immediately.74 In 2010 the Ministry of Law and Justice tasked the LCI with studying new proposals for amending the ACA, resulting in the LCI’s 246th Report in 2014. On 1 January 2016, Parliament passed the Arbitration and Conciliation (Amendment) Act of 2015 (2015 Amendment), which makes several major changes that fall into two broad

69  Prachi Shrivastava, ‘LCIA Yet to Bag 10th Case as High-Powered Hiranandani Arbitration Resolved with Cherie Blair, AP Shah, Karanjawala’ Legally India (8 August 2013) available online: www.legallyindia.com/ litigation-arbitration-disputes/3-year-old-lcia-still-to-get-its-10th-dispute-resolves-hiranandani-feud-withkaranjawala-pepper-hamilton-20130808-3898. In a similar vein, in 2007 the Law Ministry of India concluded a ‘Host Country Agreement’ with the Permanent Court of Arbitration in The Hague. But as of 2015, a PCA India office has not yet materialised: see United States Department of State (n 31) 10. 70  Ernst & Young (n 66) 9. 71  The official explanation was that, ‘after six years, it has become apparent that Indian parties are equally content to continue using the LCIA Rules and there are insufficient adopters of LCIA India clauses to justify a continuation of the LCIA India Rules as a separate offering. This situation is not expected to change in the near term.’: Jackie van Haersolte-van Hof, ‘LCIA Adopts a Changed Approach to Indian Arbitration Market’ LCIA India (15 January 2016) available online: www.lcia.org//News/lcia-adopts-a-changed-approach-to-indian-arbitrationmarket.aspx. 72  Delhi High Court Arbitration Centre, ‘DAC Panel of Arbitrators’, available online: www.dacdelhi.org/topics. aspx?mid=20. The picture is somewhat different at institutions affiliated with the High Courts. For example, of the 112 arbitrators on the Arbitration & Conciliation Centre Bengaluru’s panel, 97 (or 87 per cent) are former judges: Arbitration & Conciliation Centre Bengaluru, ‘Panel of Arbitrators and Conciliators’, available online: www.arbitrationcentreblr.org/Panel_of_%20Arbitrators.html. 73  The ACA provides that ‘[a] person of any nationality may be an arbitrator’: s 11(1), and most Indian arbitral institutions allow experienced foreigners to serve on their panels. 74  D Sengupta, ‘International Commercial Arbitration in India: Issues & Concerns’ (2012) 48 ICA Arbitration Quarterly 18–22. Within five years of its enactment, the Government asked the LCI to undertake a comprehensive review of the ACA and propose amendments to address perceived problems. These efforts eventually resulted in an Arbitration and Conciliation Amendment Bill that was introduced in Parliament in 2003. The Bill was ultimately withdrawn in order to permit further study of the issues.

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areas outlined below.75 Notably, the 2015 Amendment does not appear to have been much influenced by the 2006 Revisions to the Model Law.76

3.3.1.  Reducing Judicial Intervention, Increasing Judicial Support The 2015 Amendment reduces both the scope and opportunity for judicial intervention in several ways. First, it limits judicial intervention at two key stages: the reference to arbitration under section 8 and the appointment of arbitrators under section 11. In part due to decisions such as Patel Engineering, courts were accustomed to conducting a plenary inquiry into the existence and validity of arbitration agreements prior to granting relief under sections 8 or 11. The 2015 Amendment now precludes courts from doing so unless they find that ‘prima facie no arbitration agreement exists.’77 It thereby reaffirms the principle of kompetenz-kompetenz by reserving to the arbitrators the power to make a conclusive determination on these issues. Second, the 2015 Amendment fixes a high bar for challenging ICA awards as contrary to public policy. Revised section 34 now contains an Explanation to the effect that a domestic ICA award violates the public policy of India only if: (i) the award was ‘induced or affected by fraud or corruption’; (ii) the award was ‘in contravention with [sic] the fundamental policy of Indian law’ (a standard intended not to ‘entail a review on the merits of the dispute’); or (iii) was ‘in conflict with the most basic notions of morality or justice.’78 Patent illegality has been excluded from this definition. The same Explanation has also been inserted into section 48, thereby harmonising the interpretation of public policy for both setting aside domestic ICA awards and refusing enforcement of foreign awards.79 At the same time, the 2015 Amendment gives courts more leeway to set aside domestic awards in arbitrations between two Indian nationals. Such awards are still subject to the additional head of patent illegality from SAW Pipes.80 Third, the 2015 Amendment strengthens the autonomy of the arbitral process by requiring parties to seek interim relief from the tribunal rather than the courts once the arbitration has been initiated and by giving arbitrators the same power as their judicial counterparts to award and enforce interim relief.81 75  The 2015 Amendment applies only to arbitrations commenced after 23 October 2015 unless otherwise agreed by the parties. 76  Of the material revisions introduced by UNCITRAL in 2006, only those relating to interim relief by arbitrators were explicitly considered by the LCI in drafting the 2015 Amendment bill. Two other significant revisions to the Model Law did not make it into the 2015 Amendment. The first provides for the Model Law to be interpreted in light of its ‘international origin and to the need to promote uniformity in its application.’: UNCITRAL Model Law s 2A. The second significantly liberalises the writing requirement for arbitration agreements, in large part based on feedback from practitioners about changing international contracting practices and technological developments: Model Law, s 7. Nevertheless, in a nod to the increasing use of technology the 2015 Amendment recognises that an arbitration agreement may be contained in a ‘communication through electronic means’: Arbitration and Conciliation (Amendment) Act 2015 (‘2015 Amendment’), s 3. 77  2015 Amendment, ss 4, 6. 78  ibid, s 18. The award may also be set aside if it was in violation of s 75 or 81 regarding the nondisclosure and inadmissibility of matters relating to conciliation proceedings. 79  ibid, s 22. 80  ibid, s 18. 81  ibid, ss 5, 10. The amendment clarifies that interim measures awarded by the tribunal under s 17 have the same force and effect as a civil court order, thus solving the problem created by cases such as MD Army Welfare Housing Organisation v Sumangal Services Pvt Ltd (2004) 9 SCC 619, which held that s 17 interim awards could be enforced neither by the tribunal nor by the courts.

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At the same time that it limits the potential for unnecessary judicial intervention, the 2015 Amendment also provides some additional, much-needed judicial support for the arbitration process. For example, parties to domestic arbitrations may now seek interim relief from the courts even before the arbitral tribunal is constituted, provided the arbitration is initiated within 90 days of the date of the order granting such relief.82 And parties to foreign-seated arbitrations may now take advantage of two key forms of support from the Indian courts—interim relief and assistance in the taking of evidence—that had been denied them after the decision in BALCO.83

3.3.2.  Promoting Efficiency and Fairness 3.3.2.1.  Costs, Delay and Ineffective Case Management The 2015 Amendment contains several provisions designed to curb the costs of arbitration and hold parties accountable for sporting tactics that tend to inject unnecessary delay and expense into the process. For example, High Courts now have the power to promulgate rules and establish caps on fees in domestic ad hoc arbitration.84 To that end, the 2015 Amendment includes a Fourth Schedule modelled after the DAC’s fee schedule that contemplates a modest, flat fee of Rs 45,000 (approximately US$ 650) for disputes valued up to Rs 500,000 and maxes out at Rs 3 million (approximately US$ 45,000) for disputes valued in excess of Rs 200 million.85 Perhaps the most controversial amendment is the addition of section 29A, which requires arbitrators to issue an award within 12 months unless extended for an additional six months by stipulation of the parties (or for a discretionary period by the court upon a showing of sufficient cause).86 While a time limit has the potential to help speed up arbitration proceedings, there are downsides to a one-size-fits-all approach. As to ad hoc cases that legitimately require more than 18 months to complete or administered cases that are already subject to effective case management, the requirement of proving sufficient cause for an extension may just create more opportunities for delay and procedural wrangling in court. Other provisions give courts unprecedented tools to curb inefficiency and mismanagement by parties and arbitrators. For example, courts may impose actual or exemplary costs on parties who cause delay and may penalise arbitrators by reducing their fees by up to five per cent for each month of delay beyond the time limits set forth in new section 29A.87 The 2015 Amendment also introduces a new, ‘costs follow the event’ default regime that gives 82  ibid, s 5. This addition appears to have been motivated in part by the growing popularity of emergency arbitrator provisions at institutions such as SIAC and HKIAC and the frequency with which Indian parties appear to have availed themselves of them. 83  BALCO held that Part I of the ACA, which provides these forms of support, did not apply to arbitrations seated outside India. See ibid, s 2(II). Parties may now avail themselves of them but only in ICAs. 84  ibid, s 6(ix). ICA and arbitrations administered by institutions are exempted. 85  ibid, Fourth Schedule. The High Courts need only ‘tak[e] into consideration the rates specified in the Fourth Schedule’ and retain considerable discretion in setting compensation rates: see ibid, s 6(ix). 86  ibid, s 15. Failure to comply with these time limits automatically terminates the arbitrators’ mandate. The 2015 Amendment also provides for an optional ‘fast track’ procedure that contemplates a decision within six months, on the papers, and before a sole arbitrator: see ibid, s 15. 87  ibid, s 15. They are also empowered to reward arbitrators with additional fees (subject to agreement of the parties) for issuing a final award within six months’ time.

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arbitrators broad discretion to award or withhold costs in particular cases, such as where the prevailing party unreasonably refused an offer to settle the dispute.88 Courts have been given the same discretion with respect to arbitration-related litigation,89 which is significant given that the duration of such proceedings, including multiple tiers of appeal, can often dwarf the length of the original arbitration. Likewise, in an effort to discourage the liberal granting of adjournments the 2015 Amendment now requires parties to first show sufficient cause for an adjournment and empowers arbitrators to impose costs (including exemplary costs) for failure to do so.90 The incentive to file opportunistic applications to set aside arbitral awards has also been minimised. It used to be that such applications automatically stayed enforcement of the award until such time as the application was denied. The 2015 Amendment now provides for immediate enforcement during pendency of the application and requires any party seeking a stay to file a separate application and deposit the amount of the award for security.91 Moreover, courts must dispose of such applications within just one year.92 3.3.2.2.  Conflicts of Interest An important nod toward improving fairness in arbitration was achieved by adding provisions designed to eliminate actual or perceived conflicts of interest. As explained above, arbitration clauses in contracts with state-owned entities traditionally provided for the sole arbitrator or chairperson to be an employee or director of the entity.93 They were routinely upheld by Indian courts despite the Model Law’s expressed concern that sole arbitrators and chairpersons be ‘independent and impartial.’94 The 2015 Amendment brings this practice in line with international standards. Section 12 has been amended to provide that any person with certain conflicts set forth in the IBA Guidelines on Conflicts of Interest ‘Red List’ may not serve as an arbitrator unless the conflict of interest is waived in writing by the parties after the dispute has arisen.95 The effect of the provision is to strike a sensible balance between fair play and party autonomy. The amendments also provide further guidance on required disclosures of any grounds that would give rise to justifiable doubts about impartiality.96 3.3.2.3.  Jurisdiction over ICA Cases District courts are the courts of first instance for the majority of civil disputes, including applications under the ACA. High Courts typically hear cases on appeal from the district 88  ibid, s 17. Costs are defined broadly to include, inter alia, the fees and expenses of arbitrators, courts and witnesses; legal fees and expenses; and administrative fees of provider institutions. 89  ibid, s 17. 90  ibid, s 12. 91  ibid, s 19. 92  ibid, s 18(III). There is no indication of what consequences follow if the one year time period is exceeded, however. 93  Such clauses were animated by a longstanding concern that Indian parties are at a disadvantage when arbitrating against foreign parties with greater resources. 94  Model Law, s 11(5); Dharmendra Rautray, Master Guide to Arbitration in India (New Delhi, CCH India, 2008) 198; Nariman (n 11) 21. 95  2015 Amendment, s 8. The enumerated conflicts were drawn from both the waivable and non-waivable Red Lists. 96  These grounds are based on the IBA Guidelines’ waivable Red and Orange Lists, which are incorporated in the Fifth Schedule to the 2015 Amendment.

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courts, although in some states they exercise original jurisdiction over cases exceeding a certain monetary threshold. The 2015 Amendment seeks to prioritise applications in ICA cases (whether foreign or domestic) by allowing parties to bypass the district courts and proceed directly to the High Courts.97 This is significant given the stark difference between the two forums. For example, not all district courts are courts of record.98 Case filings are kept in hard copy ‘bundles’ rather than stored electronically, proceedings tend to be in the local language rather than English,99 basic resources such as uninterrupted electrical power and access to legal authorities are in extremely short supply,100 and grease payments to clerks and process servers are an unfortunate reality of getting business done.101 District judges are frequently described to be of a lower calibre than High Court judges and to be less trained to handle complex commercial disputes of an international nature. Thus, by guaranteeing that ICA cases will not be heard by a court inferior to a High Court, the amendment helped allay concerns of international parties about the Indian lower courts. Both ICA and non-international cases will likely receive an even further boost from the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (2015 Commercial Courts Act), which was signed into law on the same day as the 2015 Amendment. The 2015 Commercial Courts Act opens up a fast track for commercial cases—including applications and appeals in commercial arbitration cases— where the amount in controversy exceeds Rs 10 million (approximately US$ 150,000). It does so by authorising the creation of specialised Commercial Courts at the district level (which will hear high value non-international commercial arbitration cases) and a specialised Commercial Division in the High Courts (which will hear high value ICA cases). Both will be staffed with judges ‘having experience in dealing with commercial disputes’102 and will benefit from improved procedures as stricter timelines, case management, e-filing and a ‘costs follow the event’ regime.103 3.3.2.4.  Future Directions It is still too early to predict whether the 2015 Amendment and the 2015 Commercial Courts Act will help strengthen India’s arbitration regime. Cynics have already suggested that they will not,104 and there are indications that further legislative tinkering may be ­necessary in 97 

2015 Amendment, s 2(II). Constitution of India requires only the Supreme Court and the High Courts to be courts of record. Constitution of India, ss 129, 215. 99 Sulogna Mehta, ‘District Court Cases “Lost in Translation”’ Times of India (22 April 2013) available online: http://timesofindia.indiatimes.com/city/visakhapatnam/District-court-cases-lost-in-translation/articleshow/19670763.cms; SAP, ‘Tamil in the Courts’ The Economist (11 April 2013) available online: www.economist. com/blogs/johnson/2013/04/indias-high-courts. 100  Jayanth K Krishnan et al, ‘Grappling at the Grassroots: Access to Justice in India’s Lower Tier’ (2014) 27 Harvard Human Rights Journal 165–71. 101  ibid, 176–77. 102  The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (‘2015 Commercial Courts Act’), ss 3(3), 4(2). 103  Law Commission of India (2015), 253rd Report on Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015, 44–45. Each High Court has the discretion to determine which of these procedures to incorporate. 104  Promod Nair,‘When Good Intentions Are Not Good Enough’ Bar & Bench (4 November 2015) available online: https://barandbench.com/when-good-intentions-are-not-good-enough-the-arbitration-ordinance-in-india/. 98  The

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order to address conflicting judicial interpretations and to bring the amendments further in line with international best practices.105

3.4.  What Drives Reform? 3.4.1.  Legislative, Institutional and Judicial Elements On the whole, the legislature has attempted to conform Indian law to international standards through landmark modern enactments such as the ACA and the 2015 Amendment. By contrast, the judiciary has traditionally been viewed as provincial, interpreting the law in paternalistic or formalistic ways that create more opportunities for interference.106 As noted above, this has created a type of ‘two steps forward, one step backward’ dynamic that many would describe as an unfortunate hallmark of Indian arbitration reform. Nonetheless, not all of the criticism levelled at the judiciary may be well deserved. Judicial intervention is not always or necessarily anathema to arbitration. Some forms of intervention are necessary—for example, to support the arbitration process or to avoid inequities that can arise when ex ante rules are rigidly applied in particular cases.107 In a common law jurisdiction such as India, courts also play a vital role in bringing important issues to the surface so that they can be vetted by the public, the bar, and other branches of government. A good example of this (ironically) is the Bhatia judgment. However incorrect its interpretation of the scope of Part I, Bhatia helped underscore the practical reality that parties to foreign-seated arbitrations sometimes need the assistance of the Indian courts.108 Thus, a different way of characterising the tension between the legislative and judicial branches in the arbitration area may be to see each as moments in a broader dialectic that has ultimately helped India modernise in the long run. In recent times the most pro-arbitration of the three branches is neither the legislature nor the judiciary but rather the executive. The LCI in particular has been instrumental in seeking ways to improve the operation of arbitration law in India and in proposing numerous forward-thinking suggestions for reform. In 2001, for example, it produced a report and a draft amendment bill aimed at improving arbitration’s efficiency and its autonomy vis-à-vis the courts. In 2004, the Ministry of Law and Justice constituted the Justice Saraf Committee to consider the bill and prepare a report proposing further amendments. Both the LCI and the Saraf Committee held extensive stakeholder meetings during which they received input from judges, lawyers and arbitration specialists both nationally and internationally. Although the bill was ultimately withdrawn as premature, it is worth noting that

105 

Justice Srikrishna Committee (n 23) 25. M Singhvi, ‘Memoirs of a Personal Journey through Indian Arbitration Law’ (2015) 4(2) Indian Journal of Arbitration Law 16–17. 107  This is particularly true where there are vast knowledge and resource asymmetries between the parties, as was often the case in disputes between Indian and European nationals: Sarosh Zaiwalla, ‘LCIA India: Will It Change the International Arbitration Scene in India?’ (2010) 27(6) Journal of International Arbitration 660; Fali S Nariman, ‘India and International Arbitration’ (2009–10) 41(2) George Washington International Law Review 368–69. 108  This may help explain why the 2015 Amendment creates an exception whereby foreign parties may seek relief from the Indian courts under Part I ss 9 (interim relief) and 27 (assistance with the taking of evidence), even though it otherwise seeks to maintain a clear distinction between the scope of Parts I and II. 106  Abhishek

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several provisions eventually included in the 2015 Amendment were foreshadowed by the LCI’s and the Saraf Committee’s reform proposals during this time.109 In its 246th Report proposing the bill that would eventually become the 2015 Amendment, the LCI again showed itself to be at the vanguard of arbitration reform. For example, in view of the growing popularity of emergency arbitrator procedures at institutions such as LCIA and SIAC,110 it proposed an amendment that would have made interim awards by emergency arbitrators enforceable.111 In view of conflicting case law on the arbitrability of fraud claims, it proposed an amendment to section 16 that would have clearly made such claims arbitrable. And in order to promote institutional arbitration, it proposed an Explanation to section 11 to the effect that ‘[t]he High Court may take steps to encourage the parties to refer the disputes to institutionalised arbitration by a professional Indian or International Arbitral Institute.’112 These provisions had the potential to help improve the arbitration landscape in India; unfortunately, they were ultimately rejected by Parliament.113

3.4.2.  Top-down Versus Bottom-up Reform Arbitration reform efforts in India have traditionally come from the top down—that is, though formal law-making at the national level. There has been very little in the way of reform by non-governmental actors. This is no doubt due in part to the dominance of ad hoc arbitration, which has prevented Indian institutional providers from flourishing. Private institutions play a vital role in helping to shape both the culture and regulation of arbitration—a role they have played effectively in jurisdictions such as Hong Kong and Singapore but far less so in India. Nonetheless, two exceptions are worth mentioning here. The first is LCIA India. In 2010, LCIA India promulgated the LCIA India Rules, which were specifically tailored to the Indian market. Among other things, those rules anticipated several changes to Indian arbitration law. For example, Article 28.4 gave the tribunal the discretion to impose costs based on the parties’ relative success or failure on the merits and ‘their conduct and cooperation during the arbitration and any undue delays or unnecessary expense.’ Article 32.6 effectively overturned Bhatia as to LCIA India arbitrations, by excluding the more intrusive provisions of Part I from applying in foreign-seated arbitrations while making available beneficial provisions 109  For example, in 2001 the LCI recommended making assistance from Indian courts with respect to interim relief and the taking of evidence available in foreign-seated arbitrations, imposing a one year deadline for completing domestic arbitrations, and including a fast track procedure—all of which were later substantially incorporated into the 2015 Amendment: see Law Commission of India, 176th Report of the Law Commission of India Reviewing the 1996 Act, 2001, 26–29, 122–28, 169–79. 110  SIAC reports that nine out of the 34 emergency arbitrator requests received came from Indian parties: N Vivekananda, ‘The SIAC Emergency Arbitrator Experience’, Singapore International Arbitration Centre, available online: http://siac.org.sg/images/stories/articles/siac_articles/45th_Article-VivekanandaN-The_SIAC_ Emergency_Arbitrator_Experience.pdf. 111  Law Commission of India (n 6) 37. 112  ibid, 45. 113  Finally, it bears mentioning that the current Prime Minister Narendra Modi, himself a strong advocate of privatisation and inflows of foreign direct investment, has recently declared it to be something of a national priority to transform India into a global hub of commercial arbitration: PTI, ‘Working to Make India an Arbitration Hub: PM Narendra Modi’ The Economic Times (23 October 2016) available online: http://economictimes. indiatimes.com/news/politics-and-nation/working-to-make-india-an-arbitration-hub-pm-narendra-modi/ articleshow/55015283.cms. It is unusual to say the least for a head of state to take such a public stance in support of commercial arbitration—a fact that may portend a brighter outlook for arbitration reform in India.

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such as interim relief and assistance with evidence-taking. These features of the LCIA India Rules presaged important reforms that would not find their way into Indian law until the 2015 Amendment. Although the actual impact of the LCIA India Rules remains questionable given the well-known paucity of adopters, the rules themselves illustrate the potential for private providers to drive reform. Another illustration is LCIA India’s participation as amicus curiae in BALCO, the ground-breaking case in which a five-judge bench of the Supreme Court overturned Bhatia. The Supreme Court ultimately sided with the position staked in LCIA India’s amicus brief—namely, that Part I should not apply to foreign-seated arbitrations unless expressly agreed by the parties. As discussed above, BALCO has been widely credited with ushering in a new, pro-arbitration judicial climate in India. The second agent of bottom-up reform is the Indian and international arbitration bar, whose initiative, resourcefulness and sophistication has sometimes helped improve the regulatory framework. Lawyers with exposure to the workings of world-class institutions such as LCIA and SIAC as well as the legal framework in arbitration-friendly jurisdictions have played an important role educating regulators about international ‘best practices’ and advocating for change.114 It was in part due to their critical feedback, for instance, that a Parliamentary committee recommended withdrawing the earlier 2003 bill to amend the ACA in favour of further study of the issues.115 They have also employed contract-based solutions to reform the arbitration landscape for their clients. For example, in response to the problems created by Bhatia, lawyers based in India and abroad drafted clauses that excluded the application of Part I to foreign arbitrations. These clauses, which came to be widely known as ‘Bhatia clauses’, anticipated what would be achieved from the top-down only much later, in BALCO.

3.4.3.  Special Considerations The largely top-down nature of reform efforts helps explain a major theme in Indian arbitration reform discourse, which is that improvements to the law on the books have done remarkably little to change the law in action.116 The failure, in other words, has been in law implementation more so than in its generation. What are some other India-specific barriers to effective arbitration reform? 3.4.3.1.  The Rule of Law India’s weak rule of law environment poses a major impediment.117 For example, measures designed to limit judicial intervention in the arbitral process may be of limited utility if 114  John Samuel Raja D, ‘Why Singapore Scores over India on Settlement of Corporate Conflicts’ The Economic Times (1 January 2013) available online: http://economictimes.indiatimes.com/news/company/corporate-trends/ why-singapore-scores-over-india-on-settlement-of-corporate-conflicts/articleshow/17836163.cms; Kurian (n 38). 115 Department Related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice, Ninth Report on Arbitration and Conciliation (Amendment) Bill, 2003, 5 August 2005, available online: http://164.100.47.5/rs/book2/reports/personnel/9threport.htm. 116  As one commentator put it in relation to the ACA, ‘the general consensus is that the Act has failed to create any pro-arbitration legal regime in India. The current practice is said to be a far cry from what was envisioned in the objective of the Act and the UNCITRAL Model Law’: Sengupta (n 74) 18. 117  The World Justice Project ranked India’s civil justice system 93rd out of 113 countries surveyed in terms of rule of law, giving particularly low marks for delay and effective enforcement: World Justice Project, WJP Rule of Law Index 2016, available online: https://worldjusticeproject.org/sites/default/files/documents/RoLI_FinalDigital_0.pdf.

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judges can be bribed. In 2016 Transparency International ranked India 79th out of 176 countries in terms of corruption.118 It also reported that 45 per cent of survey respondents who had had contact with the Indian judiciary in the prior 12 month period paid bribes, and that Indians were more likely than citizens of any other South Asian country to perceive the judiciary as corrupt.119 Likewise, some estimate that as many as 20–50 per cent of Indian judges have received bribes.120 A backlogged and inefficient court system also erodes the rule of law, for justice delayed is very often justice denied. It is estimated that the Indian judiciary currently suffers from a backlog of more than 30 million cases.121 Data collected in 2016 show that the oldest case still pending was originally filed in 1948 and that 82 per cent of civil and criminal cases in the High Courts have been pending for 10–15 years.122 The Chief Justice of India recently reported that 5,300 lower court and 420 High Court vacancies have yet to be filled and that it will take something in the order of 50,377 judges to keep up with current caseloads.123 And according to the World Bank, India ranks 130 of 190 in terms of ease of doing business and 172 of 190 in terms of contract enforcement as of June 2016.124 These sobering realities on the ground may also make it difficult to realise the full benefits promised by ambitious reforms such as the 2015 Amendment and the 2015 Commercial Courts Act. 3.4.3.2.  Legal and Litigation Culture A common complaint is that there is little in the way of a pro-arbitration culture or an appreciation of international arbitration ‘best practices’ in India. Lawyers are accused of engaging in the same no-holds-barred tactics they use in court.125 As Fali Nariman describes it, ‘[t]he aim of almost every Indian party to an arbitration agreement, domestic or foreign, is:

118  Transparency International, ‘Corruption Perceptions Index 2016’ (25 January 2017) available online: www. transparency.org/news/feature/corruption_perceptions_index_2016#table. 119 Deborah Hardoon, ‘Daily Lives and Corruption: Public Opinion in South Asia’ (2011) Transparency International 12, 25, available online: www.tisrilanka.org/pub/reports/GCB_SA.pdf. 120  Binny Seth, ‘Institutionalized Corruption in India: Judicial Systems, Ineffective Mechanisms, and Movements of Reform’ (2012) 15(2) Touro International Law Review 178–83; ‘50% of Higher Judiciary Corrupt, Says Ex-SC Judge Markandey Katju’ Hindustan Times (28 September 2015) available online: www.hindustantimes.com/ punjab/50-of-higher-judiciary-corrupt-says-ex-sc-judge-markandey-katju/story-Hfu8Ru8o9YfoGOjloboytN. html. So long as retired judges make up the bulk of ad hoc arbitrators, it is not difficult to speculate that corruption also affects the arbitration process: JC Seth, ‘Corruption and Miscarriage of Justice in Arbitration’ (2011) 49 ICA Arbitration Quarterly 17–22; Promod Nair, ‘Quo Vadis Arbitration in India?’ The Hindu Business Line (19 October 2006) available online: www.thehindubusinessline.com/todays-paper/tp-opinion/quo-vadis-arbitration-in-india/ article1749291.ece. 121  At the end of 2013, there were 31,367,915 pending cases in the Indian courts. Bloomberg Businessweek estimates that ‘[i]f the nation’s judges attacked their backlog nonstop—with no breaks for eating or sleeping— and closed 100 cases every hour, it would take more than 35 years to catch up.’: Tom Lasseter, ‘India’s Stagnant Courts Resist Reform’ Bloomberg Businessweek (8 January 2015) available online: www.bloomberg.com/news/ articles/2015-01-08/indias-courts-resist-reform-backlog-at-314-million-cases. 122 DAKSH, State of the Indian Judiciary, eds Harish Narasappa and Shruti Vidyasagar (Lucknow, Eastern Book Company, 2016) 4, 7. 123  ‘More FDI Only If Judiciary Is Effective: CJI’ LiveLaw (24 October 2016) available online: www.livelaw.in/ fdi-judiciary-effective-cji/; United States Department of State (n 31) 11. 124  World Bank, ‘Economy Profile 2017: India’ in World Bank (ed), Doing Business 2017: Equal Opportunity for All (Washington DC, World Bank, 2017) 6, 15. 125  Nair (n 120).

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“Try to win if you can; if you cannot, do your best to see that the other side cannot enforce the domestic or foreign award in India for as long as possible.”’126 Retired judges are faulted for conducting arbitrations too much like litigation—for example, by indulging frequent adjournments that drive up expenses and produce more delay or by getting caught up in formalities of procedure or evidence instead of helping parties resolve disputes pragmatically and efficiently.127 It is questionable, however, whether the current pattern of top-down reforms will help change these realities on the ground.

4.  The Future The 2015 Amendment promises a new and improved legislative framework that more closely tracks international expectations and best practices. Likewise, the SCI’s landmark 2012 decision in BALCO and subsequent decisions reveal an increasingly pro-arbitration attitude by the courts. But the jury is still out as to whether India has earned the status of a modern, arbitration-friendly jurisdiction.128 Many believe that the cultural and structural impediments described above will continue to stymie arbitration reform in India.129 How can India build on these positive developments and take arbitration reform to the next level? In the following, I offer four proposals for consideration that fall into two broad categories.

4.1.  Legislative, Judicial and Institutional Reform 4.1.1.  Replacing Ad Hoc with Institutional Arbitration The first and perhaps most ambitious proposal is for ad hoc arbitration to become the exception rather than the rule in India, as it is in every other developed arbitration jurisdiction around the world. The persistent failure of home-grown arbitral institutions to take root is serious enough that shortly after the 2015 Amendment, the Government of India constituted a High Level Committee (HLC) headed by retired SCI Justice Srikrishna to study the issue.130 And at a recent international conference on strengthening arbitration in

126  Nariman (n 107) 372. Other commentators note that ‘one cannot help but notice the manner in which appeals and revisions are filed at interlocutory stages against every decision or order taken or made by the arbitral tribunal, which is not even contemplated under the Act [of 1996].’: Krishna Sarma, Momota Oinam and Angshuman Kaushik, ‘Development and Practice of Arbitration in India—Has It Evolved as an Effective Legal Institution?’, Center on Democracy, Development and the Rule of Law, Freeman Spogli Institute for International Studies Working Paper No. 103, October 2009, 21. 127  Nariman (n 34) 120; Nair (n 120). 128  Alison Ross, ‘Does India Refuse to Modernise?’ (2012) 7(6) Global Arbitration Review 35. 129  For example, a 2011 survey found that only 52 per cent of the respondents approved of initiatives by the central government to amend the law and open new arbitration centres: Ernst & Young (n 66) 10. 130  The HLC recently issued a working paper inviting comments from arbitral institutions, parties and their representatives, and other interested parties. See Justice Srikrishna Committee (n 23).

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India, Prime Minister Narendra Modi declared that the creation of a ‘vibrant ecosystem for institutional arbitration’ was one of his government’s top priorities.131 Legislative reforms could focus on changing the ACA’s well-noted agnosticism toward institutional arbitration. The 2015 Amendment made some progress in this direction, such as by clarifying that the power to appoint arbitrators under section 11 may now be delegated to non-judicial actors such as institutional providers—a move that could help institutional arbitration become the default choice when parties have expressed no clear preference either way in their contracts.132 But it also missed important opportunities, such as by failing to adopt the LCI’s proposal to require institutional arbitration in disputes over contracts valued at Rs 50 million (US$ 775,000) or more.133 Private sector reforms could focus on incentivising trade associations and chambers of commerce to establish more institutional providers through government funding or tax breaks,134 or on forming specialised bodies to better promote institutional arbitration in India.135 Businesses could also be encouraged to pay more attention to ex ante dispute prevention, such as through thoughtful arbitration clauses that specifically select a domestic institution and its rules. The ability to recruit corporate repeat-player adopters on a large scale is commonly believed to be a make-or-break factor in an arbitral institution’s success, as it appears to have been for LCIA India.136 The recent launch of MCIA has injected a new sense of optimism, much needed after the LCIA debacle, about the future of institutional arbitration in India. In addition to its own rules and a dedicated secretariat based in Mumbai, the MCIA boasts state-of-the-art hearing facilities of the sort found at LCIA or SIAC—facilities often lacking at other Indian institutions. But as Indian clients become accustomed to world-class services offered at the likes of MCIA, will they continue to arbitrate at home or will this only whet their appetite to go abroad? As we saw above, market capture by foreign players such as SIAC has been an abiding concern and there is no reason to think that this pattern will stop just because top rate domestic institutions enter the market. More attention therefore must be paid to this pattern if India wishes not just to generate demand for institutional arbitration but also to cash-in on it.

4.1.2.  Development of a Specialised Arbitration Bench and Bar Another set of proposals would focus on promoting quality control and professionalisation within both the judiciary and the arbitration services market. For example, establishing a dedicated arbitration bench in each of the High Courts, comprised of judges who appreciate arbitration’s benefits and have experience with arbitration law, might promote

131 

PTI (n 113). 2015 Amendment, s 6. The effect of this clarification was to overturn Patel Engineering (n 37) [38], discussed above. 133  Government of India Ministry of Law and Justice, A Consultation Paper on Proposed Amendments to the Arbitration & Conciliation Act, 1996, 2010, 36–37. 134  Justice Srikrishna Committee (n 23) 16. 135  Law Commission of India (n 6). 136  As noted above, LCIA cited insufficient adopters of its LCIA India Rules between 2009 and 2016 as a reason for shuttering its short-lived operations in India, suggesting perhaps some deeper cultural impediments to widespread adoption of provider-specific rules and clauses. 132 

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more efficient, consistent and accurate results.137 The Delhi High Court has operated such a dedicated bench with great success.138 The formation of a specialised arbitration bar, consisting of lawyers with experience in and a commitment to the arbitral process, might also help increase the quality of representation in arbitration and lead to more satisfying results for end-users.139 There is a perception that lawyers who handle both arbitration and litigation matters sometimes fail to appreciate the former’s distinct advantages over the latter in terms of speed, economy and cutting straight to a dispositive hearing on the merits.140 Perhaps because of the prospect of larger fees or the desire to impress a sitting judge, lawyers are also thought to prioritise their court cases, relegating arbitration matters to the status of a ‘mistress, indulged in during evenings and weekends.’141 A dedicated arbitration bar, like those that exist in international arbitration hubs such as London and Paris, may help elevate both the prestige and calibre of arbitration practice in India. Finally, efforts could be made to help improve the cadre of professional arbitrators.142 One way to do this is to democratise the small club of arbitrators that currently dominates in the ad hoc space. Institutions can serve as an important catalyst in this regard by helping fledgling arbitrators receive more referrals than they might otherwise achieve by working alone. Institutions can also take proactive steps to recruit new arbitrators with sought-after subject matter expertise and to ensure that their panels represent a diverse cross-section of their client base not just in terms of industry background but also in terms of traits such as gender, culture, language or religious affiliation.143 Legal reforms may also help in the march toward arbitrator professionalism. For example, there are currently no uniform codes of conduct for arbitrators in India beyond those that apply to lawyers in general through the Advocates Act 1961 and the Bar Council of India Rules 1975. To be sure, the Model Law is infused with provisions that require arbitrators to treat parties equally and disclose facts that may cast doubt on their neutrality or independence and, as discussed above, the 2015 Amendment recently tightened the provisions on conflicts of interest. But an independent and widely-recognised

137  This proposal has been advocated by the Government of India and key arbitration stakeholders for some time now: Arbitration and Conciliation (Amendment) Bill 2003, s 37A. Although it creates a fast track for arbitration cases directly to the Commercial Court or the Commercial Division of the High Court, the 2015 Commercial Courts Act does not contemplate an arbitration bench per se. Commercial Court and Commercial Division judges are only required to have ‘experience dealing with commercial matters’: 2015 Commercial Courts Act, s 3(3). 138  As the LCI noted, ‘[t]his has resulted not only in better and quicker decisions, but has also increased the confidence of the parties in choosing the jurisdiction of the High Court for dealing with arbitration related cases.’: Law Commission of India (n 6) 16. 139  Nariman (n 34) 115–27. Nariman describes some efforts along these lines that were attempted in the past by leaders of the bar. Unfortunately, interest appears to have fizzled out very quickly. 140  Nair (n 120). 141  Ross (n 128) 35 (comments of VP Singh). 142 ‘We Need Basic Institutional Reforms To Strengthen Our Arbitration Framework: President Pranab Mukherjee’ LiveLaw (21 October 2016) available online: www.livelaw.in/need-basic-institutional-reformsstrengthen-0ur-arbitration-framework-president-pranab-mukherjee/. 143  The need for diversity in international arbitration has attracted significant attention in recent years, with end-users increasingly complaining that the proverbial ‘old boy’s club’ no longer adequately reflects the diverse profile of disputants: International Institute for Conflict, Prevention & Resolution, ‘“Old, White, and Male”: Increasing Gender Diversity in Arbitration Panels’, 3 March 2015, available online: www.cpradr.org/news-publications/ articles/2015-03-03--old-white-and-male-increasing-gender-diversity-in-arbitration-panels.

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code of conduct such as the American Bar Association’s Code of Ethics for Arbitrators in Commercial Disputes may help curb abuses of the type that have given ad hoc arbitration in India a bad name.144 There is also currently no positive law of arbitrator immunity in India.145 In theory, therefore, an individual acting as an arbitrator risks being held personally liable for breach of contract or tortious conduct in connection with the discharge of his or her duties146—a considerable disincentive to entering a market that is already dominated by an elite group of former judges. This is in marked contrast to most developed arbitration jurisdictions, where national laws and institutional rules extend judicial immunity to arbitrators as well.147

4.2.  Enhancing Competitiveness, Independence and Professionalism 4.2.1. Foreign Lawyers Another proposal is to further improve the quality of representation in arbitration through diversification and competition—specifically, by allowing foreign lawyers to represent clients in ICAs taking place in India. In the vast majority of developed ICA jurisdictions, foreign lawyers may represent parties before an arbitral tribunal without a practising certificate. In India, however, it is currently an open question whether foreign lawyers may ‘fly in, fly out’ solely for purposes of representing clients in arbitrations. Pursuant to the Advocates Act 1961, only Indian citizens are entitled to practice law.148 But in AK Balaji v Government of India, the Madras High Court recently created an exception for foreign lawyers entering India on a temporary basis to conduct international arbitrations or advise clients on foreign law matters.149 Although Balaji is still good law for the time being, it has been appealed to the SCI where it is still pending as of the date of this writing.150 Liberalising the market for legal services in arbitration matters would help introduce cutting-edge practices and thereby improve the overall quality of arbitration in India. Endusers may benefit from increased competition among advocates. And ad hoc arbitrators accustomed to conducting arbitrations like litigation in the Indian courts may be held to higher standards by practitioners with international expectations about efficiency and party autonomy.

144  In this vein it should be noted that the Srikrishna Committee is currently considering the creation of a new regulatory body for accrediting arbitrators: Justice Srikrishna Committee (n 23) 23–24. 145  Nariman (n 11) 28. 146  There do not appear to be any cases on point, however: Nariman (n 11) 28. 147  Born (n 2) 2080. 148  Advocates Act 1961, ss 24(1)(a), 29. 149  AK Balaji v Government of India (2012) 32 KLR 290 (Mad) [45], [60], [63]. 150  Meanwhile, the Bar Council of India began work drafting new rules for liberalising the Indian legal market that include a provision for foreign lawyers to represent clients in international arbitrations: Indian National Bar Association, Report of Draft Bar Council of India Rules for Registration and Regulation of Foreign Lawyers in India, 2016, available online: www.indianbarassociation.org/wp-content/uploads/2016/09/Report-on-BCI-Rules2016-Final-copy.pdf. But it abandoned that effort in late 2016, citing strong opposition from lawyers and state bar councils as well as the importance of giving the SCI a chance to issue a final judgment in Balaji.

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4.2.2.  Culture of Arbitration A final proposal, echoed by many others, is to find ways to inculcate ‘a culture of arbitration among … the bar, the Bench, the arbitrators, arbitral institutions and the consumers of arbitration.’151 The LCI went as far as to assert that meaningful change would require nothing short of a ‘cultural revolution’ from within the arbitral community.152 The unifying rationale is that there is a limit to what top-down reform can accomplish given realities on the ground. Some suggestions for this type of bottom-up reform include outreach to universities and bar groups for purposes of spreading awareness about arbitration.153 During its brief six year existence, LCIA India made some inroads along these lines. In addition to organising conferences and an annual arbitration lecture series, it established four regional Users’ Councils that provided a forum for arbitration practitioners and end users to discuss important arbitration issues.154 In a related vein, entrenched mindsets of key players need to change. As D Sengupta explains, [r]etired judges who act as arbitrators have to realise that their role is that of a person who helps to resolve the dispute. It is not to decide a case as in formal court proceedings. The lawyers also have to give up their perceptions of being a gladiator.155

To this end, more arbitration advocacy trainings and continuing education could be offered to help lawyers appreciate that effective litigation advocacy does not automatically translate into effective arbitration advocacy. In addition, the widely held myth that only retired judges make good arbitrators156 needs to be challenged—not just because it is empirically questionable but because it sets false normative expectations that both short-change arbitration’s distinctive benefits and threaten to conform it to the model of litigation. And parties and contract drafters anxious to close a deal may do well to devote more attention to pre-dispute arbitration clauses that select a recognised Indian institution. Breaking down traditional barriers between litigators and transactional lawyers within law firms may help in this regard. Finally, the development of a robust culture of arbitration cannot happen in isolation; some thought must be given to nurturing a broader spectrum of dispute resolution processes within India’s ADR ‘ecosystem’—especially mediation. End-users are increasingly looking for a menu of different dispute resolution services rather than a one-size-fits-all approach. For example, sophisticated businesses sometimes include ‘stepped’ ADR clauses in their contracts—clauses that require good faith efforts at mediation as a precondition to initiating arbitration or litigation. Moreover, parties who choose arbitration often end up

151 

Nair (n 120). Law Commission of India (n 6) 12–13. 153  Sarma, Oinam and Kaushik (n 126). 154  Thomas (n 17) 140. Other foreign arbitral institutions with a presence in India, such as ICC and SIAC, have also sought to promote arbitration to the legal and business communities: ICC India, ‘Indian Arbitration Group’, available online: www.iccindiaonline.org/IAG-Brief.pdf. 155  Sengupta (n 74) 20. 156  Sathyapalan and Sivaraman (n 25); Price Waterhouse Coopers India (n 4) 15–16. 152 

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realising that other modes of dispute resolution are better tailored to their circumstances.157 In the US it is estimated that fully 50 per cent of arbitrations settle prior to an evidentiary hearing on the merits,158 and if these figures hold true more broadly it may suggest that the availability of high quality mediation services is an important consideration in the choice of a seat. Finally, mediation may help nourish the market for arbitration, such as where parties who initially prefer mediation later discover that the only way to reach a global settlement is to have one or more intractable issues decided in arbitration. In other words, jurisdictions that can provide end-users with top rate arbitration together with other ADR services will be better poised to compete in the international arbitration marketplace. So far, however, mediation is relatively underdeveloped in India. There is no national mediation legislation,159 and in marked contrast to institutions such as LCIA, ICC, ICDR and HKIAC, many top rate Indian institutions such as MIAC neither offer mediation services nor encourage mediation in their published rules.

5. Conclusion To the extent there is a distinctive reform pattern in India it may be summed up as follows: The legislature (informed in important respects by other government actors such as the LCI) has traditionally set the reform agenda by introducing new statutory frameworks that seek to bring India in line with modern, international developments. And although there is a fine line between unnecessary judicial intervention and necessary judicial support, for the most part the courts have managed to undermine these forward-looking legislative achievements. There are, however, signs of change. The BALCO decision was a dramatic turning point in the SCI’s long-criticised arbitration jurisprudence that revitalised Model Law ideals embedded in the ACA, such as party autonomy and international harmonisation. Together with subsequent pro-arbitration judicial decisions, BALCO has created a new sense of optimism about India’s ability to develop into a regional—even global—arbitration hub. If there is one lesson from the Indian experience, it is that top-down reforms—while perhaps necessary—are far from sufficient. Bottom-up efforts focused on awarenessraising, fostering a culture of arbitration, and private ordering are just as crucial, and when reformers ignore this other half of the equation they do so at their peril. In most developed jurisdictions, private institutions play a crucial role in such grassroots initiatives. But India’s

157  In the US, at least, the mounting delay and expense of arbitration proceedings, coupled with the lack of substantive merits review and other procedural protections available in court, has led many corporate general counsel to prefer mediation over arbitration: Thomas Stipanowich and J. Ryan Lamare, ‘Living with “ADR”: Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations’ (2013) 19(1) Harvard Negotiation Law Review 1–68. 158  Financial Industry Regulatory Authority, ‘Dispute Resolution Statistics’, available online: www.finra.org/ arbitration-and-mediation/dispute-resolution-statistics; American Arbitration Association, ‘B2B Dispute Resolution Impact Report: 2015 Key Statistics’, available online: http://info.adr.org/2015-key-statistics/. Currently this seems to happen mostly though bilateral negotiation but sometimes also through third-party facilitated mediation. 159  It is currently an open question the extent to which ACA Part III relating to conciliation governs mediation, as Indian law draws a distinction between the two processes. See ACA, s 30(1); Code of Civil Procedure 1908, s 89.

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ad hoc arbitration exceptionalism has meant that institutions have largely been disabled from performing these important managerial and norm-setting functions. Happily, in the wake of the 2015 Amendment’s ‘honeymoon period’, high-profile conferences and task forces have proliferated to help jumpstart conversations on institutional arbitration. The hope is that these efforts will ultimately help India bring recent reforms initiated from the top-down to the finish line.

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12 The Reform of Commercial Arbitration in Australia: Recent and Prospective Developments LEON TRAKMAN*

1. Introduction International commercial arbitration (ICA) in Australia is growing, albeit not geometrically. These developments are attributable in part to new legislation adopted by the federal, state and territory governments that make arbitration in Australia more attractive to domestic and foreign parties. These include the preservation of the autonomy of the parties to choose their preferred form of arbitration, whether institutional or not, the fact that Australian courts are firmly committed to the principles of the rule of law, and that ICA awards are enforced consistent with international standards and laws that are incorporated into Australian federal, state and territorial law. Australia has ratified both the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards and the ICSID Convention in its domestic law. Both are included in section 40 of the International Arbitration Act 1974 (Cth) (IAA). Australia’s accession to the New York Convention is without reservation and extends to all States and Territories within the country. Australia has an established record of recognising international commercial arbitration. It was one of the first to adopt the 2006 amendments to the 1985 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the Model Law).1 It has long endorsed the principles embodied in that Model Law, including protection of the autonomy of parties to arbitration, flexibility in the conduct of arbitration and greater uniformity in arbitration across national jurisdictions. These tenets of arbitration were incorporated into the IAA by the 2010 amendment, as a

*  The author thanks Doug Jones and Luke Nottage for their comments, and Hugh Montgomery, Joanna Lee and Gia-Yen Luong for their research assistance, the Australian Research Council for the award of a Discovery Grant on arbitration, and the University of New South Wales for its support. 1  Luke Nottage, ‘Addressing International Arbitration’s Ambivalence: Hard Lessons from Australia’ in Vijay K Bhatia, Christopher N Candlin and Maurizio Gotti (eds), Discourse and Practice in International Commercial Arbitration (Farnham, Ashgate, 2012) 11, 19.

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reflection of international best practice.2 In accordance with the 2010 amendments to the IAA, disputing parties can no longer choose to exclude the application of the Model Law insofar as it is incorporated into the IAA. The IAA affirms the finality of arbitration awards and limits the grounds for judicial review. It also builds on the authority of arbitrators to grant interim awards and creates a regime to ensure confidentiality. The core principles regarding commercial ­arbitration embodied in the 2010 amendment are also reflected in uniform legislation across all ­Australian jurisdictions.3 They affirm the legitimacy of arbitration as a mechanism for dispute resolution and the significance of Australia as a centre for the resolution of disputes. However, ICA in Australia continues to face concern over what are sometimes perceived to be protracted arbitral proceedings that are both dilatory and costly.4 The author has responded to these criticisms in a co-authored article which argues that comprehensive proceedings are often necessary in deciding complex arbitrations and the allegedly ­‘judicialisation’ of the arbitral process is often misconceived and over-stated.5 In addition, there has been a significant increase in resort to institutional arbitration in ICA proceedings, notably with the adoption of new Arbitration Rules by the ­Australian Centre for International Commercial Arbitration (ACICA) and the establishment of the Australian International Dispute Centre (AIDC). There have also been increases in ­arbitrations since the revision of the IAA in June 2010 and recent amendments to domestic Commercial Arbitration Acts (CAAs). While Article 1(3) of the UNCITRAL Model Law stipulates that it only applies to international commercial arbitration, and not to domestic arbitration, the recently revised CAAs of states across Australia now replicate the Model Law with some variations.6 This chapter will focus on the Australian legal system and its role in arbitration. It will examine the development of ICA in Australia and the 2010 amendment to the IAA. It will consider the role of the Australian Centre of International Commercial Arbitration (ACICA) as an exemplary centre governing commercial arbitration. It will focus on ­Australia’s role in promoting arbitration within the Asia Pacific region, of which it is an integral part. It will explore Australia’s whole-hearted embrace of international arbitration as a viable alternative to court proceedings. Finally, it will support the conservative and formalist underpinnings of current arbitration reforms, including the need to elaborate on them, and render them more dynamic in operation.

2  International Arbitration Act 1974 (Cth) (‘IAA’). See further Doug Jones, Commercial Arbitration in A ­ ustralia 2nd edn (Pyrmont, Thomson Reuters, 2012); Richard Garnett and Luke Nottage, International Arbitration in ­Australia (Annandale, Federation Press, 2010). 3  See LexisNexis Australia, ‘Australian Commercial Arbitration’, available online: www.lexisnexis.com.au/sites/ en-au/products/australian-commercial-arbitration.page. 4  For criticisms of the ‘judicialisation’ of ICA, see Richard Garnett and Luke Nottage, ‘What Law (if any) Now Applies to International Commercial Arbitration in Australia?’ (2012) 35(3) UNSW Law Journal 953–78. 5  See Leon E Trakman and Hugh Montgomery, ‘The “Judicialization” of International Commercial Arbitration: Pitfall or Virtue?’ (2017) 30(2) Leiden Journal of International Law 1–30, available online: https://doi.org/10.1017/ S0922156517000024. 6  See s 2.1.1 below.

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2. Background 2.1.  Legislative and Regulatory Framework Certain features of the Australian legal system distinguish it from other systems, based on its historical origins, development and attributes. It is important to appreciate that Australia is a federation of six states and two territories, with two levels of government: the federal and the states (and equivalent territories). Each state and territory government exercises jurisdiction over commercial disputes within its jurisdiction. State and territory courts have jurisdiction to review decisions of tribunals in accordance with the applicable Uniform Commercial Arbitration Act.7 The federal government has jurisdiction over federal matters. This includes judicial review of decisions of ­tribunals which are subject to federal law. The federal legislation governing arbitration is the IAA, as amended in 2010,8 and it is a significant source of analysis in this chapter. There are various attributes ordinarily ascribed to Australian courts. They are, unavoidably, generalisations and subject to exceptions. One such generalisation is that Australia is a ‘rule of law’ jurisdiction, which is accurate insofar as its Judiciary subscribes to the principles of ‘natural justice’ or procedural justice. These principles, in turn, circumscribe the function of arbitrators that are subject to state, territorial or federal jurisdiction: namely, to decide cases in accordance with principles of due process, which essentially include: providing the parties with the right to a fair and impartial hearing, and reaching determinations according to law. This description of Australia as a ‘rule of law’ jurisdiction is subject to challenge when a party alleges that an arbitrator or court has failed to ensure procedural justice in an arbitration. Another attribute of Australian courts is the independence of the Judiciary from the legislature and executive at both the federal and state (or territory) levels. Arbitral awards are subject to review by courts whose decisions, in turn, are subject to review by higher courts, but not to interference by parliament or the executive. The overriding principle is that courts are required to decide disputes without intervention from other branches of government, so long as they exercise their jurisdiction in accordance with the applicable legislation or other source of law.9 There have been claims that courts that enforce arbitration awards do not act independently of the parties who choose the forum and applicable law. However, the High Court has unanimously rejected this contention. The power of an arbitrator is contingent on agreement between the parties and is therefore not a judicial power. However, a court acts independently of the parties’ arbitration agreement in determining whether or not to recognise an arbitration award.10

7 

Commercial Arbitration Act 2010 (Cth) (CAA).

9 

IAA s 35. TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5.

8 IAA. 10 See

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The test of whether Australia is a ‘rule of law’ jurisdiction and whether a court has failed to act independently of the executive or legislature is not determined by the violation of either principle. In issue is rather whether the alleged violation is properly redressed and whether an appropriate remedy is granted. It is important to note that Australian federal courts exercise concurrent jurisdiction with state and territory courts in regard to arbitration. This means that a party to arbitration may submit a claim to a federal, state or territory court and any of those courts may hear the claim. If an action is lodged in a court with jurisdiction to hear a dispute, a court with concurrent jurisdiction will ordinarily decline to hear that case. To a similar effect, ­Australian courts generally give more weight to prior decisions of courts at the seat of arbitration dealing with common issues, so long as the enforcing court complies with the New York Convention, to which Australia is a party, relating to international arbitration awards.11 International law is also binding on Australian courts and, in turn, upon arbitrators. This is reflected in Australia’s adoption of the New York Convention.12 In particular, Section 7(2)(b) of the IAA implements Australia’s treaty obligations embodied in Article 11(3) of the New York Convention.13 This will be discussed later.

2.1.1.  Australian Law Governing ICA As a federal system, the Federal, state and territorial governments provide for arbitration. As a result, international arbitration is dealt under separate legislation to domestic arbitration laws. Acting through the Federal Government, Australia was one of the first countries to adopt the 2006 amendments to the Model Law in its 2010 amendment to the IAA. In effect, ­‘Australia has a “dual track” system for international and domestic commercial arbitrations. International arbitrations are governed by the IAA, whereas domestic arbitrations are governed by State or Territory-based arbitration legislation’.14 However, following federal legislation adopting the Model Law, most states have followed suit. In particular, the states of New South Wales, Victoria, South Australia, Tasmania and Western Australia and the Northern Territory have adopted the new CAA regime that largely follows the Model Law. The result is that, despite slight variations, both domestic and international arbitration regimes are closely aligned. ‘The new uniform CAAs which have been implemented in all States and Territories except the ACT much more closely follow the Model Law provisions with a few important additions and departures of which practitioners need to be aware’.15 At the same time, as Richard Garnett notes, ‘there are some differences, including the stance

11 See Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109. See generally Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the ‘New York Convention’), available online: www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.htm. 12 IAA. 13  IAA s 7(2)(b). 14  See Geoffrey Hansen, ‘International Dispute Resolution in the Asia-Pacific—Arbitration in Australia Revisited’ Kluwer Arbitration Blog (24 April 2014) available online: http://kluwerarbitrationblog.com/2014/04/24/ international-dispute-resolution-in-the-asia-pacific-arbitration-in-australia-revisited/. 15 ibid.

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on confidentiality, reasons for the right of appeal and inclusion of med-arb provision.’16 There is also ‘a clarification that the Model Law applies to international arbitrations in ­Australia to the exclusion of the state Commercial Arbitration Acts (s 21)’17 In particular, the 2011 legislative amendments to the International Arbitration Act (IAA) sought to promote greater consistency between domestic and international arbitrations. Prior to this amendment, domestic arbitrations were ordinarily treated differently from international arbitration under Australian law. Only the International Arbitration Act 1974 (Cth) applied to an international commercial arbitration.18 Only the relevant State or Territory statute applied to a domestic arbitration. As a result, parties to an arbitration agreement governed by Australian law could choose whether to opt out of the Model Law if the applicable CAA in the state or territory permitted them to do so. This led to uncertainty over the application of the IAA. The 2011 amendment, coupled with amendments to state and territory CAAs, has significantly redressed this issue, rendering arbitration rules and proceedings more predicable in relation to ICA.19 This unification in the treatment of domestic and international arbitration is also likely to grow further as the CAAs in the various States come into force and are interpreted by the courts.20 The attendant result is likely to be that domestic ‘best practice’ will increasingly replicate international ‘best practice’, even though domestic arbitration has traditionally been a matter of state law, governed by the applicable state or territorial CAA.21 This unification between the treatment of domestic and international commercial arbitration is already evident in recent decisions by Australian courts that support ICA. First, Australian courts endorse international arbitration practice in compliance with arbitration law. Second, they recognise the need to render Australia into a responsible legal regime in which to recognise and enforce ICA.22 Their guiding policy is to ‘enhance Australia’s position as an attractive jurisdiction within which private parties can effectively conduct international arbitral disputes’.23 This growing judicial endorsement of ICA is also

16 See Richard Garnett, ‘Australia’s International and Domestic Arbitration Framework’ in GA Moens and P Evans, Arbitration and Dispute Resolution in the Resources Sector (New York, Springer, 2015) 9, available online: www.springer.com/cda/content/document/cda_downloaddocument/9783319174518-c2.pdf?SGWID= 0-0-45-1507878-p177329726. 17  See Allens (2010), ‘Focus: International Arbitration Laws Overhauled’, available online: www.allens.com.au/ pubs/arb/foarb1jul10.htm. This article notes that the purpose of this difference in s 21 of the IAA is to avoid the problem in distinguishing between Federal and State law, that arose in Eisenwerk v Australian Granites Ltd [2001] 1 Qd R 461, by clarifying that the Model Law applies to international arbitrations in Australia, to the exclusion of the state Commercial Arbitration Acts. 18  See IAA s 21(1) which provides: ‘If the Model Law applies to an arbitration, the law of a State or Territory relating to arbitration does not apply to that arbitration.’ 19  See Gordon Smith and Andrew Cook, ‘International Commercial Arbitration in Asia–Pacific: A Comparison of the Australian and Singapore Systems’ (2011) 77(1) Arbitration 77 108–15, available online: www.kennedyslaw. com/files/Uploads/Documents/IntArb_February2011.pdf. 20 ibid. 21  See Benjamin Hayward, ‘The Australian arbitration framework’, 2016, in the Notes from the 2016 Resolution Institute CPD Seminar, Melbourne, 1–24, available online: http://dro.deakin.edu.au/eserv/DU:30082985/ hayward-australianarbitration-2016.pdf. 22  See further s 3.2 below. 23  See Corrs, ‘High Court Upholds Constitutional Validity of Australia’s International Arbitration Act which Gives the UNCITRAL Model Law Force of Law in Australia’, 2013, available online: www.corrs.com.au/publications/corrs-in-brief/high-court-upholds-constitutional-validity-of-australias-international-arbitration-actwhich-gives-the-uncitral-model-law-the-force-of-law-in-australia.

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demonstrated by the fact that ‘the Federal Court is willing to take a more active role in matters involving international arbitration, by being the gatekeepers to the pro-enforcement bias of the New York Convention’.24 A related result of this statutory and judicial adoption of international ‘best practice’ is that Australian law has placed limits on the authority of commercial arbitrators, consistent with international arbitration standards. For example, applicable federal and state statutes in Australia specify that arbitration proceedings are ordinarily private and confidential.25 Neither arbitration proceedings nor awards are placed on the public record, except in ­matters of public interest.26 Conversely, Australian courts sometimes construe the authority of arbitrators expansively, to ensure that they have the necessary powers to decide cases expertly and fairly, such as to grant interim measures of protection to the parties.27

2.1.2.  Arbitration Agreement The New York Convention adopts a wide definition of ‘arbitration agreement’ and imposes a strict obligation on Australian courts to stay proceedings brought in breach of an obligation to arbitrate. The same principles regarding the conduct of arbitration and the appointment and disqualification of arbitrators now apply under the revised IAA and CAAs. An arbitration agreement is required to be in writing for both international and domestic arbitrations. Under the IAA, the term ‘agreement in writing’ has the same meaning as under the New York Convention. In particular, the CAAs have adopted the expansive definition of an arbitration agreement contained in Article 7 of the Model Law, specifically that ‘[a]n arbitration agreement is in writing if its content is recorded in any form that provides a record of the agreement, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means’. The CAAs also provide that an arbitration agreement can arise from an electronic communication, an exchange of statements of claim and defence, or be incorporated by reference into that agreement. However, legislation adopting the IAA and the CAAs across Australia does not mandate the content of an arbitration agreement. The terms of an arbitration agreement are rather governed by the principles of contract law in Australia, including the choice of laws of the parties which permit them to agree on the substantive law governing their dispute. ­Article 28(1) of the IAA, based on the Model Law, provides that any designation of the law or legal system of a particular state shall be regarded as referring directly to the substantive law of that state and not its conflict of law rules, unless otherwise expressed by the parties. In the absence of an express or implied choice by the parties, Article 28(2) provides that the arbitral tribunal shall apply the conflict of law rules applicable at the seat of the arbitration to determine the substantive law governing the dispute.

24  ibid. This practice is reflected by the Federal Court in upholding Justice Murphy’s two first instance judgments in favour of enforcing ICA awards. On the judicial support for ICA in general in Australia, see Garnett (n 16). 25  See for example, IAA s 23C. 26  See ibid, s 23D. 27  On these developments, see further Garnett and Nottage (n 4) 953. See also Allens (n 17); Corrs (n 23).

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Also consistent with free choice, the parties to an arbitration agreement can enter into multi-tier dispute resolution agreements in which arbitration operates as one tier among others, in resolving a dispute. Such an arbitration agreement is ordinarily binding and enforceable; and can only be nullified on limited grounds, such as in being induced by a fraudulent misrepresentation, subject to a material mistake, unconscionable, or unable to be performed due to frustration. An arbitration agreement is ordinarily limited to the parties to it and is not binding upon third parties who do not enjoy privity of contract. A limited exception arises when a parent company engages in a sham in which it relies on a subsidiary to act as a signatory to the agreement in order to disguise the material interest of the parent company in the agreement. However, it is arguable that this is not a true exception to privity of contract, on grounds that the parent company is an implied or ostensible party to the contract, and/or is estopped from denying that it is a party. Further consistent with the free choice of the parties, Article 8 of the Model Law provides for a stay of judicial proceedings when there is a valid arbitration agreement. However, the IAA varies from Article 8 of the Model Law by requiring, in section 7(5) of the IAA, that courts decline to grant a stay of proceedings only if they find that the arbitration agreement is null, void, inoperative or incapable of being performed. In contrast, the CAAs fully replicate Article 8 of the Model Law, according primacy to the arbitration agreement concluded by the parties and denying judicial discretion not to enforce it. Reaffirming the freedom of choice of the parties to an arbitration agreement, the Full Court of the Federal Court of Australia, in Comandate Marine Corp v Pan Australia Shipping Pty Ltd,28 decided that courts must strive to give a broad and flexible interpretation to an arbitration agreement, with the purpose of referring as many of the parties’ claims to arbitration as possible. This approach, arguably, is justified, not only by the autonomy of the parties to the arbitration agreement, but also by the needs of international commerce which require greater certainty and efficiency in the resolution of disputes.29

2.2.  Institutional Framework Both institutional and ad hoc arbitration are allowed in Australia. This permits disputing parties to tailor the procedural rules to their particular circumstances and needs. In particular, it permits them to adopt the rules of an arbitration association in whole or part, such as the rules of the Australian Centre for International Commercial Arbitration (ACICA), or to adopt ICA without resort to the rules of any arbitral association, or to choose an option between institutional and ad hoc arbitration.30 However, it should be noted that there has been an increase in institutional arbitration in deciding ICA disputes in Australia since the enactment of ACICA’s new Arbitration Rules,

28 

Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 at [165]. Garnett (n 16). 30  See Peter Wood, Phillip Greenham and Roman Rozenberg, ‘Arbitration in Australia’, CMS Guide to ­Arbitration 1 (2012): 52, available online: https://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_ AUSTRALIA.pdf. 29 

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the establishment of Australian International Dispute Centre (AIDC), and the revisions to the IAA and various CAAs. ACICA remains the most prominent international arbitration institution in Australia.31 ACICA is responsible for the administration of ICA and is the only centre with such a comprehensive mandate in Australia.32 It is also the sole default appointing authority under the IAA to perform the functions under Article 11(3) and 11(4) of the Model Law that deal with the appointment of arbitrators as prescribed by the International Arbitration Regulations 2011 (Cth). As a result, the ACICA can appoint arbitrators to international arbitrations seated in Australia where the parties have not agreed upon an appointment procedure. This ‘removes the requirement for parties to commence proceedings in one of the State or ­Territory Supreme Courts or in the Federal Court to have an arbitrator appointed under the IAA.’33 ACICA has an Advisory Board, an Appointments Committee and an Executive. ACICA rules and proceedings are overseen by its advisory board, comprising representatives of the Attorney-General of Australia, the Chief Justices of the High Court and Federal Court, the President of the Australian Bar Association, the President of the Law Council of Australia and industry representatives.34 ACICA’s Appointments Committee is responsible for the nomination of arbitrators; however, the Executive has the authority to make such appointments. ACICA has adopted comprehensive rules and procedures governing ICA proceedings. In 2011, it devised rules for expedited arbitration as well as emergency arbitration and emergency interim measures of protection. On 26 November 2015, it launched new, efficiency-focused arbitration rules that came into effect on 1 January 2016.35 These rules also deal with, among other issues, rules and procedures for expedited arbitration. ACICA also provides for mediation, including through a model mediation clause.36 In March 2011, ACICA adopted the ACICA Appointment of Arbitrators Rules 2011, to streamline the process by which a party can apply to have an arbitrator appointed to a dispute with its seat in Australia. ACICA is affiliated with dispute resolution centres across Australia, such as the Australian Disputes Centre,37 and the Melbourne Commercial Arbitration and Mediation Centre,38 It also provides seminars and other forms of continuing arbitration education and runs international conferences on current issues in ICA.39

31 

See Smith and Cook (n 19). See the website of Australian Centre for International Commercial Arbitration at www.acica.org.au. See Doug Jones, ‘The Asia-Pacific Arbitration Review’ (2013) Global Arbitration Review 22, available online: www.dougjones.info/wp-content/uploads/2012/07/gar-2013-australia-jones.pdf. 34  See ACICA Rules Booklet 2016, available online: https://acica.org.au/wp-content/uploads/2016/02/ACICA_ Rules_2016_Booklet.pdf. 35  On the new ACICA Rules, see http://acica.org.au/acica-services/acica-rules-2016. 36  See ACICA Mediation Rules 2007, available online: http://acica.org.au/assets/media/Rules/Mediation-Rules. pdf. 37 See Australian Disputes Centre at https://disputescentre.com.au. See also https://acica.org.au/australiandisputes-centre/. 38 See Melbourne Commercial Arbitration and Mediation Centre at https://acica.org.au/melbournecommercial-arbitration-and-mediation-centre-mcamc/. 39  See, for example, the 4th International Arbitration Conference on 22 November 2016, https://acica.org.au/ wp-content/uploads/2016/08/Save-the-Date-Int-Arbitration-Conf-2016.pdf. 32 

33 

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ACICA maintains a panel of international arbitrators, which are known as ACICA ­Fellows. Applicants must have: 1. Extensive arbitration experience, including practical experience either as counsel or arbitrator in an international arbitration context. 2. Good standing in the international arbitration community. 3. Fellow membership in the Chartered Institute of Arbitrators or comparable professional arbitration institute. There is also an annual membership fee for ACICA Fellows of AUD 400.40 The ACICA Rules do not require arbitrators to have particular qualifications, except to be impartial and independent.41 Nor are disputing parties required to appoint an arbitrator from the ACICA panel.42 However, appointed arbitrators must have an appropriate level of experience in order to serve on an ACICA panel.43 In particular, Rule 16.3 provides: Before appointment, a prospective arbitrator shall sign a statement of availability, impartiality and independence and return the same to ACICA. The prospective arbitrator shall disclose in writing to those who approach him or her in connection with his or her possible appointment any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence.’

ACICA nevertheless faces several challenges which also represent opportunities. ICA in Australia is sometimes depicted as unduly protracted. However, much of this criticism is not substantiated. Nor is it peculiar to ICA in Australia. The length of arbitral proceedings will ordinarily vary from case to case, depending on the governing arbitration agreement, the complexity of the issues in dispute, the location of the parties, the number of arbitrators appointed, and the cooperation of the parties with the tribunal and one another in resolving their dispute. Parties who opt for expedited proceedings, not limited to emergency proceedings, under the ACICA Arbitration Rules, can further redress costs and delays in proceedings. A further criticism is that ACICA’s facilities at 1 Castlereagh Street, Sydney are unable to service multiple arbitration proceedings concurrently. However, this supports the case for extending these facilities, including hearing and meeting rooms, together with support staff in response to the growth in ICA conducted under the auspices of ACICA.44 Another apprehension is that ACICA faces competition from other arbitration centres in Australia with their own arbitration rules and services, such as the Institute of Arbitrators and Mediators Australia (IAMA) at the Resolution Institute. However, it is arguable that these services can be complementary to those provided by ACICA and strengthen the case for parties to opt for ICA in Australia including under the auspices of ACICA.45 The same argument applies to new arbitration centres that have evolved that are not directly

40 See ACICA, ‘Fellow Membership—ACICA Panel of Arbitrators’, available online: https://acica.org.au/ fellow-panel-of-arbitrators-membership/#join. 41  See ACICA rules, s 16.3. 42 ibid. 43  See Doug Jones and Bjorn Gehle, ‘Australian Centre for International Commercial Arbitration’ in Loukas A Mistelis and Laurence Shore, Arbitration Rules—National Institutions 2nd edn (Huntington, Juris Publishing, 2010) [ACICA-1]–[ACICA-60]. 44  See ACICA Rules 2016 at https://acica.org.au/acica-rules-2016/. 45  See Institution of Arbitrators and Mediators Australia at www.iama.org.au.

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affiliated with ACICA, such as the Perth Centre for Energy and Resources (PCERA) that have specialised capabilities which the ACICA understandably, cannot, nor should attempt to, replicate.46 ACICA and other ICA arbitration centres in Australia also benefit from the presence of further established arbitration associations in Australia, such as the Australian Institute for Commercial Arbitration (AICA)47 and the Chartered Institute of Arbitrators.48 These various associations gain further benefit from recent Australian federal, state and territory legislation and judicial decisions that model ‘best practice’ in ICA. The result is therefore ‘a growing variety of arbitration institutions within the nation, some of which have evolved independently of the ACICA.’49 There is also a growing advantage to choosing ICA in Australia because of these varied and enriching arbitration opportunities for parties to resolve their disputes. This is also reflected in the increasing number of judicial decisions on ICA that predominantly support it. As an illustration of case load, from 1989 to March 2013 the Supreme Court of New South Wales heard 28 cases on ISA, while the Supreme Court of Victoria heard 14 cases.50 A limitation about having Australia as the venue for ICA which cannot easily be addressed is location. Australia is not a geographic hub like Singapore and Hong Kong; and the time and cost involved in transportation to and from Australia is significant. In addition, Sydney as the locus of ACICA is an expensive city in which to hold arbitrations. However, given the significance of ICA in the Asian region and Australia’s place in Asia, the obstacles to holding arbitrations in Australia involving regional parties are significantly less than obstacles faced by global parties holding arbitrations in Australia. Innovations in communication through digital media and developments in transportation are likely to further redress these concerns over time.

2.3.  Judicial Framework There is encouraging evidence that Australian courts generally support ICA, as a matter of established judicial practice, including practice prior to the enactment of the IAA and the recent CAAs across Australia. This includes the fact that federal and state courts have lists from which judges with experience in arbitration are chosen to preside over disputes involving arbitration. Furthermore, Australian courts generally appreciate the value of arbitration in resolving disputes expeditiously and fairly in light of the expertise of commercial arbitrators in arriving at sustainable awards.51 As a result, courts tend to regulate commercial arbitration proceedings only to the extent that they deem necessary, such as to redress a challenge to an arbitrator on grounds of a lack of ­independence. 46 

See Perth Centre for Energy and Resources Arbitration at https://pcera.org/. See Australian Institute for Commercial Arbitration at www.aica.asn.au/. 48  See Chartered Institute of Arbitrators at www.ciarb.net.au/. 49  See Trakman and Montgomery (n 5). 50  See Albert Monichino, Luke Nottage and Diana Hu, ‘International Arbitration in Australia: Selected Case Notes and Trends’ (2012) 19 Australian International Law Journal 181–211. 51  TCL v Judges (n 10) [10]; PA Keane, ‘The Prospects for International Arbitration in Australia: Meeting the Challenge of Regional Forum Competition or Our House, Our Rules’ (2013) 79 Arbitration 195–207; PWC and Queen Mary University of London School of International Arbitration, ‘2013 International Arbitration Survey’, www.arbitration.qmul.ac.uk/docs/123282.pdf and other years’ surveys. But see QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd [1991] FCA 637; [1991] 33 FCR 227. 47 

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Conversely, courts have demonstrated their readiness to assist arbitration tribunals by enforcing interim awards, or otherwise facilitating the arbitration process. This judicial guidance includes an interest in not protracting judicial oversight of arbitral proceedings and awards, nor to subvert the arbitration process by subjecting the minutia of arbitral awards to a judicial microscope. Consequently, Section 8 of the IAA restricts available defences to the enforcement of an arbitration award, to promote the finality of those awards, to provide consistent processes for their review, and to limit delays in enforcement proceedings. The Section also limits the authority of national courts to review arbitration awards, to retry cases on their merits, or to act as an appellate court that rules on errors of law or fact. Section 8 also avoids adopting an expansive conception of national public policy, limiting review on such grounds to international standards of public policy, such as related to fraud or other criminal conduct.52 The decisions of Australian courts have expanded on the recognition and enforcement of ICA awards, including prior to the 2011 amendment to the IAA. This judicial approach is evident in the Federal Court decision of Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd.53 There, the Court confirmed its commitment to enforce the arbitral process and the finality of the award, to construe judicial review of the award restrictively, and not set it aside for minor or technical breaches of the rules of natural justice. However, the case involved protracted and costly litigation due to the lack of clarity in section 18 of the IAA as to whether the Federal Court, in addition to the State and Territory Courts, was a ‘competent court’ to enforce an award under the Model Law. The Civil Law and Justice Amendment Legislation Bill 2017 has addressed this drafting issue in the IAA, and confirmed the competence of the Federal Court to enforce such awards.54 In the more recent case of Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd55 the Federal Court took a further pro-enforcement approach to the finality of an ICA award. It held that it did not have a general discretion to refuse to enforce a foreign arbitral award, other than on specific grounds provided for in the IAA.56 It held further that the public policy ground for refusing to enforce a foreign award in the IAA57 should be read restrictively, in light of the pro-enforcement purpose of the New York Convention and the objects of the IAA.58

3. Reform 3.1.  Legislative and Regulatory Initiatives The 2010 Amendment to the IAA was intended to encourage the selection of Australia as the location for international commercial arbitration. Section 39(2) of the IAA seeks to

52 

See generally Garnett (n 16). Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2014] FCAFC 83. 54  www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1057. On this amendment, see Federal Attorney-General’s Explanatory Memorandum to the 2017 Bill, para 307. 55  Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131. 56  See IAA ss 8(5), 8(7). 57  See IAA s 8(7)(b). 58  Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131, [132]. 53 

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provide ‘an efficient, impartial, enforceable and timely method by which to resolve commercial disputes.’59 The amended IAA also aims to guide courts in exercising their powers to assist arbitrators,60 including enforcing awards, appointing or removing an arbitrator, or staying judicial proceedings brought in breach of an arbitration agreement.61

3.1.1.  New York Convention The IAA was first enacted in 1974, with the purpose of giving effect to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The New York Convention serves as the global law governing ICA and was adopted by 149 state parties as at 10 January 2014. Consistent with the global stature of the New York Convention, the IAA includes that Convention in Schedule 1. In addition, and compliant with Article 2 of that Convention, section 7 of the IAA provides for the mandatory stay of judicial proceedings that are brought in breach of an arbitration clause or agreement. Consistent with Article 8 of the Convention, section 8 of the IAA provides for the enforcement of foreign arbitral awards in Australia. The IAA, in turn, imposes a duty on Australian courts to act in accordance with the New York Convention insofar as it is incorporated into Australian law, including in particular, in recognising and enforcing ICA awards. ICA awards in Australia are also subject to recognition and enforcement in foreign courts in jurisdictions that adopt the New York Convention. Conversely, ICA awards rendered outside Australia that meet these same requirements are enforceable before Australian courts. The result is that the New York Convention serves as the legal framework for the enforcement of ICA awards globally.62 The New York Convention also serves as the legal foundation for the recognition and enforcement of domestic arbitration. This is the case in regard to the Australian states and the Northern Territories that have enacted new Commercial Arbitration Acts, generically identified as the Commercial Arbitration Act 2011. As discussed in section 2.1.1 above, the CAAs mirror the New York Convention, with limited exceptions, such as by permitting an appeal from an arbitration award on the merits, subject to the agreement of the parties and the willingness of the court to grant leave to appeal. Finally, it is more likely that domestic arbitration will be subject to greater judicial scrutiny than ICA, in accordance with the wider grounds provided by state legislation for the judicial scrutiny of domestic awards. However, given the extent to which the new CAAs adopt the New York Convention’s pro-enforcement position on arbitration awards, state courts across Australia are increasingly likely to enforce domestic arbitration awards.

59 

IAA s 39(2). See Garnett (n 16). 61  On staying proceedings, see Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332. 62  See generally Hayward (n 21). 60 

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3.1.2.  Model Law Impact and Legislative Reform The IAA also endorses the UNCITRAL Model Law. Section 21 of the IAA accords exclusive jurisdiction to the Model Law in applying international commercial arbitration to a dispute with an Australian seat.63 Section 21 also precludes ‘opting out’ of the Model Law.64 The exclusivity of the Model Law has the benefit of adopting internationally recognised rules to govern international commercial arbitration. However, a question arises as to whether it denies party autonomy in cases where the parties expressly provide for an alternative to the Model Law, such as for domestic law. A related question is whether the exclusivity of the Model Law undermines the prospect of review under domestic law.

3.1.3.  Impartiality and Independence of Arbitrators There are no restrictions as to who represents the parties to an arbitration conducted in Australia, including the right of parties to represent themselves in arbitral proceedings. There is also no restriction on the right of parties to appoint foreign lawyers to act as ICA arbitrators. This is consistent with the Model Law which expressly provides that no person shall be precluded by reason of his or her nationality from acting as an arbitrator, unless otherwise agreed to by the parties. However, section 18 of the IAA provides for the independence of arbitrators.65 Section 18A specifies that an arbitrator can be challenged if there are ‘justifiable doubts as to the impartiality or independence’ of the person serving as an arbitrator.66 These provisions are consistent with international practice in arbitration. However, interpretive issues arise in determining the requisite nature of impartiality and independence required of arbitrators. What constitutes ‘justifiable doubts’ about an arbitrator’s impartiality? Should such ‘doubts’ be construed expansively or restrictively? Will an expansive interpretation of ‘justifiable doubts’ lead to a flood of challenges to the appointment and service of arbitrators? In the absence of case law and opinio juris in interpreting a code of arbitral conduct in Australia, much will depend on the extent to which an Australian court interprets the Model Law, including in determining whether and how it is ought to be interpreted in answering the questions above.

3.1.4. Confidentiality Section 22 of the IAA stipulates that parties to an arbitration may provide expressly for confidentiality,67 and sections 23C–23G prescribe the rules which govern confidentiality.68 Section 23G(1)(a) provides a ‘public interest’ exception to such confidentiality.69 Several questions arise as to the confidentiality: what is the status of confidentiality if the parties fail

63 

IAA s 21.

64 ibid. 65 

ibid, s 18. ibid, s 18A. 67  ibid, s 22. 68  ibid, ss 23C–23G. 69  ibid, s 23G(1)(a). 66 

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to provide for it expressly? In such circumstances, does the arbitration tribunal have some discretion in determining the nature and scope of confidentiality? Should confidentiality be applied expansively, to the existence of a dispute, the parties involved, the conduct of proceedings and the award reached? Should all participants in proceedings, including third party witnesses, be bound by such confidentiality? Should the ‘public interest’ exception to confidentiality be construed broadly or restrictively? Again, the answers to these questions may depend on the application and interpretation of the Model Law. In response to these questions, the IAA did not create a presumption in favour of the confidentiality of international arbitration proceedings with their seat in Australia, but instead granted parties the right to opt into a confidentiality regime. This is inconsistent with both the Model Law and the CAAs that include a presumption in favour of confidentiality of arbitration proceedings. This omission from the IAA has since been addressed by the Civil Law and Justice (Omnibus Amendments) Act 2015 which creates a presumption in favour of confidentiality, with the right of the parties to opt out of it.70

3.1.5.  Writing Requirement Part II of the IAA requires that ‘agreements [relating to arbitration are] in writing.’71 This varies from the Model Law, which proposes recognition of both oral and written agreements.72 The law in some member countries, notably in Europe, recognises both oral and written agreements, consistently with the Model Law. A potential concern is whether oral agreements that modify written agreements ought to be recognised, subject to the terms of that written agreement. This would provide the parties with greater flexibility, particularly as they are often located in different jurisdictions, and arbitration agreements may warrant modification to suit their altered circumstances. The countervailing view is that written agreements demonstrate the seriousness of the parties’ intention to arbitrate, and provide certainty and predictability. Written agreements may also avoid ex post disputes over the terms of an oral agreement. Moreover, technological capabilities include the capacity to engage in instant written communications electronically, including through e-contracting.

3.1.6.  Immunity of Arbitrators and Entities Appointing Arbitrators Section 28(1) of the IAA provides that ‘an arbitrator is not liable for anything done or omitted to be done by the arbitrator in good faith in his or her capacity as arbitrator’.73 This provision is laudable on its own terms. The problem arises in determining the nature and scope of ‘good faith.’ Does the perception that an arbitrator conducts proceedings in a dilatory manner or cancels hearings on short notice without explanation constitute ‘bad faith’? Or is ‘bad faith’ co-extensive with fraudulent acts that are mala fide? Section 28(2) specifies that ‘an entity is not liable for failing or refusing to appoint an arbitrator if done in good faith.’74 Here, questions arise over when a refusal to appoint an 70 www.legislation.gov.au/Details/C2015A00132. 71 

ibid, Part 2. See UNCITRAL Model Law on International Commercial Arbitration, Art 7. 73  IAA s 28(1). 74  IAA s 28(2). 72 

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arbitrator constitutes ‘bad faith.’ For example, does failure to appoint an arbitrator constitute bad faith when the person acting for the appointing entity decides based on unsubstantiated comments about a candidate’s alleged lack of good manners?

3.1.7.  Recognition and Enforcement of Arbitration Awards In supporting the recognition and enforcement of ICA awards, the IAA includes an exhaustive, rather than open-ended, list of grounds upon which a court may decline to enforce a foreign arbitral award.75 It also permits courts to enforce such awards and award costs against a party seeking adjournment who is not acting in good faith or who acts without reasonable diligence.76 Conversely, it permits a court to set aside an award on limited grounds, namely fraud, corruption, the denial of natural justice, or the violation of public policy.77 In key respects, these provisions in the IAA affirm provisions on the enforcement of international arbitral awards before the 2010 amendment. What remains at issue is how Australian courts are likely to interpret the applicable provisions on enforcement. The question as to when a person acts in ‘bad faith’ in seeking an adjournment is potentially contentious: would a person seeking adjournment be acting in bad faith if the primary reason for that request is that person’s knowledge that a material witness for the other side would be unavailable to testify following the adjournment? Similarly, when is the violation of ‘public policy’ sufficiently material to justify a court setting aside an arbitral award? What is generally noted is that Australian courts tend not to exercise a broad discretion to refuse enforcement of an arbitration award on grounds of public policy.78

3.1.8.  Concurrent Jurisdiction Section 18(3) of the IAA provides that the Federal Court and state and territory superior courts have concurrent jurisdiction.79 This continues the status quo and is generally consistent with international practice. The benefit of this provision is that it provides the parties with greater flexibility and, insofar as their agreements expressly or impliedly provide, for concurrent jurisdiction. However, the challenge is to impede parties from forum shopping between federal and state or territorial courts, and to avoid the duplication of proceedings. The assumption is that, if a claim is pending in the Federal Court, a state or territorial court will stay proceedings unless there are legal reasons not to do so. The converse also applies.

3.1.9.  Interim Measures The IAA provides more extensive interim measures than are stipulated for in the Model Rules. Section 23 of the IAA provides that a party to arbitral proceeding may apply to

75 

See generally IAA Part 2.

76 ibid. 77 ibid. 78 See 79 

Traxys Europ SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276, [105]. IAA s 18(3).

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a court to issue a subpoena to compel a person to attend for examination or produce documents.80 Section 23J allows a tribunal to make an order allowing the tribunal, a party or an expert to inspect evidence that is in a party’s possession.81 Section 23K gives the tribunal the power to award security for costs.82 Courts may also grant ‘anti-suit’ injunctions to prevent parties from bringing court proceedings in breach of their agreements.83 Essentially, the benefit of these interim measures is to render arbitration proceedings more effective, empowering arbitrators to require the parties to comply with the specific measures ordered. One response however, is that, taken to extremes, such empowerment may undermine due process in the conduct of an ICA and encroach on the authority of courts to redress such violations.

3.1.10.  The Scope of the CAAs The new CAAs, adopted in states across Australia, adhere largely to the Model Law.84 Even where they vary from the Model Law, their variance from it is less pronounced than in earlier CAAs. For example, the new CAAs provide for confidentiality in domestic arbitration in the absence of exceptional circumstances such as where all the parties agree to waive ­confidentiality.85 They preserve a right of appeal on questions of law, but require the consent of all parties, leave of the court to appeal, and that the court is persuaded that the arbitral decision is obviously wrong and of general public importance.86 The new CAAs also contain a ‘med-arb’ provision by which the appointed arbitrator(s) may conduct arbitration if mediation fails.87 Finally, consistent with the autonomy of the parties to choose the rules and procedures governing arbitration, the CAA’s provide that the parties may expressly agree to disallow one or more of the interim measures identified above.

3.2.  Judicial Initiatives The support of Australian courts for international commercial arbitration awards is reflected in the Australian High Court’s decision to unanimously uphold the constitutional validity of Australia’s international arbitration laws. In TCL Air Conditioner (Zhongshan) v The Judges of the Federal Court of Australia,88 the High Court rejected a constitutional writ which sought to prevent the Federal Court from making orders to enforce an international

80 

ibid, s 23. ibid, s 23J. 82  ibid, s 23K. 83  CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, 392. 84  The new CAA regime has been adopted by New South Wales, Victoria, South Australia, Tasmania, Western Australia and by the Northern Territory. 85  CAA ss 27E, 27F. 86  ibid, s 34A. 87  ibid, s 27D. See further generally Garnett (n 16). 88  TCL v Judges (n 10). See too Chief Justice Bergin of the New South Wales Supreme Court who confirmed that ‘commercial courts [in Australia] respect commercial parties’ decisions to proceed to arbitration of their dispute’, in Kaspersky Lab UK Ltd v Hemisphere Technologies Pty Ltd [2016] NSWSC 1476, [25]. 81 

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arbitration award. The High Court held that it was inherent in the arbitration agreement that the parties agreed to accept the arbitrator’s decision. Once the arbitrator had decided upon the legitimacy of the disputed rights, the exercise of that authority replaces the parties’ rights to address the applicable issue directly. In effect, the arbitrator exercised powers conferred by the parties to decide the nature of their rights. The Federal Court had the power to review that arbitrator’s decision and in doing so, was not merely endorsing the arbitration award. Therefore, the constitutional validity of the requirement that the parties comply with the arbitrator’s decision was upheld. Australian courts generally support the virtue of consistency in international arbitration processes. As Chief Justice James Allsop and Justice Clyde Croft noted: From an economic point of view, a country where the courts are inconsistent in their approach and unpredictable in their treatment of international arbitral processes and awards does not, and is not likely to, attract any significant arbitration work.89

As a result, Australian courts affirm ICA proceedings and awards under the New York Convention. They exercise powers to appoint arbitrators, take evidence, and order and enforce interim measures. They recognise the value of ordering measures in support of ongoing arbitration, without duplicating or subverting it.90 They also enforce arbitral awards to maintain certainty and finality in international dispute resolution.91 Australian courts also recognise the autonomy of the parties to agree to have their disputes resolved through arbitration rather than litigation. For example, they stay judicial proceedings if they find that there is a valid and enforceable arbitration agreement.92 However, an Australian court may decline to stay judicial proceedings if it finds that the issue in dispute is not arbitrable, or is otherwise incapable of being arbitrated.93 In a recent Federal Court decision, WDR Delaware Corporation v Hydrox Holdings Pty Ltd, the Court held that the ultimate decision whether a corporation should be wound up under the ­Corporations Act rested with the Court.94 The Court nevertheless stayed proceedings pending a determination by the Arbitral Tribunal on the related issue of whether a declaration of oppressive conduct should be made.95 The challenge here is to determine the circumstances in which the agreement is not ­arbitrable, for example, to avoid subjecting sensitive domestic policies to international commercial arbitration. As such, Australian courts are more likely to treat a matter as not being arbitrable such as on public policy grounds, than to stay arbitration proceedings or set aside an award on grounds of arbitral incapacity. However, in Sino Dragon Trading Ltd v Noble Resources International Pte Ltd,96 the Federal Court accepted that challenges under

89 See Chief Justice James Allsop and Justice Clyde Croft, ‘Judicial Support of Arbitration’ (FCA) [2014] ­ edJSchol 5, paper presented at the APRAG Tenth Anniversary Conference, Melbourne, 28 March 2014, available F online: www.austlii.edu.au/au/journals/FedJSchol/2014/5.html. 90  IAA s 7. 91 See Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd [2011] FCA 131, [126]. 92 ibid. 93  IAA s 7(5). 94  WDR Delaware Corporation v Hydrox Holdings Pty Ltd; In the Matter of Hydrox Holdings Pty Ltd [2016] FCA 1164, [112]. 95  ibid., [1] per Justice Foster. 96  Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131.

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Article 34 of the UNCITRAL Model Law do not constitute litigation in the ordinary course, and that public policy considerations warrant adverse cost orders in order to discourage unmeritorious challenges to a valid arbitral award.97

3.3.  Other Factors There is a limited competitive market for ICA services in Australia. ACICA is the premier body providing such services.98 However, a recently created specialist arbitration centre, the Perth Centre for Energy and Resource Arbitration (PCERA), provides for domestic and international commercial arbitration in relation to energy and resources which are primary sectors in Western Australia.99 No foreign arbitration centres, other than the Chartered Institute of Arbitrators and to a limited extent, the International Chamber of Commerce, has an established presence in Australia at the time of writing.100 However, collaboration among such institutions does occur, such as in the training of arbitrators, and in the conduct of conferences and workshops. Organisations such as the Australian Disputes ­Centre and the Australian Commercial Disputes Centre provide ADC training and advice on procedures for resolving disputes, in collaboration with mediators, experts and arbitrators. The Australian Commercial Disputes Centre in particular engages across commercial fields, such as by providing training and advice on building and development applications, ­commercial and industrial disputes, law, accounting and franchising.101

3.4.  What Drives Reform? 3.4.1.  Legislative, Judicial and Institutional Elements Australian legislatures, courts and arbitration institutions have progressed significantly in promoting ICA in the resolution of cross-border commercial disputes. The Australian experience highlights how its comprehensive adoption of the Model Law by legislatures and courts across the Federation has helped to promote uniformity and to create an arbitrationfriendly legal environment. There is the perception, however, of continuing problems with the allegedly formalist and conservative approach of Australian law makers and courts to ICA, although these perceived deficiencies have countervailing advantages of encouraging rigorous reasoning and detailed awards, as will be discussed in section 4.1 below. Viewed critically, Australia’s legislative promotion of international commercial arbitration has tended to maintain the status quo, more than to innovate to truly encourage a timely and cost-effective means of dispute resolution. When compared to established ICA jurisdictions like Singapore, Hong Kong and the developing arbitration centre of South Korea,

97 

ibid, [4] and [28] per Justice Beach. IAA; also see s 2.2 above. 99  See Perth Centre for Energy and Resources Arbitration at http://pcera.org. 100 On the Chartered Institute of Arbitrators, see www.ciarb.net.au; on the International Chamber of Commerce, see www.iccaustralia.com.au. 101  Available online www.disputescentre.com.au/. 98 

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Australian jurisdictions could be well served by embarking on bolder legislative frameworks that strive, not only to be arbitration-friendly, but also more arbitration-innovating. Australian law-makers and courts are undoubtedly cognisant that Australia has not attracted a large number of international arbitration cases. For example, it is reported that no more than 40 cases had been registered with ACICA between the time when the ­Australian International Disputes Centre (AIDC) opened in 2010 and until 2014.102 ­However, ACICA’s caseload increased dramatically between 2012 and 2014. By 2013/2014, more than two thirds of ACICA cases involved two foreign parties who had no other affiliation with Australia.103 However, these numbers are scant compared to the 259 new arbitrations conducted by the Singapore International Arbitration Centre (SIAC) in 2013,104 156 cases conducted by the Kuala Lumpur Regional Centre for Arbitration,105 260 cases conducted by the Hong Kong International Arbitration Centre,106 and more than 1000 cases each year since 2007 by the China International Economic and Trade Arbitration Commission (CIETAC).107 Some of these differences are not comparable to ICA in Australia, such as the cases heard by Chinese arbitration centres like CIETAC. However, in the case of the centres in Hong Kong, Singapore and Kuala Lumpur, the volume of their caseload demonstrates a significant competitive advantage over ACICA. At the same time, Australian commercial arbitrators are regularly appointed as arbitrators at these regional centres, as they are in global centres such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC) and the International Centre for Dispute Resolution of the American Arbitration Association (ICDR).

3.4.2.  Top-down Versus Bottom-up Reform The reform of ICA in Australia has been both ‘top-down’, emanating from legislation and the highest courts, and ‘bottom-up’, notably arising ad hoc or more formally, as administered according to the rules and procedures of ACICA. The ‘top-down’ approach is evident in the 2010 revisions to the IAA.108 The ‘bottom-up’ approach is evident in the new ­‘Arbitration Rules 2016’ released by the ACICA which came into effect on 1 January 2016.109 These ‘top-down’ and ‘bottom-up’ approaches are discussed above.

3.4.3.  Special Considerations The most prevalent attributes in the development of ICA in Australia inhere in the influence of the common law legal tradition and culture within a federal rather than a unitary 102 

See Nottage (n 1) 24.

103 ibid.

104  Singapore International Arbitration Centre, ‘Total Number of Cases Handled by the SIAC as of 31 ­December 2013’, 2017, available online: www.siac.org.sg/component/content/category/64-why-siac. 105  See Kanishk Verghese, ‘Arbitration in Asia: The Next Generation?’ (2014) Asian Legal Business, available online: www.legalbusinessonline.com/reports/arbitration-asia-next-generation. 106  See Albert Monichino and Alex Fawke, ‘International Arbitration in Australia: 2012/2013 in Review’ (2013) 24 Australasian Dispute Resolution Journal 209–10. 107  See Leon E Trakman, ‘Legal Traditions and International Commercial Arbitration’ (2006) 17 American Review of International Arbitration 1–36. 108  See n 2. 109  See ACICA Rules 2016 (n 44).

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jurisdiction. Despite a strong ‘rule of law’ tradition in courts across the Federation, critics assert that ICA proceedings are unduly ‘judicialised’, allegedly replicating complex judicial proceedings, and limiting innovation in ICA practice. As the author and co-author Hugh Montgomery observed of these criticisms: A preliminary survey of critics and commentators recently writing on ICA in Australia suggests that most believe that Australia’s ICA regime is still predominantly formal and complex in nature. Their criticisms are that arbitrators accept lengthy briefs, adopt formal proceedings, produce awards that resemble detailed common law decisions, and are subject to the cost, delay and destabilization of judicial review.110

However, in defence of ICA in Australia, the revision of the IAA in 2011 and the ACICA Rules in 2015 demonstrate an institutional capacity to innovate at both the levels of federal legislation.111 The author and co-author Hugh Montgomery have so advocated: Australia’s pursuit of this gold standard is now also expressed in section 39(2) of the 2010 amendments to the International Arbitration Act in Australia, which describes arbitration as an ‘efficient, impartial, enforceable and timely method by which to resolve commercial disputes’, reflecting the views of Justice Foster of the Federal Court and Justice Croft of the Victorian Supreme Court.112

ICA innovations in Australia extend beyond the IAA to include institutional developments, such as ACICA new Rules directed at promoting expeditious proceedings. As Malcolm ­Holmes, Luke Nottage and Luke Tang recently proposed: Arts 3.1 and 3.2 of the 2016 ACICA Rules bind the parties to the ‘overriding objective’ of these Rules, and its application by the tribunal, namely ‘to provide arbitration that is quick, cost effective and fair, considering especially the amounts in dispute and complexity of issues or facts involved’.113

However, innovation in ICA in Australia must necessarily recognise that a one-size-fits-all time and cost efficient model of ICA is ill-fitting, given the divergent nature of ICA disputes and proceedings. As the author and Hugh Montgomery have contended: The future success of ICA may depend not only on redressing the cost, delay and complexity of proceedings, but on reforming ICA to better acknowledge the functional diversity of arbitration cases and to arrive at more adaptable standards of ‘international best practice’. This reform of ICA does not entail dismissing the use of inductive methods of reasoning that inhere in common law decision-making, nor rejecting deductive methods of reasoning inherent in civil law systems. Rather, ICA should invite a purposeful, well designed and ultimately serviceable analysis of what constitutes ‘international best practice’ in the applicable commercial context.114

110  See Trakman and Montgomery (n 5): ‘The case disposition times, even in the Federal Court, remained largely unchanged in the three years after and before enactment of the 2010 amendments. In addition, concerns about delays and costs in international arbitration resurfaced in many other parts of the world’. 111  See s 2.2 above. 112  See Trakman and Montgomery (n 5). 113  Malcolm Holmes, Luke Nottage and Luke Tang, ‘The 2016 Rules of the Australian Centre for International Commercial Arbitration: Towards Further “Cultural Reform”’ (2016) 12(2) Asian International Arbitration Journal 211–34. 114  Trakman and Montgomery (n 5).

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4.  The Future 4.1.  Legislative, Judicial and Institutional Reform In general, Australia has been successful in integrating international commercial arbitration into the legal regimes of the region. As demonstrated, Australia was one of the first countries to adopt the 2006 amendments to the Model Law in its 2010 amendment to the IAA. This swift adoption of the Model Law was accompanied by Australia’s strong reputation within the Asia Pacific Region as a prospective situs for ICA, including such facilities as are provided at the ACICA. In addition, in 2004 Australia joined in creating the Asia-Pacific Forum for International Arbitration (AFIA); this Forum provides workshops and events designed to promote awareness and education on commercial arbitration.115 A complicating factor in determining the growth of commercial arbitration in Australia is the absence of reliable data on the performance of domestic arbitration under the Commercial Arbitration Acts since 2010. There is data confirming that between 1 September 2012 and 1 September 2014, Australian courts delivered 35 decisions relating to arbitration awards which included a little more than half (19) relating to domestic arbitration. While the number of decisions, not limited to reviews of awards, are generally limited, the data does demonstrate that Australian courts are addressing arbitration issues. This includes a decision by the High Court which dismissed the assertion that Australian courts lack independence in upholding arbitration awards.116 Australia also has a number of internationally recognised arbitrators. They have served as luminaries in arbitration reform globally, as well as in leadership roles in various international and regional arbitration associations. The final tier of Australia’s successes in adopting international commercial arbitration in the region lies in its legal system, which ensures judicial oversight of arbitration decisions. As explained, courts are empowered to assist in appointing arbitrators, taking evidence and enforcing interim measures. In general, the Australian Judiciary also understands the value and function of commercial arbitration with respect to the need to limit the time and cost associated with judicial oversight. What remains in contention, however, is whether and to what extent, the development and application of ICA is restricted in Australian law, such as by the restrictions in the Trade Practices Act (‘TPA) directed at protecting consumers. As Richard Garnett argues: The question for the court in Nicola was whether s 52 and other provisions of Part V of the TPA amounted to statutory provisions which had the effect of invalidating the foreign exclusive jurisdiction clause. The court rejected the argument, noting that s 86 of the TPA conferred jurisdiction in respect of a number of courts in respect of breaches of Part V and was not expressed in the same terms as ss 67 and 68 … Such a view must surely be correct or else a plaintiff could defeat a foreign exclusive jurisdiction clause in every case merely by commencing an action in an Australian court for breach of Part V of the TPA. The court’s reasoning would equally apply in the context of the ACL.117

115 

Nottage (n 1) 27. TCL v Judges (n 10). 117  See Richard Garnett, ‘Jurisdiction Clauses since Akai’ (2013) 87(2) The Australian Law Journal 134–49, available online: www.austlii.edu.au/au/journals/UMelbLRS/2013/6.htm. See also Jan Paulsson, The Idea of Arbitration (Oxford, Oxford University Press, 2013) 223. 116 See

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Problematic, too, is the prospect of parties concluding arbitration agreements that include a choice of foreign law and then subsequently sublimate that choice by invoking statutory rights that diverge from their prior agreement. This issue arose in the Comandate case118 and related to whether parties who agreed on a foreign choice of law and arbitration clause should be bound by their choices, even if doing so precluded them from relying on Australian statutory law, such as the Australian Consumer Law (ACL) which the foreign arbitrator declined to apply. Given the importance of party autonomy in the choice of arbitration, parties seeking access to the ACL should expressly so provide in their contract. This development under the ACL is most welcomed: it plainly does nothing for the reputation of Australia as a centre of international arbitration if parties are allowed to circumvent their arbitration agreements by post-contract appeals to novel Australian statutory rights.119

4.2.  Enhancing Competitiveness, Independence and Professionalism There are several reform measures that could further promote ICA in Australia. International companies and their lawyers sometimes perceive commercial arbitration as a less known and less desirable method of dispute resolution than civil litigation. They worry about arbitration proceedings prolonging commercial disputes that ultimately lead to litigation. Alternatively, they have misgivings that arbitration can lead to awards which are not subject to appeal. They also have qualms about courts declining to review arbitration awards in deference to the arbitration process and to avoid a flood of complex commercial cases entering the court system. These negative views of arbitration are based, to some degree, on limited understanding among commercial parties about the nature of arbitration and how to resort to it in a timeand cost-effective manner. Nor does the fact that their contracts provide for arbitration imply either that they appreciate the significance of those clauses, or how best to employ arbitration in the event of a dispute. The disapproval of arbitration among Australian lawyers, as in comparable legal systems, reinforces rather than redresses the negative view of arbitration held by many of their commercial clients. Arbitration, not least of all ICA, is not a core university course that law students are required to take in order to receive a degree in law, but a somewhat lower enrollment elective. Arbitration courses are viewed as being less evidently attractive to prospective employers than courses in evidence, civil procedure and civil trial practice. Extending this issue, arbitration is not generally required in practical legal training directed at gaining admission to the Law Society as a solicitor, or gaining admission to the Bar as a barrister. There is also a limited culture of educating corporate lawyers in Australia about the value and suitability of incorporating arbitration clauses in their contracts. This is in contradistinction to the widespread practice of incorporating institutionalised arbitration clauses

118  119 

See n 28. Garnett (n 16).

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across the EU, inter alia, under the rules of the ICC and to a lesser extent, in the United States under the rules of ICDR of the American Arbitration Association. A valuable further development in Australia, therefore, is to follow global, and, to some extent, regional ­leaders, such as SIAC and HKIAC, that promote the adoption of arbitration clauses in commercial contracts. Coupled with this proposed development is the need for lawyers to be encouraged to take continuing legal education courses in arbitration, provided by bodies such as the Chartered Institute of Arbitrators in Australia, to better understand the function and virtue of arbitration and how to incorporate it into commercial contracts.120 These courses are available, but the number of lawyers who attend them is limited, and the costs are sometimes high in the absence of reasonably clear evidence that they will lead to an increase in billable hours. However, such courses can provide exposure to key issues arising in arbitration practice, and how to deal with them. They can also provide mock arbitration training that addresses illustrative arbitration disputes and how to resolve with them. Such arbitration exercises can also be assessed by professional arbitrators. On the one hand, therefore, is the perception that, in ‘shaking off the shackles of the traditional English approach,’121 Australian courts need to transcend conservative and formalist constructions of law such as in interpreting arbitration clauses in ICA contracts.122 In doubt is: the English approach whereby an arbitration clause is to be construed, irrespective of the language used, in accordance with a presumption that all disputes will be decided by the arbitral tribunal. As a result, where the parties use restrictive words of reference in their arbitration clause, a stay of the parties’ entire dispute will not be granted.123 On the other hand, there is evidence of significant legislative amendments to Australia’s international arbitration regime and of Australian courts interpreting arbitration clauses expansively.124 Nevertheless, there is room for improving the culture of arbitration to achieve more practical, effective and cost-efficient dispute resolution. Legislation needs to continue to promote innovation in both arbitration practice and the legal construction of that practice. At the same time, such reform ought not to eliminate either rigorous reasoning in presenting and defending arbitration claims, or deny the utility of comprehensive arbitration awards, including on efficiency grounds. Australian legislatures have responded transparently to the need to make Australia more attractive as a site for international commercial arbitration within the Asia Pacific region. The fact that such measures are already significantly underway is commendable. Nevertheless, whilst Australia adopted the Model Law expeditiously, there are perceived limitations in the amended IAA. These have included the allegation of ‘limited public consultation’ prior to its enactment,125 and that it ‘omitted or watered down many suggested 120 

See the Chartered Institute of Arbitrators website at www.ciarb.net.au. See Luke Nottage, ‘International Commercial Arbitration in Australia: What’s New and What’s Next?’ in Nye Perram, International Commercial Law and Arbitration: Perspectives (Sydney, Ross Parsons Centre of Commercial, Corporate and Taxation Law, 2014) 287, 314. 122  On this English approach, see s 4.3; also see Trakman and Montgomery (n 5). 123  Garnett (n 16). 124 See Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [165]. 125  Nottage (n 1) 37. 121 

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reforms that would have promoted greater informality and hence potential cost of time savings in ICA.’126 The 2010 amendment to the IAA is also subject to criticisms for requiring solely written submissions to arbitrators, doubts about the extent to which ICA awards are recognised and enforced, and whether parties can amend confidentiality provisions introduced by the Model Law.127 The IAA is also perceived as having gaps, such as for not providing for med-arb.128 In question, too, is the possibility that some arbitration decisions will not be subject to either the Uniform Commercial Arbitration Act or the IAA due to the temporal operation of the Commercial Arbitration Act (which only applies to domestic commercial arbitrations).129 However, med-arb is provided for in section 27D of the Commercial Arbitration Act 2011 (SA) in NSW, Tasmania, Victoria and South Australia and in Commercial Arbitration Bill 2011 (QLD). In addition, effective from 1 January 2012 onwards, the Australian Commercial Dispute Centre provides that an arbitrator may act as a mediator during the course of the arbitration, but only if the parties have agreed to that appointment in accordance with the relevant legislative provisions.130 However, there is a more pervasive concern about the scope of the revised IAA beyond those raised above. It entails the overriding apprehension that ‘the content of the amendments keeps somewhat to the safe and conservative path rather than taking a radical and innovative approach.’131 Highlighting this concern is unease: that the IAA permits only written submissions,132 that section 21 of the IAA prohibits opting out of the Model law,133 and that the IAA in general preserves pre-existing Australian law to govern the enforcement of foreign arbitration awards.134 These misgivings are by no means peculiar to Australia. Nor are reservations about a culture of ‘billable hours’ that can exacerbate the cost of ICA peculiar to Australia. In issue is the difficulty in differentiating the costing of ICA from litigation when both specialties are lumped together as ‘arbitration and litigation’ practice.135 The need to promote international best practice is not limited to legislatures and courts. Contracting parties can also promote best practice through their choice of contract provisions to govern ICA. So too, can arbitration associations like ACICA facilitate change, as they have done, through the revision of their rules governing arbitration proceedings. In particular, party representatives can be required to provide their submissions and ­arguments

126 ibid. 127 

ibid, 37–38. ibid, 23. 129  ibid, 16. 130 See Georgia Quick, Deborah Tomkinson, Lorraine Hui and Harriet Lenigas (2012), ‘Med-arb: Do we embrace the new section 27D?’ AIDC E-News Bulletins: AIDC Summer Bulletin—Edition 1 Volume 6, available online: https://disputescentre.com.au/wp-content/uploads/2015/05/February-2012-Edition-1-Volume-3-2.pdf. 131  Richard Garnett and Luke Nottage, ‘The 2010 Amendments to the International Arbitration Act: A New Dawn for Australia?’ Sydney Law School Research Paper No. 10/88, 1–2, available online: http://papers.ssrn.com/ sol3/papers.cfm?abstract_id=1676604. This article was later published in (2011) 7(1) Asian International Journal 29–53. 132  ibid, 3. 133  ibid, 5. 134  ibid, 3–4. 135  Nottage (n 1) 3. 128 

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in more succinct form, focusing on the material issues and arguments in support of them. Arbitrators can be encouraged to eliminate lengthy recitals of procedural histories in their awards, and be less engaged in recapitulating briefs submitted by the disputing parties. As Neil Kaplan, a leading Hong-Kong based international arbitrator, proposed at the centenary of the Chartered Institute of Arbitrators in March 2015, arbitration awards can be made more user-friendly, such as by using headnotes, summaries of the key determinations and simplified proceedings and procedural recitations.136 However, in fairness, these proposals apply to ICA globally, particularly to common law jurisdictions in which arbitration proceedings replicate, to different degrees, the complexity, formality, cost and protraction of judicial proceedings. In striving for best international practice, one final acknowledgment has to be made of the need for codifying and clearly elucidating upon a cogent standard of ‘efficient’ and ‘streamlined’ arbitral proceedings. This view is reflected in the remarks of Albert ­Monichino, the Immediate Past President of the Chartered institute of Arbitrators in Australia. He acknowledges that, ‘to speak about “best practice” in international commercial arbitration is somewhat contentious … [it] is an elusive [sic] concept and not an objective, measurable standard.’137 While Monichino stresses the need for cultural reform within Australia’s ICA regime, he advises caution in determining the procedures and methods by which the growth of arbitration should take place in Australia, and the region. To this end, he provides a checklist of ideal requirements for the continuing development of best international practice in ICA, including: 1. A legal system with a singular arbitration Act (covering domestic and international arbitration), 2. A single court supervising arbitrations, and 3. A single, well-resourced arbitration institution within the nation.138 It is clear that Australia could benefit from targeted, substantive reform of its ICA regime, beyond the rhetoric of criticising broader conceptions of ‘cultural reform’ of ICA. Australia could also develop distinctive ICA capabilities to supplement developments elsewhere, such as the establishment of new, distinctive commercial courts in Singapore,139 or the introduction of client satisfaction reports by the Hong Kong International Arbitration Centre.140 Such targeted reforms are perhaps more pressing now, given the controversy that followed the Australian government’s 2010 repudiation of investor-state dispute arbitration, which included controversial claims that investor-state arbitration can be unfair, secretive and (perhaps less remarkably) costly.141 136  Andrew Maher and Alex Price, ‘Past and Future of International Arbitration in ­Australia’ Lawyers Weekly (16 March 2015) available online: www.lawyersweekly.com.au/opinion/16275-past-and-future-of-internationalarbitration-in-australia. 137  Albert Monichino, ‘Arbitration Reform in Australia: Striving for International Best Practice’ (2010) 29(1) The Arbitrator & Mediator 31 (emphasis added). 138  ibid, 46. 139 KC Lye and Darius Chan, ‘Launch of the Singapore International Commercial Court’, Norton Rose Fulbright, April 2015, available online: www.nortonrosefulbright.com/knowledge/publications/127746/ launch-of-the-singapore-international-commercial-court. 140  HKIAC, ‘Rate Your Experience—HKIAC Launches Arbitration Evaluation System’, 23 July 2015, available online: www.hkiac.org/news/rate-your-experience-hkiac-launches-arbitration-evaluation-system. 141  See Leon E Trakman, ‘Choosing Domestic Courts Over Investor-State Arbitration: Australia’s Repudiation of the Status Quo’ (2012) 35(3) UNSW Law Journal 979–1012.

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In short, in striving to improve Australia’s international commercial arbitration regime within the Asia Pacific region, there needs to be a continued and directed conversation about what ‘best international practice’ means, and how regulators, arbitrators and parties to ICA can best accomplish it.

5. Conclusion International commercial arbitration is well recognised in Australia, with a lengthy history of ICA. It is a ‘rule of law’ jurisdiction, with a recently revised International Arbitration Act that embodies best international practice. Australia has also adopted and followed the UNCITRAL Model Law, while adapting it slightly through macro-legislation and applying it more piecemeal, through judicial decisions. Australian courts are generally supportive of ICA, and have lists of judges with expertise in both commercial matters and arbitration. In addition, Australia has an established international arbitration centre, ACICA, with recently revised rules and procedures that are directed at facilitating ICA proceedings. No system is perfect, and there are areas in which the IAA could be more expansive in scope and more innovative in direction. There is limited case law in Australia on ICA, particularly given the recent legislative reforms. As a result, provisions in recent arbitration legislation, including both the IAA and the CAAs across Australia, which have barely been tested, or remain untested. What has impeded the development of international commercial arbitration, beyond Australia, is growing concern over its perceived ‘judicialisation’. This has included: the alleged tendency of arbitrators to adopt increasingly formal proceedings and for arbitration to reflect the weaknesses associated with litigation. More troubling, perhaps, are challenges to the confidentiality of commercial arbitration before courts of law across domestic jurisdictions, the neutrality of arbitrators notably in the sui generis case of investorstate arbitration,142 and the cost and time associated with enforcing arbitration awards in domestic jurisdictions. These concerns, including in relation to the confidentiality of arbitration proceedings, are accentuated by Australia’s choice not to ratify the Transparency Convention on investor-state arbitration, preferring to address transparency issues on a treaty by treaty basis.143 This approach is material, inter alia, in light of the suit brought by Philip Morris against Australia under the Hong Hong-Australia Free Trade Agreement, over Australian legislation providing for the plain packaging of cigarettes.144

142 See Leon E Trakman and David Musaleyan, ‘The Repudiation of Investor-State Arbitration and Subsequent Treaty Practice: The Resurgence of Qualified Investor-State Arbitration’ (2016) 31(1) ICSID Law Review 194–218, available online: https://academic.oup.com/icsidreview/article-abstract/31/1/194/2356747/ The-Repudiation-of-Investor-State-Arbitration-and?redirectedFrom=fulltext. 143 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (New York, 2014) (the ‘Mauritius Convention on Transparency’), www.uncitral.org/uncitral/uncitral_texts/arbitration/ 2014Transparency_Convention.html. 144 See Philip Morris Asia Limited (Hong Kong) v The Commonwealth of Australia, Permanent Court of Arbitration, case number 2012-12, available online: www.pcacases.com/web/view/5.

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Coupled with the concerns about the perceived ‘judicialisation’ of commercial arbitration is the view that arbitration, all too often, is a stage following negotiation and possibly mediation, and concludes with protracted and complicated judicial hearings. What arguably, is overlooked is the benefit of the judicial review of an arbitration award that avoids the often intricate and multifaceted features of a judicial appeal. In attempting to address global doubts about the benefits of ICA, Australia will need to consider how its system of international arbitration fits into the standards of truly ‘international best practice’, and how best to redress procedural inefficiencies in Australia’s current arbitral regime. A particular challenge ahead is that many lawyers who advise corporate clients are more familiar with negotiation and litigation and less so with ICA. Reform measures are needed, not only for such lawyers to appreciate the potential cost and time advantages of ICA, but also how to maximise them. Meeting this challenge will include continuing to ensure that the practice of ICA in ­Australia evolves in accordance with ‘best international practice’. It will also entail continuing to demonstrate how the stability associated with Australia’s ‘rule of law’ traditions can foster greater confidence in ICA in Australia.

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Conclusion: An Asia Pacific Model of Arbitration Reform ANSELMO REYES AND WEIXIA GU

The Introduction chapter to this book promised three deliverables. The first, a summary of arbitration reform in 12 Asia Pacific states, has been provided in the preceding 12 chapters. The function of this Conclusion is to make good on the remaining two promises. The initial part of this Conclusion will pull together various strands in those previous chapters to evaluate the model for arbitration reform in the Asia Pacific posited in section 3 of the Introduction. The second part will deal with the three sets of questions (looking to the past, present and future) posed in the same section of the Introduction. The final part will make good on the promise of a third deliverable by forecasting likely future arbitration reform initiatives in the Asia Pacific.

1.  The Model Revisited The model of arbitration reform proposed in the Introduction comprised six steps as follows: Step 1: Acceding to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Step 2: Adopting the UNCITRAL Model Law on International Arbitration in its original 1985 version or, more preferably, in its current 2006 version (or as much of the latter as a jurisdiction feels it can adopt). Step 3: Establishing national institution(s) and international centre(s) to administer arbitrations and provide venues for arbitrations within the jurisdiction, as well as to ensure that the arbitration rules of the institution(s) and centre(s) keep pace (and comply) with everevolving international best practices. Step 4: Establishing a corps of judges familiar with arbitration practice to ensure that courts enforce arbitration agreements, do not unduly interfere with the conduct of arbitrations, and enforce arbitral awards in accordance with best practices under the Model Law and the New York Convention. Step 5: Engaging in capacity-building activities (workshops, seminars, conferences, etc) to ensure that all stakeholders (judges, in-house and external counsel, business persons) are familiar with and supportive of arbitration as a means of dispute resolution.

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Step 6: Constantly reviewing legislation relating to arbitration and to institutions administering arbitrations, so that the jurisdiction remains competitive with developments in the dispute resolution industry. The model holds up when juxtaposed against the reforms undertaken by the 12 jurisdictions studied here. On Step 1, with the exception of Taiwan (which is unable to accede to the New York Convention), the jurisdictions are all parties to the New York Convention. In the case of Taiwan, despite its political situation of not being capable of acceding to the New York Convention, the Taiwanese courts actually adhere to the principles of the Convention when dealing with the enforcement of arbitration agreements and the recognition and enforcement of nonTaiwanese arbitral awards, save possibly when dealing with Mainland China awards.1 It would appear that joining the New York Convention is universally regarded as an ‘essential’ ingredient to successful arbitration reform. This is hardly surprising, since it will be difficult to enforce an award elsewhere without recourse to the Convention. As for Steps 2 to 6, Table 1 below summarises the extent to which each is present within the twelve jurisdictions considered here. The points below emerge from the columns of Table 1. It will be seen from column two that eight out of twelve jurisdictions are Model Law jurisdictions. Of the four that are not, China and Taiwan were nevertheless heavily influenced by the Model Law when drafting their present arbitration legislation. Of the other two jurisdictions, Indonesia does not appear motivated to further enhance its arbitration regime at the legislative level, while Vietnam is working to improve support of international commercial arbitration at the governmental, judicial, institutional and practitioner levels. On balance, it would appear that the adoption of the Model Law or substantial parts of it (or at least its spirit), while not absolutely ‘essential’, should be regarded as a ‘highly recommended’ element of reform. It signals that a country is serious about modernising its international commercial arbitration regulatory framework and bringing the latter into alignment with globally accepted best practice. The Model Law is thus an ideal standard which guides legislative reform and against which reform proposals are to be evaluated. The third column indicates those states in which arbitration institutions or centres have been established. With the exception of India, where arbitration is overwhelmingly on an ad hoc basis, the other jurisdictions have developed either arbitration institutions or centres or both. In this respect, China is unique as all arbitration there is required to be institutional and there are over 200 arbitration commissions (institutions) for that purpose, but with differing degrees of quality and competitiveness. Only a limited number of Chinese arbitral institutions (such as the China International Economic and Trade ­Arbitration Commission (CIETAC), Beijing Arbitration Commission (BAC) and Shenzhen Court of International Arbitration (SCIA) have stood out from the competition within the Chinese market and attained visibility in the regional and international market. On the other hand, institutions (such as the Hong Kong International Arbitration Centre (HKIAC)

1 

Nigel Li, Angela Lin and Jeffrey Li, ch 3.

JURISDICTION MODEL INSTITUTION/ JUDICIAL CAPACITY(1) LAW (2) CENTRE (3) SUPPORT (4) BUILDING (5)

CHINA

No7

Yes

Yes

MOST RECENT MAJOR LEGISLATION (6)

RULE OF LAW INDEX 20162 (7)

FDI AS % FDI EASE OF GDP/ OF GDP KEARNEY DOING CAPITA 20153 (8) INDEX BUSINESS (US$) 20156 20174 (9) 20175 (10) (11)

Yes

1995

0.48/80 (44)8

2.27

0.77/16 (77)

58.48

NA (61)

HONG KONG

Yes

Yes

Yes

Yes

20179

TAIWAN

No10

Yes

Yes11

Yes

1998

2.2012

1.83 NA 1.5 (2016)

64.78/78

8,069.21

84.21/4

42,327.84

81.09/11

22,384.0013

(continued)

Conclusion  281

2  World Justice Project, Rule of Law Index 2016, 5, available online: (accessed 14 June 2017). The first number given is the jurisdiction’s overall score, while the second number is its overall ranking. In arriving at an overall score, the Report takes account of 9 factors and 47 sub-factors. 3  Based on World Bank figures, as compiled at TheGlobalEconomy.com, available online: (accessed 14 June 2017). 4  The 2017 A. T. Kearney Foreign Direct Investment Confidence Index: Glass Half Full, 3, available online: (accessed 14 June 2017). Index figures for some states were not available (NA). For some states, the latest index figure available may be obtained from TheGlobalEconomy.com (n 2), the relevant year being indicated in brackets. 5  World Bank Group, Doing Business 2017: Equal Opportunity for All, 7. The first number is a jurisdiction’s DTF (Distance to Frontier) score, while the second number is its ranking overall. The DTF score is defined at p.6 as “the aggregate score for getting credit and protecting minority investors as well as the regulatory quality indices from the indicator sets on dealing with construction permits, getting electricity, registering property, enforcing contracts and resolving insolvency. The report available online: (accessed 14 June 2017). 6  Based on World Bank figures (in current dollars), as compiled at TheGlobalEconomy.com, available online: (accessed 14 June 2017). 7  Although not adopted by China, the Model Law has provided a guiding reference for the modernization of its arbitration regime. 8  Numbers in brackets are a jurisdiction’s score for 2016 under Transparency International’s Corruption Perception Index. The higher the score, the less corrupt a country is perceived to be. Available online: (accessed 14 June 2017). 9  Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 is expected to be passed in mid-2017. 10  However, many provisions of the 1998 Arbitration Act were influenced by the Model Law. 11  But, as a result of the distinction between zhi xing li (enforceability) and ji pan li (res judicata) drawn by the Supreme Court, Mainland China awards may not be recognized as giving rise to res judicata in Taiwan and may be subject to substantive scrutiny by the court. 12  FDI inward flow as percentage of gross fixed capital formation. See ‘UNCTAD World Investment Report 2017— Country Fact Sheet: Taiwan, Province of China’, available online: (accessed 14 June 2017). 13  From National Statistics (Taiwan), available online: (accessed 14 June 2017).

MOST RECENT MAJOR LEGISLATION (6)

RULE OF LAW INDEX 2016 (7)

FDI AS % FDI EASE OF GDP/ OF GDP KEARNEY DOING CAPITA 2015 (8) INDEX BUSINESS (US$) 2015 2017 (9) 2017 (10) (11)

JAPAN

Yes

Yes14

Yes

Improving15

2004

0.78/15 (72)

0.00

1.72

75.53/34

34,523.70

REP. KOREA

Yes

Yes

Yes

Yes

2017

0.73/19 (53)

0.37

1.50

84.07/5

27,221.52

SINGAPORE

Yes

Yes

Yes

Yes

2010

0.82/9 (84)

22.29

1.61

85.05/2

52,888.75

MALAYSIA

Yes

Yes

Yes

Yes

2005

0.54/56 (49)

3.70

200417

1.65 (2014) 78.11/23

Yes

Yes

Yes

0.51/70 (35)

2.00

INDONESIA

No

Yes

No

No

1999

0.52/61 (37)

2.33

1.6 (2014)

NA

9,768.33

60.40/99

2,904.20

61.52/91

3.346.49

VIETNAM

No

Yes

Improving

Improving18

2010

0.51/67 (33)

6.10

1.38 (2012) 63.83/82

2,110.92

INDIA

Yes

No19

Improving

Improving20

2015

0.51/66 (40)

2.10

1.68/8

55.27/130

1,593.26

AUSTRALIA

Yes

Yes

Yes

Yes

2010

0.81/11 (79)

2.89

1.67/9

80.26/15

56,290.65

14 

The caseload of Japanese arbitral institutions remains low. Although there is some capacity-building, public awareness in Japan of arbitration still needs to be substantially enhanced. awareness of arbitration still needs to be substantially enhanced in addition to greater training of arbitration practitioners in order to counter a culture of litigiousness. 17  Implementing Rules and Regulations issued by the Department of Justice in 2009. 18  More capacity-building and training among judges and lawyers are required. 19  The number of arbitration institutions is miniscule, arbitration in India being predominantly ad hoc. 20  Significantly more capacity-building among judges and lawyers is required. 15 

16  Public

Anselmo Reyes and Weixia Gu

PHILIPPINES

Improving16

282 

JURISDICTION MODEL INSTITUTION/ JUDICIAL CAPACITY(1) LAW (2) CENTRE (3) SUPPORT (4) BUILDING (5)

Conclusion

 283

in Hong Kong and the Singapore International Arbitration Centre (SIAC) in Singapore have been enormously successful in attracting cases from other jurisdictions (both within and outside the Asia Pacific region), while others have not (such as the Japan Commercial Arbitration ­Association (JCAA) in Japan despite over six decades of history). On balance, it would seem that the establishment of at least one leading national arbitration institution or centre within a jurisdiction is not just a ‘highly recommended’ ingredient for successful reform, but is probably an ‘essential’ element. This view is reflected in Professor Hiro Aragaki’s ‘ambitious proposal’ in his chapter on the Indian experience that, if arbitration reform is to thrive, ‘ad hoc arbitration [should] become the exception rather than the rule in India’.21 Institutions facilitate arbitrations by promulgating rules for the conduct of arbitrations and offering administrative services for the implementation of those rules. They offer regular courses for training would-be arbitrators and enhancing the capacity of existing arbitrators. Their case load in a given year serves as a convenient benchmark of the degree to which legislative, judicial and other reforms within a jurisdiction are working to foster a culture of dispute resolution through arbitration. Thus, institutions can serve as focal points for efforts at improving the profile of arbitration as a means of dispute resolution within a jurisdiction. In particular, private sector initiatives at enhancing arbitration can be solicited, directed and coordinated through the leadership of an institution. Further, where a country is large, institutions in different regions compete with each other for work and, through that competition, become more cost-effective and efficient in what they do. This is what has happened in China, although one might question the justification for establishing more than 200 arbitration institutions there, even taking account of the sheer size of the country and the strong market demand. The fourth column identifies those jurisdictions whose judiciaries can be described as arbitration-friendly. Apart from Indonesia (where the speedy enforcement of an arbitral award is problematic), all other eleven jurisdictions have judiciaries which are either supportive of arbitration or actively working towards improving judges’ understanding of the court’s role in enforcing arbitration agreements and recognising foreign awards. This step thus seems to be universally regarded as ‘essential’ to the successful implementation of arbitration reform. Again, this is hardly surprising. Unless the judiciary is supportive of arbitration, awards will not be recognised and enforced and arbitration will hardly get off the ground. The fifth column sets out those jurisdictions in which capacity-building is being undertaken to promote greater use of arbitration. While arbitration institutions or other ­organisations in all twelve jurisdictions hold conferences or run workshops and seminars on arbitration on an intermittent or regular basis, the contributors of four chapters (Japan, Philippines, Vietnam and India) believe that more intensive efforts are required to enhance public awareness of arbitration as a mode of dispute resolution in the relevant countries. The same authors have pointed to a need for greater training as a means towards increasing the pool of professional arbitrators within their jurisdictions. As a means of enhancing the public perception of arbitration and increasing its actual usage among the legal and business community, capacity-building should probably be classified as a ‘highly recommended’ ingredient to a successful arbitration reform.

21 

Hiro Aragaki, ch 11.

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Anselmo Reyes and Weixia Gu

The sixth column states when the latest major arbitration legislation was passed or reformed by a particular state. Interestingly, there are six jurisdictions where there has been no significant legislation or reform of legislation in relation to arbitration within the last decade. Those jurisdictions are China, Taiwan, Japan, Malaysia, Philippines and Indonesia. Of the other six jurisdictions, Hong Kong, Korea, Singapore and Australia are among the most active and successful arbitration-friendly jurisdictions within the Asia Pacific, while Vietnam and India are seeking to improve support of arbitration within their territory. It therefore does not seem that the regular updating of legislation is an ‘essential’ feature of successful arbitration reform. Countries seeking to market themselves as international dispute resolution hubs (Hong Kong, Korea, Singapore and Australia) may wish to revise their arbitration regimes at regular intervals in order to keep up with the latest developments and remain attractive to arbitration users outside their territories. Nonetheless, China and Malaysia are both countries that have had success in attracting international commercial arbitration business, despite their regulatory infrastructure having remained largely the same for over a decade in the case of Malaysia and over two decades in the case of China. This suggests that, while regular legislative updates may be a ‘near’ or perhaps even ‘highly recommended’ ingredient of reform, constant revision of law is not a must. Provided that the Model Law or something based on it has been legislated, what would seem to be more important is how legislation is implemented. The seventh to eleventh columns describe a jurisdiction’s political and economic circumstances in terms of various economic indices. The seventh column sets out the Rule of Law Index (ROLI) score of each of the twelve jurisdictions for 2016. The World Justice Project (WJP) does not explicitly define ‘rule of law’, but instead describes the concept ‘in terms of some of the outcomes that the rule of law brings to societies—such as accountability, respect for fundamental rights, or access to justice—each of which reflects one aspect of the complex concept of the rule of law’. Consequently, the WJP Rule of Law Index ‘seeks to embody these outcomes within a simple and coherent framework to measure the extent to which countries attain these outcomes in practice by means of performance indicators’. The higher a country’s score under the index, the greater the likelihood of adherence to the rule of law to be found in the country. As a check against the ROLI score, the seventh column includes in brackets the relevant ­jurisdiction’s 2016 score in Transparency International’s Corruption Perception Index (TICPI). The higher the score, the less corrupt a country is perceived to be. Taking China, Hong Kong, Korea, Singapore, Malaysia and Australia as states in which a strong culture of international commercial arbitration has been established, one finds that the six jurisdictions correspond to a wide divergence of ROLI and TICPI scores. Of the six, Singapore has the highest score (ROLI 0.82; TICPI 84), while China has the lowest (ROLI 0.48; TICPI 44). Of the remaining five jurisdictions for which Rule of Law Index scores are available, Japan has a high score (ROLI 0.78; TICPI 72), nearly the same as Hong Kong (ROLI 0.77; TICPI 77), but Japan cannot be said to be a jurisdiction where a culture of international commercial arbitration has truly taken root. That is despite the fact that Japan is party to the New York Convention, has enacted the Model Law, has a six-decade old arbitral institution (the JCAA), and has an arbitration-friendly judiciary.

Conclusion

 285

Thus, although adherence to the rule of law is obviously important and desirable, provided that a judiciary is supportive of international commercial arbitration (that is, arbitration agreements will be enforced and foreign arbitral awards are recognised and enforced by some court (possibly a court specially designated for such purpose)), the fact that a j­urisdiction is generally perceived to have weaker rule of law, may not be an obstacle to s­ uccessful arbitration reform and to the nurturing of international commercial arbitration as a mode of dispute resolution. Indeed, the concept of rule of law has ‘thicker’ and ‘thinner’ versions. In this particular respect, China is deemed to be a rule of law jurisdiction in the thinner sense, but not in the thicker sense, as the court system is not an independent branch of the state exercising checks and balances. On the other hand, corruption within a jurisdiction may be an impetus for the setting up of specialist courts and judges to handle international commercial arbitration cases, so as to minimise or by-pass altogether corrupt elements within the jurisdiction’s institutions (including the jurisdiction’s normal domestic court system). In other words, arbitration reform within a corrupt Asia Pacific jurisdiction could well involve creating a special fast-track court procedure existing in parallel with ordinary domestic court process. The eighth column gives foreign direct investment (FDI) in a jurisdiction as a percentage of GDP, while the ninth column sets out a jurisdiction’s score on the 2017 FDI Kearney Index. The latter is ‘an annual survey of global business executives that ranks which markets are likely to attract the most investment in the next three years’. From the figures given, it is difficult to see any real pattern. Clearly, whether or not a jurisdiction is likely to attract FDI in a given year will depend on numerous factors, among which the degree to which an arbitration agreement will be upheld and a foreign arbitral award will be recognised and enforced may conceivably play a role. But it is far from apparent that successful arbitration reform will have any key impact on whether a company decides to invest in a given jurisdiction. What might possibly be noted is that in the two most successful arbitration-friendly jurisdictions in the Asia Pacific (Hong Kong and Singapore), FDI constitutes a large proportion of GDP. But from this fact alone it cannot definitively be inferred that successful arbitration reform will inevitably lead to greater FDI. Similar inconclusive comments might be made of the figures in columns ten and eleven. It is perhaps significant in general terms that the economies perceived to be the most open (in the sense of ease of doing business) and the least corrupt, are also those with higher GDP per capita (Hong Kong, Taiwan, Japan, Korea, Singapore, and Australia). With the exception of Japan and Taiwan, these jurisdictions are also widely perceived to have successfully developed international commercial arbitration cultures. But from this information alone it is difficult to deduce that there is a direct link between successful arbitration reform and rise in GDP per capita. In particular, GDP growth is related to a diverse range of factors. Perhaps it is more realistic to say that having a supportive arbitration-friendly environment furthers ease of doing business within a jurisdiction. That is likely to be a factor, possibly a significant factor, among many others that will attract FDI and at least indirectly contribute to GDP growth. It may, for example, tip the balance where an enterprise is faced with a choice between investing in jurisdiction A as opposed to jurisdiction B, one arbitration-friendly, the other not.

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2.  Looking to the Past, Present and Future 2.1.  The First Set of Questions Turning to the questions specifically raised in the Introduction, the first set asked the following: 1. Has there in fact emerged a standard Asia Pacific pattern of reform or are there as many trajectories to reform as there are jurisdictions? 2. In the event that there is some discernible pattern, to what extent have political, legal, social, cultural, religious, geographical or other factors influenced the way in which that pattern has been adhered to (or not) in a given jurisdiction? In other words, what variations have there been and why? The standard pattern of development in the 12 jurisdictions might be described thus in general terms: 1. Stage 1: (a) The jurisdiction accedes to the New York Convention. (b) Legislation is passed implementing dual track arbitration (that is, different regimes for domestic and international arbitration). Consideration is given to adopting the Model Law or at least incorporating some of its provisions into the national arbitration law. (c) Judiciaries may be prone to active intervention in the interests of due process and ensuring that arbitral awards conform with substantive law. (d) An arbitral institution is started by business executives and legal professionals. At this time, there may not be many (if any) cases administered by the institution. The institution may initially be largely engaged in organising workshops, conferences, and seminars for professionals and other interested parties. The institution may issue a first version of its rules. 2. Stage 2: (a) Legislation is amended to bring into effect the 1985 Model Law. (b) Judicial reforms are implemented to encourage restraint in matters relating to arbitration. (c) The work of the arbitral institution begins to develop. Capacity-building in the form of workshops, conferences and seminars continues. The institution’s case load may show signs of increasing. The institution’s rules are refined. Other institutions may also be established. 3. Stage 3: (a) Legislation is further amended to bring into effect some or all of the 2006 revisions to the Model Law. The dual track regime is often rationalised at this stage, so that largely similar laws regulate both domestic and international arbitrations. (b) Judiciaries establish a regional or even an incipient international reputation of being supportive of arbitration. (c) Domestic arbitral institutions compete with each other and with institutions outside the jurisdiction for more work (in terms of attracting both increased caseload

Conclusion

 287

and quality cases with large amounts in dispute). Training and other capacitybuilding is emphasised and offered not just to interested persons within the ­jurisdiction, but also outside of it. Institutional rules are revised to offer innovations that may not feature in the rules of rival institutions. 4. Stage 4: (a) Further legislation, attuned to market demands, is implemented (for example, the introduction of third party funding) to introduce elements that will make ­arbitration within the jurisdiction more attractive in comparison to other jurisdictions. The focus is on keeping up with, or surpassing, the competition not just on a regional level, but internationally. (b) Judiciaries maintain their reputation of supporting arbitration. (c) Institutions look to provide capacity building in other jurisdictions (especially, but not exclusively, within the Asia Pacific) where arbitration is less developed. Of the twelve jurisdictions, it is suggested that Indonesia is at Stage 1; Vietnam is in transition from Stage 1 to 2; the Philippines and India are at Stage 2; China (albeit not competitive from a legislative viewpoint), Japan (albeit not competitive in terms of arbitral institutions) and Taiwan (albeit neither competitive from a legislative nor an institutional viewpoint), are perhaps in transition from Stage 2 to 3; Malaysia and Australia are at Stage 3; Hong Kong, Singapore (albeit retaining a dual track regime) and Korea are either in Stage 4 or are in transition from Stage 3 to 4. Some variations apparent within the twelve jurisdictions are considered below. A remarkable feature of China is its insistence on administered arbitration within its ­territory, regardless of whether the arbitrations are domestic or international in nature. In this connection, Professor Weixia Gu in her chapter refers a ‘rapid proliferation of local arbitration commissions across China’ in the 1990s.22 She further mentions ‘a rise of ancillary rules which effectively frustrate the goal of institutional “independence”’.23 Ad hoc awards are enforced, but only if they were made outside Mainland China (including Hong Kong, Macau, and Taiwan awards). Non-Mainland China awards are routinely enforced, but a distinctive element appears to be the pre-reporting system instituted by the Supreme People’s Court (SPC). The system has the effect that ‘lower level courts may not refuse recognition or enforcement of foreign or foreign-related awards without the SPC’s confirmation’.24 The impression that one obtains of the Chinese path to arbitration reform is that it relies very much on control from the top (such as the institutional arbitration monopoly). But, at the same time, the system depends on competition for cases among the numerous arbitral commissions to make domestic and international arbitration an attractive option for dispute resolution. The Chinese model is thus far from monolithic. It is led from the top, reflecting its prevailing political ideology on arbitration, while at the same time being reliant on and even accommodating of competition at the local level. The Chinese trajectory is thus an attempt to synthesise a unique socio-economic dynamic, with both a controlling element and free market features. In the meantime, despite the Chinese arbitration

22 

Weixia Gu, ch 1.

23 ibid. 24 ibid.

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system being monopolised by Chinese arbitral commissions, it does not prevent these ­commissions from being market players, competing among each other internally and with traditional giants in the region externally. Hence, the free market features have become a more important force driving arbitration reform in China over the past decade. Hong Kong and Singapore may be taken together, as their geographical, political, ­economic and legal situations are not only similar, but are in stark contrast to the circumstances in Mainland China. Both jurisdictions are dependent on the provision of financial, legal and other services to domestic and international enterprises for their livelihood. Rigorous control may not attract businesses to come to Hong Kong or Singapore. The Chinese model of arbitration reform (emphasis on control from the top and free market competition from the bottom) may therefore not be appropriate to Singapore or Hong Kong. Singapore is different from Hong Kong in the sense that Singapore has a more ethnically, culturally and perhaps religiously diverse population than Hong Kong. But, this does not seem to have made a significant difference in the trajectory which Singapore has followed for the purpose of developing international commercial arbitration there. The two jurisdictions have instead followed similar liberal, open and market-driven, approaches. They have adopted internationally recognised legislative frameworks (the Model Law and the New York Convention) and implemented measures and facilities at the governmental and institutional level to encourage the greatest possible use of their ­arbitration dispute resolution services by all parties, including those with little or no connection with them. They are open to all forms of arbitration, ad hoc or administered, and routinely recognise and enforce arbitral awards. Because of their small size, there is no need (for example) to implement a pre-reporting system as in China to ensure uniformity. All cases for the enforcement of an arbitration agreement and the recognition or enforcement of arbitral awards go to a single court to be dealt with by a specialist judge in charge of the arbitration cases. The result is that, subject to adherence to due process and save for the rare case when a question of public policy arises, almost everything is possible in relation to arbitration in Hong Kong and Singapore. Although there is a regulatory framework, that is kept to a minimum in keeping with recognised international standards. Everything else is left to be determined in accordance with party autonomy. A possible difference between the two jurisdictions may be that, as Chan Leng Sun observes, arbitration reform in Singapore has largely followed a top-down approach (although with consultation of the business sector and legal practitioners).25 In contrast, according to Professor Shahla Ali, the corresponding process in Hong Kong has ‘largely been initiated by members of Hong Kong’s business and financial community in order to maintain Hong Kong’s position as a leading global financial centre’.26 Nonetheless, it is not clear that this difference (if it exists) is significant. Korea is similar to Hong Kong and Singapore, albeit much larger geographically. From Professor Joongi Kim’s account, it appears to be following a nearly identical model to that espoused by Hong Kong and Singapore in an effort to become a major arbitration hub. This has involved (among other things) ensuring that the KCAB is (and is perceived to be)

25  26 

Chan Leng Sun, ch 6. Shahla Ali, ch 2.

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completely separate from the government or judiciary, adopting substantial parts of the 2006 Model Law, and passing the Arbitration Industry Promotion Act (AIPA) to develop the necessary manpower and facilities to turn Korea into a preferred seat of international arbitration. Professor Kim’s view is that the Korean experience can be characterised as ‘topdown with input from the judiciary and legislative branch and key stakeholders’.27 This is much like the Singapore approach. But it would be wrong to conclude from this that topdown is the preferred method for moving (say) from Stage 2 to 3 or from Stage 3 to 4. Malaysia’s approach may also be compared to that of Korea, Singapore and Hong Kong. From the account in the Malaysian chapter, there would seem to be little to distinguish the Malaysian model from the trajectories taken in the latter three jurisdictions. But it should be noted that, according to Lam Ko Luen, arbitration reform in Malaysia has been ‘both top-down and bottom-up’.28 That is more like the Hong Kong approach, as opposed to the Singapore and Korea approach. In Malaysia, although the government has been active in developing arbitration, so have institutions. In particular, the KLRCA has been especially innovative in promoting ­Malaysian arbitration. This is attributable in large part to a single individual, Datuk ­Professor Sundra Rajoo, the current director of the KLRCA and ‘the man responsible for re-branding KLRCA and putting it on the global map’.29 This highlights the importance of institutions as pointed out in Section 1, but it also shows that the landscape of arbitration in a jurisdiction can be galvanised through the dynamism of a single individual. A further point about Malaysia is that, despite its majority Muslim population, religion in general and Islam in particular does not seem from Lam Ko Luen’s chapter to have had any major impact on the development of commercial arbitration there. The only reference to Islam in the chapter is in connection with the creation of i-Arbitration Rules by the KLRCA.30 Those Rules are a modification of the UNCITRAL Arbitration Rules to make them sharia-compliant and thereby appropriate for the resolution of commercial disputes in accordance with Islamic principles. The rules may be administered by the KLRCA. Religion has thus merely led to the development of a unique dispute resolution product tailored to draw arbitration business from Islamic countries to Malaysia. A final point on Malaysia relates to corruption and its effect on arbitration reform. Malaysia’s score on ROLI and TICPI scores for 2016 (0.54 and 49 respectively) are not impressive. But this has not prevented KLRCA from building its reputation as a regional and international arbitration institution. It does not yet rank at the same level as HKIAC and SIAC, but it is fast catching up. One element that may counterbalance the adverse effects of perceived corruption may be the Malaysian judiciary’s ‘hands off ’ approach in connection with arbitration in recent years. Lam Ko Luen comments: Over the last decade since the commencement of the Arbitration Act 2005, the Malaysian Courts have demonstrated that they are on par with the neighbouring jurisdictions in lending their support for international commercial arbitration. The Malaysian Courts are in particular mindful of

27 

Joongi Kim, ch 5. Lam Ko Luen, ch 7. 29 ibid. 30 ibid. 28 

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upholding party autonomy and in recognising and enforcing arbitration agreements and arbitral awards.31

Thus, in evaluating corruption and its effect, it is necessary to delve more deeply. Does the perception of corruption extend to judges (as in Indonesia and India) or does the perception focus more on the executive branch of government? Where judges are not tainted, then arbitration reform may still be successful. Conversely, where the judiciary is perceived as corrupt, then arbitration reform may be more problematic. Consider now three jurisdictions (Australia, Japan and Taiwan) which appear to have reformed their arbitration laws in much the same way as Hong Kong, Singapore, Korea and Malaysia. But these have been less successful in marketing themselves as international commercial arbitration hubs. What factors account for the difference? In respect of Australia, geography is an obvious factor militating against businesses choosing Australia as an arbitral seat. But in this day of email and video-link, geography should not be an insurmountable barrier. There could, for instance, be factors that offset any disadvantages due to geography alone. It might be thought that Australia’s federal system would also impede the development of arbitration through a plethora of different laws in different states and at the federal level. But this does not seem to be the case from Professor Leon Trakman’s account. At least at the present moment, even if it has not always been so in the past, the federal and state governments in Australia seem to be on the same page about the desirability of boosting the profile of international commercial arbitration as a means of dispute resolution within Australia. The federal and state dichotomy thus does not appear to be a significant factor today in Australian arbitration reform. If anything, competition among states to bring in business would be a positive incentive to innovate in order to bring in more business. A more pertinent factor may be the ‘judicialisation’ of Australian arbitration. Professor Leon Trakman in his chapter has suggested that ‘the alleged “judicialisation” of the arbitral process is often misconceived and over-stated’.32 But he accepts that: What has impeded the development of international commercial arbitration, beyond Australia, is growing concern over its perceived ‘judicialisation’. This has included: the tendency of arbitrators to adopt increasingly formal proceedings and for arbitration to reflect the weaknesses associated with litigation. More troubling, perhaps, are challenges to the confidentiality of commercial ­arbitration before courts of law, the neutrality of arbitrators notably in the sui generis case of investor-state arbitration, and the cost and time associated with enforcing arbitration awards in domestic jurisdictions.

Whatever the reality, arbitration is apparently widely perceived throughout Australia at the federal and state level as simply litigation by another name. This means that arbitrations too often simply mimic (or are seen to mimic) court processes. The scrutiny of arbitral awards by the courts is thus time-consuming or at least thought to be such. The outcome is that there is less resort to arbitration than should otherwise be the case. This means that there is less incentive to innovate and, in such circumstances, it becomes difficult to counterbalance the unattractiveness of Australia’s more remote geographical position and attract arbitration business notwithstanding that impediment. 31  32 

Lam Ko Luen, ibid. Leon Trakman, ch 12.

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The remedy for this is increased capacity-building efforts by Australian arbitral institutions, to increase public awareness of the significant ways in which arbitration (especially international commercial arbitration) differs from court litigation. Professor Trakman puts it in his conclusion: A particular challenge ahead is that many lawyers who advise corporate clients are more ­familiar with negotiation and litigation to redress commercial disputes than international commercial arbitration. Reform measures are needed, not only for lawyers to appreciate the potential cost and time advantages of international commercial arbitration, but also how to maximise them. Meeting this challenge will include continuing to ensure that the practice of international commercial arbitration in Australia evolves in accordance with ‘best international practice’. It will also entail continuing to demonstrate how the stability associated with Australia’s rule of law traditions can foster greater confidence in international commercial arbitration in Australia.

Japan is an example of how internal attitudes may affect the success of arbitration reform. On the face of things, Japan has many of the key elements to become a successful ­arbitration hub. It is a Model Law jurisdiction. It has a supportive judiciary. It has had arbitral institutions over a long period of time. But what is lacking is an internal market demand for arbitration services. As Professor Luke Nottage and Nobumichi Teramura note in their chapter conclusion,33 there is a tendency in Japanese culture to avoid resolution of disputes by adjudicative means (whether litigation or arbitration). If one has to resort to adjudicative means, the court is preferred, being inexpensive, efficient and reliable. Even where arbitration might be contemplated, there is a lack of sufficient numbers of experienced Japanese arbitrators. It is interesting that Professor Luke Nottage and Nobumichi Teramura draw comparisons with the Australian experience and point to the difficulty in Japan and Australia of arbitration gaining ‘traction’.34 The remedy for this lack of ‘traction’ would again seem to be greater capacity-building, especially by Japan’s arbitral institutions. However, Professor Nottage and Teramura also note that there has been a lack of dynamism in the JCAA, Japan’s leading arbitral institution. As far as they are concerned, ‘The JCAA tends to play catch-up rather than to venture out in new directions’.35 This can be contrasted with the Malaysian situation where the dynamism of one individual has led to a transformation of the KLRCA into a leading arbitral institution within the Asia Pacific. Taiwan has recently moved to liberalise its arbitration regime and bring it in line with international practice. This was most recently demonstrated by the Legislative Yuan’s amendment of Paragraph 2, Article 47 of the Arbitration Act of 1998, intended to make it clear that a foreign arbitral award has binding force and should be enforceable in ­Taiwan for that reason. Nonetheless, difficulties remain. The two major outstanding questions ­following the intervention of the Legislative Yuan are (1) whether Taiwan courts will regard Mainland China awards as res judicata and thus enforceable subject only to questions of due process, arbitrability and public policy; and (2) whether foreign ad hoc awards will be recognised and enforced in Taiwan.

33 

Luke Nottage and Nobumichi Teramura, ch 4.

34 ibid. 35 ibid.

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The political reality that Taiwan is unable to accede to the New York Convention does not appear to have been an impediment to the development of international commercial arbitration there. The courts have simply applied the principles of the New York Convention when deciding whether or not to recognise and enforce foreign arbitral awards. The first outstanding question on the status of Mainland China awards may, however, be an offshoot of the political situation. How should Taiwan courts treat Mainland China awards? Foreign arbitral awards are governed by the Arbitration Act 1998. That enables foreign arbitral awards to be recognised more or less automatically as having the same effect as Taiwanese judgments. Hong Kong and Macau awards are governed by the Laws and Regulations Regarding Hong Kong and Macao Affairs (LRR). That allows Hong Kong and Macau awards to be recognised in Taiwan in the same way foreign arbitral awards are recognised under the Arbitration Act. But Mainland China awards are governed by the Act Governing Relations between the People of the Taiwan Area and the Mainland Area (AGR). There is no special legislation dealing with Mainland China awards. The AGR does not provide for Mainland China awards to be recognised as equivalent to foreign arbitral awards under the Arbitration Act, but instead subjects Mainland China awards to a similar regime as that applicable to Taiwan awards. To enable Mainland China awards to be recognised under a similar regime to that in the LRR, it will probably require intervention by the Legislative Yuan. However, that assimilation of the treatment of Mainland China awards to that of foreign arbitral awards may be subject to political considerations. Nonetheless, it is common nowadays for Taiwanese businesses to engage in joint ventures with Mainland China counterparts. This is likely to give rise to an increasing number of disputes to be resolved by arbitration, including arbitration in Mainland China. There will, at some point, sooner or later, be significant commercial pressure for Mainland China awards to be recognised and enforced in Taiwan much in the same way as in any foreign arbitral award, so that some practical way will have to be found around political sensitivities. In relation to the second outstanding question, although ad hoc arbitration agreements are recognised in Taiwan, ad hoc arbitration is rare there. It appears that, where the parties appoint arbitrators ad hoc, difficulties are likely to be encountered as the award may not give rise to res judicata. This approach by the Taiwan courts might also extend to foreign ad hoc awards. International commercial arbitration therefore remains a work in progress in Taiwan, according to Nigel Li, Angela Lin and Jeffrey Li.36 Many of the right elements are in place. But the courts’ attitude to certain types of awards (Mainland China awards and foreign ad hoc awards) remains unclear. Legislation may well be required to rectify the matter. Unfortunately, due to political sensitivity, it is unclear whether such legislation will be forthcoming in the near future. Only time will tell whether these significant difficulties can be overcome. The Taiwanese trajectory to arbitration reform is thus hampered by political considerations. That leaves four jurisdictions: Indonesia, Vietnam, the Philippines and India. There are a number of similarities among the four countries. Of the twelve jurisdictions, the ‘GDP per capita’ in these four countries are the lowest, respectively, US$ 3.346.49; US$ 2,110.92; US$ 2,904.20; and US$ 1,593.26 in 2015. Their ROLI score (TICPI score in brackets) are

36 

Nigel Li, Angela Lin and Jeffrey Li, ch 3.

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among the lowest: respectively, 0.52 (37); 0.51 (33); 0.51 (35) and 0.51 (40) in 2016. Of the other 12 jurisdictions, only Malaysia had a similar (albeit slightly higher) score: 0.54 (49) in 2016. The four countries’ Ease of Doing Business scores are also low: respectively 61.52; 63.83; 60.40; and 55.27 in 2017. On the other hand, in terms of the Kearney FDI Confidence Index for 2017, the scores for Indonesia and India are not bad: respectively, 1.6 and 1.68. This compares with 1.67 for Australia and 1.5 for Korea in 2017 and 1.5 for Taiwan in 2016. Current Kearney Index scores for Vietnam and the Philippines are not available, but it is presumed that the score will be similarly good for the Philippines, given FDI as a percentage of GDP there in 2015. The Kearney index score for Vietnam may well be even higher in light of FDI as a percentage of GDP there in 2015. Indonesia has been characterised above as being at Stage 1. From Professor Simon Butt’s account, it is unlikely to be moving beyond that to Stage 2 in the foreseeable future. At the very least, procedures for the recognition and enforcement of arbitral awards will have to be streamlined (including the numerous levels of appeal) by the judiciary and the concept of ‘public policy’ may have to be defined in legislation. There is a culture of using arbitration in Indonesia, but ‘[m]any companies, Indonesian and foreign, prefer to arbitrate outside of Indonesia, usually in Singapore, given its very strong reputation for professional dispute resolution … and its close proximity to Indonesia’.37 Despite his generally upbeat assessment of the development of arbitration in Indonesia, Professor Butt acknowledges that ‘[a]rbitration offshore also allows companies to avoid Indonesia’s judiciary … [which] has a poor reputation for competence and integrity’.38 Thus, the perception of judicial corruption plays an important part in the development of arbitration. Businesses frequently resort to arbitration, not in Indonesia, but outside Indonesia. This highlights the importance of judicial support as an essential element in arbitration reform. Although a secular state, Indonesia has a large Muslim population. Nonetheless, again, much as has been seen in the Malaysian chapter of this book, religion does not appear to be a significant factor for or against the development of arbitration in Indonesia. Vietnam is in a state of flux. It has relatively recently implemented arbitration reforms at the governmental, legislative and judicial levels. It remains to be seen what the effect of those reforms will be. Hop Dang is optimistic. He observes that: [T]he use of arbitration in Vietnam has seen a significant increase following the effectiveness of the LCA [that is, the 2010 Law on Commercial Arbitration]. The caseload at the VIAC continued to increase, up to 155 cases in 2016 and is predicted to increase further in 2017. While there had been concerns about many arbitral awards being set aside by the courts in previous years, 2015 saw no VIAC award being set aside by Vietnamese courts. It seems evident that the community and the legal institutions, including the judiciary, have now placed much more confidence in the arbitration system in Vietnam.39

What may be worth noting in the Vietnamese experience is that, although not a Model Law jurisdiction and unlikely to adopt the Model Law in the foreseeable future, it has obviously had regard to the Model Law in implementing its arbitration reform legislation (including its Law on Commercial Arbitration). The measures implemented to ensure compliance

37 

Simon Butt, ch 9.

39 

Hop Dang, ch 10.

38 ibid.

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with ­international standards have had an expectation to practice under the Model Law as well as in connection with the New York Convention. This signals commitment to change. Nonetheless, the proof of the pudding is in the eating. The legislation is in place. Capacitybuilding is ongoing. What remains to be seen is whether these measures will have any actual effect on how the judges in Vietnam approach the question of recognising and enforcing awards. Further, although sharing a similar socialist ideology as China, it has not adopted the controlled approach seen in China. Vietnam, for example, recognises both ad hoc and administered arbitrations. This suggests that it may be possible for China to loosen its strictures on ad hoc arbitration. As far as reform trajectories are concerned, there may not be any or any strong negative correlation between allowing ad hoc arbitration and the exercising of political control in the arbitration market. In the Philippines, the government, the legislature and the judiciary have all taken steps to facilitate the use of arbitration. That is why it has been classified as being at Stage 2. However, Professor Arthur Autea cautions that, if the foregoing initiatives are to succeed, then ‘[a]rbitration has to remain insulated from any form of corruption’. On this, he is cautiously optimistic, as ‘[s]o far, the cases that have reached the Supreme Court on the issue of vacating domestic arbitral awards have not included one involving corruption’.40 A priority in the Philippines appears to be to develop arbitration as a means of ‘decongesting’ (Professor Autea’s expression) the backlog of cases in the courts. This will be difficult (in Professor Autea’s view), because of a predilection for litigation among lawyers in Philippines. This means that lawyers recommend that clients go to court to resolve their disputes, rather than embark upon arbitration to which the lawyers are unused. In Professor Autea’s colourful expression, ‘[s]taying in the comfort zone seems to be the law of the market for arbitration’. In those circumstances, in the absence of efforts to increase public awareness of arbitration and its virtues, the fear is that arbitration cases will remain ‘a small slice of the pie’. On the assumption that corruption of the arbitral process is kept under control, what is thus needed to move the Philippines forward in arbitration reform is greater training and capacity-building, possibly spearheaded by its nascent arbitral institutions. Although it has a significant Muslim minority, the Philippines is predominantly Roman Catholic. Nonetheless, as already seen in Malaysia and Indonesia, religion does not seem to play any part in arbitration reform initiatives within the Philippines. India is likewise in a state of flux. The judiciary and the legislature have acted to encourage greater use of arbitration. But what needs to be done to support that is to enhance ­public awareness of arbitration as a means of dispute resolution and to increase significantly the pool of capable Indian arbitrators. Capacity-building is needed to bring in real competition and force out corruption. Having cited an estimate that possibly ‘as many as 20–50 per cent of Indian judges have received bribes’, Professor Hiro Aragaki observes in a footnote: ‘So long as retired judges make up the bulk of ad hoc arbitrators, it is not difficult to speculate that corruption also affects the arbitration process’.41 Further, users will need to be better informed about what

40  41 

Arthur Autea, ch 8. Hiro Aragaki, ch 11.

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arbitration is not. Currently, arbitration is regarded in India as no different from litigation. There is a prevalent attitude that arbitration is in effect an all-out war to achieve victory in one’s case or exhaust the other side in its pursuit of a remedy. In a jurisdiction where ad hoc arbitration is the rule, arbitral institutions may have to be established and nurtured to spearhead the creation and growth of an arbitration culture and capable arbitrators.

2.2.  The Second Set of Questions Where do the answers to the first set of questions lead? The second and third sets of questions essentially invite a summary of the observations in section 2.1 of this chapter and prompt academic inquiries to practice and policy concerns. The second set of questions articulates the likely ingredients key to a successful arbitration reform and other surrounding factors as applicable in individual jurisdictions: in light of the actual arbitration reform experience (or lack of such) in the 12 states (jurisdictions), it is possible to draw up a list of ‘ESSENTIAL’, ‘HIGHLY RECOMMENDED’, or ‘NEAR’ ingredients that may be contemplated today by jurisdictions in their prospective reforms, in the Asia Pacific or elsewhere. A list of ‘key ingredients’ might look like this: 1a. Adoption of the New York Convention—ESSENTIAL. 1b. Adoption of the Model law—HIGHLY RECOMMENDED or at least a jurisdiction must have close regard to the Model Law when drafting its legislation on arbitration reform. 2. Establishment of at least one national body (institution) to administer arbitrations— HIGHLY RECOMMENDED, but the body must be dynamic, even if the moving spirit behind the body may only be a single person. 3. Establishment of an arbitration-friendly (or pro-arbitration) judiciary staffed with judges familiar with best practices in application of the Model Law and the New York Convention—ESSENTIAL. 4. Establishment of an arbitration community, that is, a sufficient number of arbitrators, lawyers, business persons, and academics who are familiar with arbitration as a means of both domestic and international commercial dispute resolution—ESSENTIAL, since even where a top down approach is taken there must be some dialogue among government, academics, legal and other practitioners, and business end-users. See also the analysis below on developing ‘traction’. 5. A sufficient volume of existing or anticipated commercial activity (holding arbitration seminars, conferences, training sessions) to make use of (and justify the expenses involved in establishing) a modern arbitration infrastructure within the jurisdiction (may also be termed as a ‘healthy arbitration ecology’)—HIGHLY RECOMMENDED, possibly even ESSENTIAL in order for arbitration to gain ‘traction’. 6. An openness and readiness to the introduction of further arbitration reform or ­innovation so as to keep ‘one step ahead’ of competing jurisdictions—NEAR, but HIGHLY RECOMMENDED when a state is seeking to move from Stage 3 to Stage 4. 7. Rule of law—HIGHLY RECOMMENDED.

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Other elements (but not ‘key ingredients’) that may play a role in the outcome of arbitral reform (especially in relation to commercial arbitration) are as follows: 1. 2. 3. 4.

Religion—minimal role (see Malaysia, Indonesia and the Philippines). Federalism—probably little or no role (see Australia, Malaysia). Cultural and ethnic diversity—probably no role (see Singapore, India). Political considerations (including a perceived need for a ‘controlling’ policy on arbitration)—some role (see China, Taiwan, but contrast with Vietnam). 5. Corruption—some role, especially where the judiciary is perceived as corrupt (see Indonesia, the Philippines and India, but contrast with Malaysia). 6. National characteristics—some role (see Australia (predilection for judicialisation); Philippines (predilection of lawyers to resort to litigation); India (predilection to treat arbitration as little or no different from all-out litigation); Japan (aversion to conflict).)

2.3.  The Third Set of Questions The third set of questions prompt further academic inquiries as follows: 1. How should individual Asia Pacific jurisdictions pitch themselves to compete in the arbitration market on the following two fronts: (a) among each other; and (b) with more established counterparts in leading Western jurisdictions? 2. Has arbitration reform in the Asia Pacific been characterised by localised globalism or globalised localism? What (if any) implications does this have? 3. Do judicial and institutional reforms play important roles in arbitration reform in the Asia Pacific? Are such roles complementary to each other or do they develop independently of each other and with what implications? On sub-question (1), the most successful Asia Pacific jurisdictions (Hong Kong, ­Singapore, Korea, Malaysia, Australia) have followed relatively similar trajectories. They have learned from each other and from established Western counterparts. They have watched what other jurisdictions (not necessarily just in the Asia Pacific) have done and copied swiftly or sought to improve upon those innovations. But, so far, Asia Pacific jurisdictions have done little to develop unique products to cater for different types of specialised arbitrations (for example, arbitrations to handle specialised financial, investor-state, anti-monopoly, intellectual property, maritime, construction, consumer or labour disputes). In other words, gaining an edge over the competition would require developing capacity in specific areas in which a jurisdiction enjoys a comparative advantage. There is a movement in that direction in the six most successful or most active Asia Pacific jurisdictions (Hong Kong, Singapore, Korea, Malaysia, Australia, China), but much remains to be done to determine what the regional and international market requires by way of niche forms of dispute resolution. Currently, there is a sameness among the six busiest Asia Pacific jurisdictions referred to above. On sub-question (2), the twelve jurisdictions all appear to be examples of globalised localism. Each jurisdiction has chosen those elements of the Model Law deemed to be ­suitable to it. In some cases (Hong Kong, Singapore, Korea and Malaysia) almost all of the

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Model Law has been adopted. In other cases (Indonesia), a significant number of Model Law elements have not been adopted. This may explain why, although the Indonesian business community acknowledges the role of arbitration, it prefers to arbitrate outside Indonesia and avoid Indonesian arbitration law as the governing law. In no case, broadly speaking, have jurisdiction-specific usages been introduced to cater for unique features of a jurisdiction. The implication reinforces the view, already expressed above, that the Model Law is the ideal standard for successful arbitration reform. It is not absolutely essential, but it is difficult to see how arbitration reform can get off the ground successfully unless a substantial part of the Model Law is adopted. Nor is it clear why adoption of the Model Law should be at the expense of local usages. In fact, what has been seen, is that local usages have apparently played little role in arbitration reform in the Asia Pacific. The recommendation in the answer to sub-question (1) is at heart a call for greater focus on local (including sub-regional and regional) needs in order to generate niche arbitration products to cater for such needs and thereby distinguish one’s self from a sameness in the approaches followed by regional and international competitors. On sub-question (3), the implication from what has been discussed above is that judicial and institutional reforms are most effective when they complement each other. Without judicial support, arbitration reform cannot get off the ground. On the other hand, without institutional support to enhance public awareness of arbitration and to create capacitybuilding in the sense of a highly-qualified pool of arbitration professionals (arbitrators, lawyers, business people, academics), it is difficult for arbitration reform to gain ‘traction’. Judicial and institutional reform may start up independently, but at some point they have to be coordinated (and made consistent) with each other. China as a case study of arbitration reform is a vivid example, despite China’s lack of legislative reform of an over-two-­decadeold arbitration law. Hong Kong and Singapore’s stories also reinforce the conclusion that successful reform depends heavily on healthy bi-directional support between active local arbitration institutions (the HKIAC and SIAC) and pro-arbitration judicial systems (the Hong Kong and Singapore courts and arbitration-specialised judges).

3.  Some Predictions This book will make three predictions in light of the foregoing analysis. The first forecast is that, in the short and medium terms, Asia Pacific jurisdictions will continue to copy each other and copy traditional arbitration giants in the West in order to move forward their arbitration reform to the next stage. This will mean (among other measures) that more and more jurisdictions will adopt more and more (in both coverage and depth) of the Model Law in their legislation. It will mean that judiciaries will become increasingly supportive of arbitration. An example is what is currently going on in Vietnam, where the government is heavily engaged in ­enhancing judicial awareness of best international arbitration practices in relation to the recognition and enforcement of foreign arbitral awards. Institutions in turn will become increasingly dynamic in (1) revising their rules to copy innovations introduced by other arbitration centres (in particular, those successful

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a­ rbitration centres in the region and internationally), (2) improving public awareness of arbitration as a means of dispute resolution through holding seminars, conferences and training activities, and (3) enlarging the pool of qualified arbitrators and competing for arbitrator talent within a jurisdiction. Where a jurisdiction does not have strong arbitral institutions (such as India), new organisations will need to be established. China is at the other extreme from India in this respect. China has over 240 arbitration institutions spreading over the country. As competition for caseload is increasingly intensified, some of the less developed Chinese arbitral institutions will likely be phased out. On the other hand, while there is presently no ad hoc arbitration in China, there might be a gradual liberalisation to allow the latter (possibly initially in specific areas within China), in order to attract more business and compete with institutional arbitration. Healthy competition will mean increasingly following the ‘survival of the fittest’ market rule. In China, this will particularly be pertinent in light of the Belt and Road Initiative. At some point, even Indonesia will have to accede to commercial pressures from domestic and international business enterprises (especially in the context of the ASEAN Economic Community (AEC) inaugurated on 31 December 2015) to improve its international commercial arbitration regime. The consequence of all this will be greater competition among jurisdictions in the Asia Pacific to become sub-regional, regional or international dispute resolution hubs. The second forecast is that, in the medium to long terms, there will be a greater number of niche arbitration products introduced into the Asia Pacific market. That is, in order to keep ahead of the competition, countries will (1) keep updating their arbitration rules in parallel with regional and international arbitration rule-making giants; (2) introduce particular rules for the arbitration of specialised types of disputes (especially in highly technical areas); and (3) develop internal capacity to arbitrate specialised disputes and administer such arbitrations. These niche products will not just concern purely commercial matters, but may deal with disputes involving religious, cultural, political, environmental, social and other issues having significant financial or economic consequences. The third forecast is that successful arbitration reform requires a judiciary with a reputation for being supportive of arbitration through a ‘hands off ’ approach, and ­ thereby could be a means in the long term of reducing corruption in other branches of a ­country’s government. As more and more commercial awards are recognised and enforced in an expeditious and cost-­effective manner, there will be correspondingly less red tape or bureaucracy involved in the enforcement of commercial rights. There will be fewer opportunities for corruption, which often arises to help parties to ‘facilitate’ or ‘negotiate’ their way through an opaque system. Arbitration reform will thereby be an ingredient, by no means the only one, for attaining greater transparency in the day-to-day administration of commercial justice.

4.  The Developing World If the three predictions sound all too rosy, that optimism is actually reflected in and justified by the titles and subtitles of the twelve preceding chapters. Although asked to stick as much as possible to a template in the body of their chapter, contributors were encouraged to

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come up with individual subtitles capturing the essence of arbitration reform within their jurisdiction. It is instructive to consider the totality of the subtitles eventually put forward: 1. China’s Arbitration Modernisation under Judicial Efforts and Marketisation Wave 2. Balancing Procedural and Substantive Arbitration Reforms: Advancing International Arbitration Practice in Hong Kong 3. Cautious Optimism for Arbitration Reform in Taiwan 4. Arbitration Reform in Japan: Reluctant Legislature and Institutional Challenges 5. Arbitration Reform in Korea: At the Threshold of a New Era 6. Making Arbitration Work in Singapore 7. Arbitration Reform in Malaysia: Adopting the Model Law 8. Philippine Arbitration Reform: Fresh Breathing Space from Congested Litigation 9. Arbitration in Indonesia: Largely Dependable Recognition and Enforcement 10. Arbitration Law and Practice in Vietnam: Fundamental Changes over the Past 20 Years and Potential for the Future 11. Arbitration Reform in India: Challenges and Opportunities 12. The Reform of Commercial Arbitration in Australia: Recent and Prospective Developments As mentioned in the Introduction chapter to this book, the notion of ‘developing world’ as used in the title posits some correlation between the pattern/level of arbitration reform within a jurisdiction on the one hand and the degree of foreign direct investment and overall economic development there on the other. Developing economies (China, ­Malaysia, Philippines, Indonesia, Vietnam and India) have looked and continue looking at the development of arbitration development in economically more developed jurisdictions (Hong Kong, Taiwan, Singapore, Japan, Korea, Australia) to learn from their successful strategies. But, interestingly, findings from the individual chapters here seem to collectively indicate that a jurisdiction’s level of economic development does not necessarily lead to or play a role in the progress (pace) and outcome (success) of arbitration reform. The experiences of Hong Kong and Singapore suggest that it is more the nature of an economy (ie, the fact that both jurisdictions are reliant on the provision of services and attracting foreign investment)42 that has led to them standing at the forefront of arbitration reform in the Asia Pacific. Further, the experiences of China and Vietnam show that developing economies are more incentivised to reform their arbitration system (whether top-down or bottom-up, and especially if the country is aggressive in attracting foreign investment). China’s experience in particular is pertinent in that lacking a top-down legislative reform of arbitration law has not prevented China from becoming one of the busiest (if not the busiest) jurisdictions for arbitration services in the Asia Pacific. It is likely that China’s Belt and Road Initiative will only enhance this trend. The case of Japan reinforces the view that it is the nature, rather than the level of development, of an economy that leads to success in arbitration reform. Japan is one of the most developed economies in the Asia Pacific, but the country’s difficulty in attracting FDI43 42  According to World Bank, Hong Kong’s FDI as percentage of GDP in 2015 is 58.48 per cent, and Singapore’s figure is 22.29 per cent. Both jurisdictions are ranked as highest in FDI among the 12 Asia Pacific jurisdictions investigated. See Column 8 of Table 1. 43  According to World Bank, Japan’s FDI as percentage of GDP in 2015 is 0 per cent, ranked as lowest in FDI among the 12 Asia Pacific jurisdictions investigated. See Column 8 of Table 1.

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and the fact that it is not an economy dependent on the provision of services to foreign nationals, coupled with a culture of aversion to conflict, have slowed down the development of arbitration reform there. This can be contrasted with Korea which also has a low inward FDI component within its economy44 and a similar culture of conflict avoidance. But Korea’s ambitions with respect to becoming a service economy have led Korea to push forward an agenda of arbitration reform. Japan has as a result lagged behind its economic peers (such as Korea and China) in arbitration development. Alongside indications that the level of economic development does not necessarily lead to or play a role in the progress and outcome of arbitration reform, the Introduction chapter referred to an underlying premise that arbitration reform is itself an engine of economic development, a means of attracting investment, and a way of improving the efficiency of the commercial market and strengthening the rule of law within a jurisdiction. Nothing in the individual contributions to this book casts any real doubt on this underlying assumption. Contributors may be critical of the pace and degree of reform in a jurisdiction—too slow, not fast enough, too timid, not bold enough, etc. But, at heart, the positive titles chosen by the contributors evidence a broad conviction that arbitration reform within a given jurisdiction can only be beneficial for business interests there and should be nurtured as a continued serious commitment by the jurisdiction. Arbitration regimes can be improved or reinforced, in some jurisdictions to a greater extent than might be required in others, but reform on the whole will change for the better. It may take effort. It is currently very much an ongoing project premised on the nature and positioning of the economy of respective jurisdictions. But ultimately reform is a development to which Asia Pacific jurisdictions at whatever stage and whatever nature of economic well-being can and should aspire. The Asia Pacific region is currently the most vibrant in world economic growth. Despite the wide consensus in both the East and West that successful arbitration is an engine of economic growth, arbitration development in the East has been comparatively much less studied in comparison to that in the West. It is hoped that this book can enhance understanding of the issues raised by rapid transformations in the arbitration landscape of the Asia Pacific, from an Eastern perspective. It is also hoped that this book will stimulate interest in the study of arbitration reform in the world generally.

44  According to World Bank, Korea’s FDI as percentage of GDP in 2015 is 0.37 per cent, ranked as second lowest in FDI among the 12 Asia Pacific jurisdictions investigated. See Column 8 of Table 1.

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Legislative Materials Arbitration Law, Arts 8, 10(1), 11, 12, 13, 14, 15, 15(2), 16, 18, 20, 26, 58, 66, 67, 68, 70, 71; Chapter VII. BAC Arbitration Rules 2015, Arts 35, 62, 63; Chapter VIII. Beijing Arbitration Commission Arbitration Rules. Circular of Supreme People’s Court on Implementing Convention on the Recognition and Enforcement of Foreign Arbitral Awards Entered by China, Art 1. Civil Procedure Law (pre-2013 version), Art 213. Civil Procedure Law (2013 version), Arts 237(2), 260(1).

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—— ‘The Hong Kong Advantage—Arbitration’. www.psdas.gov.hk/content/doc/2003-2-02/HKIAC_ Booklet%20-%202003-2-02.pdf. —— ‘Upcoming Events’. http://www.hkiac.org/events/upcoming. HKSAR Government. Policy Address 2014. http://www.policyaddress.gov.hk/2014/eng/pdf/Agenda_ Ch1.pdf. 2014. —— ‘Government sets up Advisory Committee on Promotion of Arbitration’. http://www.info.gov. hk/gia/general/201412/18/P201412180576.htm. 18 December 2014. Hong Kong Institute of Arbitrators, ‘Report of Committee on Hong Kong Arbitration Law’. http:// www.legco.gov.hk/yr08-09/english/bc/bc59/papers/-bc590728cb2-2261-3-e.pdf. 30 April 2003. ‘Hong Kong International Arbitration Centre 2013 Administered Arbitration Rules’. http://www. hkiac.org/sites/default/files/ck_filebrowser/PDF/arbitration/2013_hkiac_rules.pdf. Hong Kong Mediation and Arbitration Centre, ‘Corporate Training and Seminar’. https://hkmaac. org/training/corporate.php. Holtzmann, Howard M, Neuhaus, Joseph E, Kristjánsdóttir, Edda, and Walsh, Thomas W, A Guide to the 2006 Amendments to the UNCITRAL Model Law on International Commercial Arbitration: ­Legislative History and Commentary (Alphen aan den Rijn, Kluwer Law International, 2015). Hong Kong Economic and Trade Office (New York), ‘Hong Kong’s arbitral strengths promoted in New York and Miami’. http://www.hketony.gov.hk/ny/whatsnew/2014/hkaspnymia.htm. —— ‘Promoting Hong Kong’s Strengths as an International Dispute Resolution Center’. http://www. hketony.gov.hk/ny/whatsnew/2014/idrcenter.htm. Hsieh, Pasha L, ‘Liberalizing Trade in Legal Services under Asia-Pacific FTAs: The ASEAN Case’ (2015) 18 Journal of International Economic Law 153–85. Jo, Katherine, ‘CIETAC raises its game’ (2014) 20 China Law & Practice 2. King, Ronnie, ‘New Arbitration Rules for HKIAC’. https://www.ashurst.com/publication-item. aspx?id_Content=9317. Kwok, David, ‘Pro-enforcement Bias by Hong Kong Courts. The Use of Indemnity Costs’ (2015) 32 Journal of International Arbitration 677–88. Law Society of the England and Wales, ‘England and Wales: The jurisdiction of choice’. http://www. eversheds.com/documents/LawSocietyEnglandAndWalesJurisdictionOfChoice.pdf. Lee, Tin Yan, ‘Introductory Note to the New Arbitration Ordinance of the Hong Kong Special Administrative Region’ (2012) 51 International Legal Materials 133–97. Mau, Stephen, ‘The Legislative History of the New Hong Kong Arbitration Ordinance (Legislative Comment)’ (2012) 28(6) Construction Law Journal 482–506. —— ‘The Proposed New Arbitration Law of Hong Kong’ (2010) 26(5) Construction Law Journal 379–96. —— and Cheng TYW, Hong Kong Arbitration: A User’s Guide 2nd edn (Hong Kong, CCH Hong Kong, 2008). —— and —— Hong Kong Arbitration: A User’s Guide 3rd edn (Hong Kong, CCH Hong Kong, 2014). Sandborg, David, ‘Arbitration in Hong Kong’ in Shahla F Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia 3rd edn (Huntington, Juris, 2013). Simon McConnell, ‘Hong Kong—Third Party Funding’. http://www.conventuslaw.com/report/hongkong-third-party-funding/. 16 November 2015. Singapore Academy of Law, ‘Alternative Dispute Resolution’. http://www.singaporelaw.sg/sglaw/­ arbitration-adr/arbitration-adr-in-singapore. 2015. Singapore International Arbitration Centre, ‘SIAC: Arbitration in the New Millennium’. http://www. lawgazette.com.sg/2000-1/Jan00-23.htm. 2000. Spigelman, James J, ‘International Commercial Litigation: An Asian Perspective’ (2007) 37 Hong Kong Law Journal 859–89.

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Sun, Wei and Willems, Melanie, Arbitration in China (Alphen aan den Rijn, Kluwer Law International, 2015). Tao, Jingzhou, Arbitration Law and Practice in China 3rd edn (Alphen aan den Rijn, Kluwer Law International, 2012). The Law Reform Commission of Hong Kong, The Adoption of the UNCITRAL Model Law in Hong Kong. http://www.hkreform.gov.hk/en/docs/runcitral-e.pdf. The Law Reform Commission of Hong Kong Third Party Funding for Arbitration Sub-committee, ‘Consultation Paper Third Party Funding for Arbitration’. http://www.hkreform.gov.hk/en/docs/ tpf_e.pdf. October 2015. The Legislative Council of the Hong Kong SAR, ‘Paper for the House Committee meeting on 10 April 2015, Report of the Bills Committee on the Arbitration (Amendment) Bill 2015’. http://www.legco. gov.hk/yr14-15/english/hc/papers/hc20150410cb4-717-e.pdf. 8 April 2015. To, Christopher and So, Damon, Butterworths Hong Kong Arbitration Law Handbook (Hong Kong, LexisNexis Butterworths, 2012).

Chapter 3: Taiwan Cases And Other Judicial Materials Allen v McCurry 449 US 90 (1980). Ministry of Justice Letter Fa-Lu-Juei-Tzi No 0930017621 (2004). Shih-Lin District Court Judgment 83 Jung-Su-Tzi No 1 (1994). Supreme Court Civil Decree 75 Tai-Kang-Tzi No 335 (1986). Supreme Court Civil Decree 103 Tai-Kang-Tzi No 236 (2014). Supreme Court Civil Decree 103 Tai-Kang-Tzi No 850 (2014). Supreme Court Judgment 73 Tai-Shang-Tzi No 61 (1984). Supreme Court Judgment 81 Tai-Shang-Tzi No 2196 (1992). Supreme Court Judgment 93 Tai-Shang-Tzi No 1690 (2004). Supreme Court Judgment 93 Tai-Shang-Tzi No 1943 (2004). Supreme Court Judgment 96 Tai-Shang-Tzi No 2531 (2007). Supreme Court Judgment 97 Tai-Shang-Tzi No 236 (2008). Supreme Court Judgment 97 Tai-Shang-Tzi No 2477 (2008). Supreme Court Judgment 99 Tai-Shang-Tzi No 1007 (2010). Supreme Court Judgment 99 Tai-Shang-Tzi No 1788 (2010). Supreme Court Judgment 100 Tai-Shang-Tzi No 671 (2011). Supreme Court Judgment 100 Tai-Shang-Tzi No 2029 (2011). Supreme Court Judgment 102 Tai-Shang-Tzi No 683 (2013). Supreme Court Judgment 104 Tai-Shang-Tzi No 33 (2015). Supreme Court Precedent 22 Kan-Tzi No 598 (1933). Tai-Chung District Court Decree 96 Kang-Tzi No 94 (2007). Taipei District Court Civil Decree 99 Chung-Su-Tzi No 357 (2010). Taiwan High Court Civil Decree 99 Fei-Kang-Tzi No 122 (2010). Taiwan High Court Civil Decree 102 Kan-Gan-1-Tzi No 13 (2013). Taiwan High Court Civil Decree 102 Kan-Gan-1-Tzi No 13 (2013). Taiwan High Court Judgment 86 Jung-Shang-Tzi No 400 (1997).

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 309

Legislative Materials Act Governing Relations between the People of the Taiwan Area and the Mainland Area, Art 74. Arbitration Act (the ROC Arbitration Law), Arts 1, 5(2), 6, 21, 21(3), 37, 37(1), 47, 49(1), 50; (2015 version) Art 47(2); Chapters IV, VII. Compulsory Execution Law, Arts 4(1)(1), 4(1)(6), 14. New York Convention, Art 3. Laws and Regulations Regarding Hong Kong and Macao Affairs, Art 42. Provisional Statute for Civil Arbitration, para 1. Rules on Arbitration Institutions, Mediation Procedures and Fees, Arts 3(1), 19, 25, 28. UNCITRAL Model Law.

Books, Journal Articles, Websites and Other Materials Born, Gary, International Arbitration: Law and Practice (Alphen aan den Rijn, Wolters Kluwer Law International, 2012). Chang, Wen-Yu, ‘The Recognition of Mainland Area’s Judgments: A Comment on the Supreme Court Judgments 96 Tai-Shang-Zi No. 2531 (2007) and 97 Tai-Shang-Zi No. 236 (2008)’ (2010) 178 The Taiwan Law Review 246–57. Chen, CV, ‘Party Autonomy and the New Arbitration Act of Taiwan, the Republic of China’. (2002) 1 CAA Arbitration Journal 1–36. Chen, Hui-ling, ‘Enforcement of Chinese judgments and arbitral awards in Taiwan: the res judicata problem’. Winkler Partners, 6 June 2015. http://www.winklerpartners.com/?p=6218. Chiu, Hungdah and Fa, Jyh-Pin, ‘Taiwan’s Legal System And Legal Profession’ (1994) 5 Maryland Series in Contemporary Asian Studies. Flannery, Louis and Garel, Benjamin, ‘Arbitration costs compared: the sequel’ Global Arbitration Review. https://www.noexperiencenecessarybook.com/VxpX9/arbitration-costs-compared-thesequel-international-arbitration.html. 15 January 2013. Hung, Guo-Chan, ‘A Beautiful Mistake: Whether the Judgment Made in Mainland Area has Res ­Judicata? To Opine the Supreme Court Judgments 96 Tai-Shang-Zi No. 2531 (2007)’ (2009) 167 The Taiwan Law Review 186–203. Hung, Tiffany and Amber Hsu, ‘Taiwan’ in Baker & McKenzie (ed), The Baker & McKenzie International Arbitration Yearbook 2014-2015 (New York, Juris, 2014). Jennifer Brown, ‘New ICC rules of arbitration aim to cut costs and time’, Legal Feeds. http://www. canadianlawyermag.com/legalfeeds/467/new-icc-rules-of-arbitration-aim-to-cut-costs-and-time. html. 23 September 2013. Li, Catherine, ‘The New Arbitration Act of Taiwan—Up to an International Level?’ (1999) 16(3) ­Journal of International Arbitration 127–38. Li, Nigel NT, ‘Dispute Resolution’ in Mitchell A Silk (ed), Taiwan Trade & Investment Law (Hong Kong, Oxford University Press, 1994). Moses, Margaret L, The Principles and Practice of International Commercial Arbitration 3rd edn (Cambridge, Cambridge University Press, 2017). Su, David W, ‘International Commercial Arbitration and the ROC Arbitration Act’ (2002) 1 CAA Arbitration Journal 103–12. Yu, Hong-lin, ‘The Taiwanese Arbitration Act 1998’ (1998) 15(4) Journal of International Arbitration 107–25. Note: Tai-Shang-Zi (as adopted in various articles cited) and Tai-Shang-Tzi (as adopted in this ­chapter) refers to the same law report.

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Chapter 4: Japan Cases KK X v Y Inc (Tokyo District Court, 13 June 2011) Hei 21 (Chu) no 6; 58 Hanrei Jihou 2128. KK X v Y Inc (Tokyo High Court, 13 March 2012) Hei 23 (Ra) no 1334. Polestar Ship Line SA v The Sanko Steamship Co Ltd (Tokyo District Court, 28 January 2015) 2258 Hanrei Jiho 100. Ringling Circus case (also known as Nippon Kyoiku Co Ltd v Kenneth Feld) (Supreme Court, 4 September 1997) Hanrei Times no 969 (1998), 138–45. Taiyo Ink Manufacturing Co Ltd v Tamura Kaken Corporation (Tokyo District Court, 21 October 2004) 1216 Hanrei Times 309; 1926 Hanrei Jiho 127. X KK v American International Underwriters Ltd (Tokyo District Court, 29 July 2009), Hei 20 (Chu) no 3; 292 Hanrei Times 1304. X KK v American International Underwriters Ltd (Tokyo High Court, 26 February 2010). X v Y (Osaka High Court, 28 June 2016) Hei 27 (Ra) no 547, 32 Hanrei Jihou 2319.

Legislative Materials Arbitration Law (Law No 138 of 2003), Arts 3, 4, 12(2), 13(2), 13(5), 14(1), 15, 16, 17, 18, 20, 24, 28(1), 28(2), 28(3), 35, 38(4), 44, 44(1)(iv), 44(1)(vi), 44(i)(viii), 45, 46, 55; Chapter 10. Arbitration Law, Supplementary Provisions on the. Arts 3, 4. Civil Execution Law (Law No 4 of 1979) Art 22(iv)-2. Civil Law and Justice Legislation Amendment Act 2015 (Australia, Commonwealth). Constitution of Japan Art 76. Construction Business Law (Law No 100 of 1949). ICSID Convention. Japanese Attorney Law (Law No 205 of 1949) Art 72. Japanese Civil Code (Law No 89 of 1896), Arts 415, 655, 709. Japanese Code of Civil Procedure (Law No 109 of 1996) Arts 23, 23(1)(vi), 24(1), 338(1)(9). Japanese Code of Civil Procedure (Law No 29 of 1890) Chapter 8. Japanese Penal Code Art 35. JCAA Commercial Arbitration Rules 13, 25(1). Law Concerning Public Preemptory Notice and Arbitration Procedure, The (Law No 29 of 1890), Art 786. New York Convention. Rules of the Supreme Court (Law No 27 of 2003). Special Measures Law concerning the Handling of Legal Business by OFreign Lawyers (Law No 66 of 1986), Art 58-2 (1996 version). UNCITRAL Model Law, Arts 7(4) Option I, 34.2(b)(ii).

Books, Journal Articles, Websites and Other Materials Abe, Masaki, and Nottage, Luke, ‘Japanese Law’ in Jan Smits (ed), Encyclopedia of Comparative Law (Cheltenham, Edward Elgar, 2012). Aronson, Bruce E, ‘Elite Law Firm Mergers and Reputational Competition: Is Bigger Really Better? An International Comparison’ (2007) 40(3) Vanderbilt Journal of Transnational Law 763–831.

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Aronson, Bruce, Kozuka, Souichirou, and Nottage, Luke, ‘Corporate Law’ in Parissa Haghirian (ed), Routledge Handbook of Japanese Business and Management (London, Routledge, 2016). Blackaby, Nigel, ‘Redfern and Hunter on International Arbitration’ in Constantine Partasides, Alan Redfern and Martin Hunter (eds), International Arbitration 6th student version edn (Oxford, Oxford University Press, 2015). Cole, Tony, ‘Commercial Arbitration in Japan: Contributions to the Debate on Japanese Non-­Litigiousness’ (2007) 40(1) New York University Journal of International Law and Politics 29–114. Garnett, Richard and Nottage, Luke, ‘What Law (if any) Now Applies to International Commercial Arbitration in Australia?’ (2012) 35(3) UNSW Law Journal 953–78. Godwin, Peter, ‘The Arbitration in Asia—the Good, the Bad and the Ugly!’ (2016) 22 Kuala Lumpur Regional Centre for Arbitration Newsletter 20–23. —— ‘“Finger-Pointing” Arbitration Clauses—Don’t Use Them!’ (2006) 43 Herbert Smith—Dispute Avoidance Newsletter. Haley, John O, ‘The Japanese Judiciary: Maintaining Integrity, Autonomy, and the Public Trust’ in Daniel H Foote (ed), Law in Japan: A Turning Point (Seattle, University of Washington Press, 2007). —— ‘The Role of Courts in Making Law in Japan: The Communitarian Conservatism of Japanese Judges’ (2013) 22(3) Pacific Rim Law & Policy Journal 491–503. Hamamoto, Shotaro, ‘Recent Anti-ISDS Discourse in the Japanese Diet: A Dressed-up but Glaring Hypocrisy’ (2015) 16(5–6) Journal of World Investment and Trade 931–51. Hamamoto, Shotaro, and Nottage, Luke, ‘Japan’ in Chester Brown (ed), Commentaries on Selected Model Investment Treaties (Oxford, Oxford University Press, 2013). Harata, Hiroshi, ‘Interpretation and Application of the New York Convention in Japan’ in George Bermnan (ed), New York Convention (Berlin, Springer, 2017). Hayakawa, Yoshihisa. ‘Historical Phase of Arbitration in Japan’ [in Japanese] (2015) 1084 Horitsu Jiho 19–24. Heath, Christopher, and Nottage, Luke, ‘Case No 71: Arbitration Law—Separability and ­Arbitrability— Terminated Contract’ in Moritz Bälz, Marc Dernauer, Christopher Heath and Anja PetersenPadberg (eds), Business Law in Japan: Cases and Comments (Alphen aan den Rijn, Kluwer, 2012). Holmes, Malcolm, Nottage, Luke and Tang, Robert, ‘The 2016 Rules of the Australian Centre for International Commercial Arbitration: Towards Further “Cultural Reform”’ (2016) 12(2) Asian International Arbitration Journal, 211–34. http://ssrn.com/abstract=2786839. Horton, David, and Cann Chandrasekher, Andrea, ‘After the Revolution: An Empirical Study of ­Consumer Arbitration’ (2015) 104 Georgetown Law Journal 57–124. Hwang, Michael, ‘Commercial Courts and International Arbitration—Competitors or Partners?’ (2015) 31 Arbitration International 193–212. Inomata, Takashi, ‘Case Analysis—Tokyo Dist. Ct., 13 June 2011’ [in Japanese] (2012) 2145 Hanrei Jihou 161–69. International Chamber of Commerce. ‘Statistics’. http://www.iccwbo.org/Products-and-Services/ Arbitration-and-ADR/Arbitration/Introduction-to-ICC-Arbitration/Statistics/. —— ‘ICC Statistical Reports’. http://library.iccwbo.org/dr-statisticalreports.htm?AUTH=c0a40e55f2c0-437b-b975-97a9c7cf1d67&Timeframe=ySNdSitNQnp4u4TLbDFTvc6qReyNPWSVvZXmsw lxc=. Japan Federation of Bar Association, ‘ADR Center (紛争解決センター)’ [in Japanese]. http://www. nichibenren.or.jp/contact/consultation/conflict.html. —— ‘JAA (社団法人日本仲裁人協会)主催 模擬国際仲裁セミ’ [in Japanese]. http://www.nichibenren.or.jp/event/year/2012/120529.html. Japanese Commercial Arbitration Association. ‘Key Points of Proposed Amendment to the Commercial Arbitration Rules’. http://www.jcaa.or.jp/new/docs/kaiseiten2e.pdf. —— ‘The Key Points of The 2014 Amendment to the Commercial Arbitration Rules’ (2014) 31 JCAA Newsletter 1–12.

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—— ‘The Methods of Activating International Commercial Arbitration in Japan from the Perspectives of Japanese Companies’ (2008) 55(8–10) JCA Journal 64–73, 48–55, 34–45. Japan Shipping Exchange Inc, The ‘Arbitration’. http://www.jseinc.org/tomac/index.html. ‘Japan to open center for international business arbitration’. Nikkei Asian Review. http://asia.nikkei. com/Politics-Economy/Policy-Politics/Japan-to-open-center-for-international-business-arbitration. 18 May 2017. Jones, Colin, ‘The Influence of Amakudari on the Japanese Legal System’ (2015) 40 Journal of Japanese Law 1–58. Justice System Reform Council, The, ‘Recommendations of the Justice System Reform C ­ ouncil for a Justice System to Support Japan in the 21st Century’. http://japan.kantei.go.jp/judiciary/ 2001/0612report.html. Kawamura, Akira. ‘The Approaches of The Japan Arbitrators Association’ [in Japanese] (2015) Horitsu Jiho 51–52. Kawashima, Shiro, Japanese and Litigation [in Japanese] (Kyoto, Horitsubunkasha, 2010). Kawashima, Takeyoshi, Japanese Legal Consciousness [in Japanese] (Tokyo, Iwanamishoten, 1967). Kisa, Shigeo, Miyazawa, Setsuo, Sato, Tetsuo, Kawashima, Shiro, and Mizutani, Norio, Japanese Judicial System [in Japanese] 6th edn (Tokyo, Nipponhyoronsha, 2015). Kitagawa, Toshimitsu, and Nottage, Luke, ‘Globalization of Japanese Corporations and the Development of Corporate Legal Departments: Problems and Prospects’ in William Alford (ed), Raising the Bar: The Emerging Legal Profession in East Asia 201–85 (Cambridge and Massachusetts: Harvard East Asian Legal Studies Program [distributed by Harvard University Press], 2007). Kojima, Takeshi, Comparative Study of Arbitration and Process of Complaints [in Japanese] (Tokyo, Cyuo University Press, 1985). Kojima, Takeshi, and Inomata, Takashi, Arbitration Law [in Japanese] (Tokyo, Nipponhyoronsha, 2014). Kojima, Takeshi, and Takakuwa, Akira, The Arbitration Law: Commentary and Issues [in Japanese] (Tokyo, Seirinshoin, 2007). Kondo, Masaaki, Goto, Takeshi, Uchibori, Kotatsu, Maeda, Hiroshi, and Kataoka, Tomomi, Arbitration Law of Japan (Tokyo, Shojihomu, 2004). Koyama, Noboru, Arbitration Law [in Japanese] 2nd edn (Tokyo, Yuhikaku, 1983). Kozuka, Souichirou, and Nottage, Luke, ‘Policy and Politics in Contract Law Reform in Japan’ in Maurice Adams and Dirk Thilbaut (eds), The Method and Culture of Comparative Law (Oxford, Hart, 2014). Lalive, Pierre, ‘Irresponsibility in International Commercial Arbitration’ (1999) 7(2) Asia Pacific Law Review 161–76. Lewis, Dan, The Interpretation and Uniformity of the UNCITRAL Model Law on International ­Commercial Arbitration: Focusing on Australia, Hong Kong and Singapore (Alphen aan den Rijn, Wolters Kluwer, 2016). Markert, Lars, ‘The JCAA Arbitration Rules 2014—One Step Forward in the Modernization of ­Japanese Arbitration’ (2014) 32 JCAA Newsletter 1–5. McAlinn, Gerald, and Nottage, Luke, ‘Changing the (JCAA) Rules: Improving International Commercial Arbitration’ (2004) 18 Journal of Japanese Law 23–36. Miki, Koichi, ‘The Present and the Future of Arbitration (2)’ [in Japanese] (2008) 55(6) JCA Journal 8–16. Miki, Koichi, and Yamamoto, Kazuhiko, Theory and Practice of the New Arbitration Act [in Japanese] (Tokyo, Yuhikaku, 2006). Ministry of Land, Infrastructure, Transport and Tourism. ‘Concerning construction work disputes committees’. http://www.mlit.go.jp/sogoseisaku/1_6_hf_000127.html. ‘Minutes of the 1st Meeting of the Arbitration Study Group (仲裁検討会第1回議事録)’ [in ­Japanese]. 5 February 2002.

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‘Minutes of the 5th Meeting of the Arbitration Study Group (仲裁検討会第5回議事録)’ [in ­Japanese]. 27 May 2002. Monichino, Albert. ‘The Future of International Arbitration in Australia’ (2015) 5(1) Victoria University Law and Justice Journal 60–74. Monichino, Albert, Nottage, Luke, and Hu, Diana, ‘International Arbitration in Australia: Selected Case Notes and Trends’ (2012) 19 Australian Journal of International Law 181–212. Morishita, Tetsuo, ‘Setting Aside of a JCAA Arbitral Award and Violation of the Arbitrators’ Duty of Disclosure’ [in Japanese] 1505 Jurist 315–16. Morrison, James, and Nottage, Luke, ‘Country Report on Australia For: International Commercial Arbitration—an Asia-Pacific Perspective’ (2014) 14(19) Sydney Law School Research Paper 1–106. Moses, Margaret L, The Principles and Practice of International Commercial Arbitration 2nd edn (Cambridge and New York, Cambridge University Press, 2012). Nakamura, Tatsuya, ‘Future of International Arbitration of Japan’ in Koichi Miki, Hiroyuki Tezuka and Akihiro Hironaka (eds), International Arbitration and Corporate Strategy [in Japanese] (Tokyo, Yuhikaku, 2014). —— ‘Investigation of Arbitration for JCAA Arbitration and Japanese Companies’ [in Japanese] (2009) 56(1) JCA Journal 43–46. —— ‘The Recent Court Decisions on the Japanese Arbitration Law’ (2015) 34 JCAA Newsletter 4–12. —— ‘The Recent Japanese Court Decisions on Arbitration’ (2012) 28 JCAA Newsletter 4–10. Nakamura, Tatsuya, and Nottage, Luke, ‘Arbitration in Japan’ in Shahla F Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia 3rd edn (New York, Juris, 2013). Nakata, Jyunichi, Special Proceedings [in Japanese] (Tokyo, Nipponhyoronsha, 1938). Nottage, Luke, ‘Civil Procedure Reforms in Japan: The Latest Round’ (2005) 22 Ritsumeikan Law Review 81–86. —— ‘Consumer Rights in Japan’ in Parissa Haghirian (ed), Japanese Consumer Dynamics (New York, Palgrave Macmillan, 2010). —— ‘The Cultural (Re)Turn in Japanese Law Studies’ (2009) 39(4) Victoria University of Wellington Law Review 755–77. —— ‘International Arbtiration and Society at Large’ in Andrea Bjorklund, Franco Ferrari and ­Stefan Kröell (eds), Cambridge Compendium on International Arbitration (Cambridge, Cambridge ­University Press, 2017). —— ‘International Commercial Arbitration in Australia: What’s New and What’s Next?’ (2013) 30(5) Journal of International Arbitration 465–94. —— ‘Japan’s New Arbitration Law: Domestication Reinforcing Internationalisation?’ (2004) 7 ­International Arbitration Law Review 54–60. Nottage, Luke, and Green, Stephen, ‘Who Defends Japan? Government Lawyers and Judicial System Reform in Japan and Australia’ (2011) 13(1) Asian-Pacific Law and Policy Journal 129–73. Nottage, Luke, and Monichino, Albert, ‘International Commercial Arbitration Developments in Model Law Jurisdictions: Japan Seen from Australia’ (2013) 1 International Arbitration Law Review 34–45. Oghigian, Haig, Ohara, Mami, and Hamai, Hiroyuki, ‘Japan’ in Nancy M Thevenin (ed), Baker & Mckenzie International Arbitration Yearbook: 2012–2013 (United States, Juris Publishing, 2013). Queen Mary University of London School of International Arbitration. ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’. http://www.arbitration. qmul.ac.uk/docs/164761.pdf. Ragan, Charles. ‘Arbitration in Japan: Using Alternative Methods of Resolving Disputes’ (1992) 14(10) East Asian Executive Reports 8. Rheuben, Joel, and Nottage, Luke, ‘Now That the (Radioactive) Dust Has Settled: Resolution of Claims from the Fukushima Nuclear Disaster’ (October 2013) Asian Dispute Review 126–31.

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Singapore International Arbitration Centre. ‘Statistics’. http://www.siac.org.sg/2014-11-03-13-33-43/ facts-figures/statistics/64-why-siac. ‘Status: UNCITRAL Model Law on International Commercial Arbitration (1985), with Amendments as Adopted in 2006’. http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_ arbitration_status.html. Tanase, Takao, Law and the Community: A Critical Assessment of American Liberalism and Japanese Modernity (translated by Luke Nottage and Leon Wolff, Cheltenham, Edward Elgar, 2010). Taniguchi, Yasuhei. ‘The Development of the Adversary System in Japanese Civil Procedure’ in Daniel H Foote (ed), Law in Japan (Washington, University of Washington Press, 2007). —— ‘Interview: The Background of the Appointment for the Judge of Newly Established Singapore International Commercial Court’ [in Japanese] (2015) The Lawyers 16–22. —— ‘Violation of Procedural Public Policy as a Ground for Setting Aside Arbitral Awards’ [in Japanese]’ in Koichi Miki, Hiroyuki Tezuka and Akihiro Hironaka (eds), International Arbitration and Corporate Strategy (Tokyo, Yuhikaku, 2014). Taniguchi, Yasuhei, and Nakamura, Tatsuya, ‘Japanese Court Decisions on Article V of the New York Convention’ (2008) 25 Journal of International Arbitration 857–63. Taniguchi, Yasuhei and Suzuki, Isomi (eds), Law and Practice of International Commercial Arbitration [in Japanese] (Tokyo, Maruzenyushodo, 2016). Taniguchi, Yasuhei, Takakuwa, Akira, Aoyama, Yoshimitsu, and Dogauchi, Masato, Commentary on Arbitration Rules of the Japan Commercial Arbitration Association [in Japanese] (Tokyo, The Japan Commercial Arbitration Association, 1999). Taylor, Phil, ‘Japan’s Arbitration Phobia’ (2008) AsiaLaw. Retreived from ProQuest. Tetsuo, Kurita, Takeshi, Yoshida, Tomohiro, Tateno, and Yuichiro, Oomori, International Commercial Arbitration in Asia [in Japanese] (Tokyo, LexisNexis Japan, 2014). Tezuka, Hiroyuki. ‘The New Arbitration Law and International Commercial Arbitration’ [in ­Japanese] in Koichi Miki, Hiroyuki Tezuka and Akihiro Hironaka (eds), International ­Arbitration and C ­ orporate Strategy (Tokyo, Yuhikaku, 2014). Tezuka, Hiroyuki, and Kawabata, Yutaro, ‘Japan’ in International Arbitration Review, European Lawyer Reference Series (England, Sweet & Maxwell, 2012). Tezuka, Hiroyuki, and Maeda, Yoko, ‘Development of arbitration in Asia, and Japan’ [in Japanese] (2015) 1084 Horitsu Jiho 13–18. Tobimatsu, Junichi, ‘Is “Public Policy” and Authorization to Take a Second Look at an Arbitration Award? Not in Japan’. http://uk.practicallaw.com/3-535-3518. Toyota, Hiroaki. ‘Challenge to Arbitrators (1)’ [in Japanese] (2006) 53(9) JCA Journal 2–11. West, Mark, ‘The Resolution of Karaoke Disputes: The Calculus of Institutions and Social Capital’ (2002) 28(2) The Journal of Japanese Studies 301–37. ‘Workshop: Education in Arbitration at Law Department and Law School’ [in Japanese] (2005) 52(4) JCA Journal 48–63. Yamada, Aya, ‘ADR in Japan: Does the New Law Liberalize ADR from Historical Shackles or Legalize It?’ (2009) 1 Contemporary Asia Arbitration Journal 1–24. Yamamoto, Kazuhiko, and Yamada, Aya, Law of ADR & Arbitration [in Japanese] 2nd edn (Tokyo, Yuhikaku, 2015). Yanase, Shuji, and Greer, Joel, ‘International Arbitration in Japan: Untouched Opportunities’ [in ­Japanese] (2012) 975 NBL Journal 28–31. Yokokawa, Hiroshi, ‘The Approaches of the Japan Commercial Arbitration Association’ [in Japanese] (2015) 1084 Horitsu Jiho 49–50.

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Chapter 5: Korea Cases Supreme Court, 2003 Da 5634 (2004).

Legislative Materials 2015 Regulation on the Statutory Interest Rate in the Main Text of Article 3.1 of the Litigation Expedition Special Act. Arbitration Act (Act No 1767 of 16 March 1966), Arts 1, 3, 17.6, 41. Arbitration Act (Act No 14176 of 29 May 2016) Arts 1, 3, 8.3.1, 8.3.2, 8.3.3, 12.3, 17.6, 18.1, 18.2, 18-2.1, 18-2.2, 18-3, 18-5, 18-6, 18-7, 18-7.4, 18-8, 28.3, 28.5, 32, 34-2, 34-3, 37, 37.1, 37.3, 37.4, 37.6, 37.7. Arbitration Industry Promotion Act (Act No 14471 of 27 December 2016) Arts 1, 5, 6, 7, 7.1, 7.2, 9, 10, 11. Civil Procedure Act (Germany) Art 1030.1. ICSID Convention. KCAB International Rules Arts 47, 48. Litigation Expedition Special Act, Art 3. New York Convention. UNCITRAL Model Law (1985 version) Art 11(4), footnote 2. UNCITRAL Model Law Arts 2A, 11(4), 17(2) 17A, 17B, 17C, 17D, 17F, 17G, 17H, 17I, 35(2); Chapter IVA; Option 1.

Books, Journal Articles, Websites and Other Materials Kim, Joongi, ‘A Bellwether to Korea’s New Frontier in Investor-State Dispute Settlement? The Moscow Convention and Lee Jong Baek v. Kyrgyz Republic’ (2015) 15 Pepperdine Dispute Resolution Law Journal 549–65. —— International Arbitration in Korea (Oxford, Oxford University Press, 2017). Kim, Kap-you, Bang, John P, Cho, Seungwoo, and Bae, Kim & Lee LLC, Arbitration Law of Korea: Practice and Procedure (New York, Juris, 2012). Ministry of Justice, Republic of Korea. ‘International Arbitration Guide for Our Companies’.

Chapter 6: Malaysia Cases Ahmani Sdn Bhd v Petronas Penapisan (Melaka) Sdn Bhd & Other Cases [2015] 9 CLJ 782. Ajwa for Food Industries Co (Migop), Egypt v Pacific Inter-link Sdn Bhd & Another Appeal [2013] 2 CLJ 395.

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Awangku Dewa bin Pgn Momin & Ors v Superintendent of Lands and Surveys, Limbang Division [2015] 3 MLJ 161. Best Re (L) Limited v Ace Jerneh Insurance Bhd [2015] MLJU 0526. Chain Cycle Sdn Bhd v Government of Malaysia [2016] 1 MLJ 618. Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2014] 1 AMR 253. George SA v Trammo Gas Ltd (The Belarus) [1993] 1 Lloyd’s Rep 215. Gold and Resource Development (NZ) Ltd v Doug Hood Limited [2000] 3 NZLR 318. Interactive Brokers LLC v Neo Kim Hock & Ors [2014] 8 CLJ 747. Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617. Kluang Health Care Sdn Bhd v Lee Yong Beng & Another Case [2016] 1 CLJ 281. Lembaga Kemajuan Ikan Malaysia v WJ Construction Sdn Bhd [2013] 8 CLJ 655. Maimunah Deraman v Majlis Perbandaran Kemaman [2011] 9 CLJ 689. Majlis Amanah Rakyat v Kausar Corporation Sdn Bhd [2009] 1 LNS 1766. Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2015] 4 CLJ 734. SDA Architects (sued as a firm) v Metro Millennium Sdn Bhd [2014] 2 MLJ 627. Sebiro Holdings Sdn Bhd v Bhag Singh & Anor [2015] 4 CLJ 209. Sintrans Asia Services Pte Ltd v Inai Kiara Sdn Bhd [2016] 2 MLJ 660. Taman Bandar Baru Masai Sdn Bhd v Dindings Corportations Sdn Bhd [2010] 5 CLJ 83. Thai-Lao Lignite Co Ltd & Another v Government of the Lao People’s Democratic Republic [2017] 1 LNS 1169. The Chrysalis [1983] 1 WLR 1469. The Government of India v Cairn Energy India Pty Ltd & Ors [2014] 9 MLJ 149.

Legislative Materials Arbitration Act 1952 ss 24, 34. Arbitration Act 2005 ss 4(1), 8, 10, 10(1)(b), 10(4), 11, 11(3), 13, 30(1), 37, 38(1), 39(1)(a)(ii), 42. Arbitration (Amendment) Act 2011 ss 8, 10(1), 10(2A)(a), 10(2A)(b), 11(1)(e), 11(3), 30(1), 38(1), 39(1)(a)(ii), 39(3), 42(1A), 51(4). UNCITRAL Model Law.

Books, Journal Articles, Websites and Other Materials ‘About KLRCA’. http://klrca.org/about/. ‘Courses—Diploma in International Arbitration’. http://www.miarb.com/courses.html. Kuala Lumpur Regional Centre for Arbitration (ed), KLRCA: Acknowledging The Past, Building The Future. (Kuala Lumpur, Kuala Lumpur Regional Centre for Arbitration, 2015). Kumar, Ashok, ‘The Arbitration (Amendment) Act 2011’. http://www.skrine.com/the-arbitrationamendment-act-2011. ‘MIArb Institute’. http://www.miarb.com/institute.html. Rajoo, Sundra, The Malaysian Arbitration Act 2005 (Amended 2011): An Annotation (Malaysia, ­LexisNexis, 2013). Rajoo, Sundra and Davidson, WSW, The Arbitration Act 2005 UNCITRAL Model Law as applied in Malaysia (Malaysia, Sweet & Maxwell Asia, 2007).

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 317

Chapter 7: Singapore Cases AJU v AJT [2011] SGCA 41. AKN v ALC [2015] SGCA 18. American Cyanamid Co v Ethicon Ltd [1975] AC 396. AYH v AYI and another [2015] SGHC 300. Beijing Sinozonto Mining Investment Co Ltd v Goldenray Consortium (Singapore) Pte Ltd [2014] 1 SLR 814. BLB and another v BLC and others [2013] 4 SLR 1169. Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] 3 SLR 854. Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] SGCA 21. Maldives Airports Co Ltd v GMR Malé International Airport Pte Ltd [2013] SGCA 16. Malini Ventura v Knight Capital Pte Ltd and others [2015] SGHC 225. Motor Image Enterprises Pte Ltd v SCDA Architects Pte Ltd [2011] 1 SLR(R) 497. Pioneer Shipping Ltd v BTP Tioxide Ltd (‘The Nema’) [1982] AC 724. PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597. PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara ­International BV and Ors [2014] 1 SLR(R) 372. Sanum Investments Ltd v Government of the Lao People’s Republic [2016] SGCA 57. Sim Chay Koon and others v NTUC Income Insurance Co-operative Limited [2015] SGCA 46. Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86. Solvadis Commodity Chemicals GmbH v Affert Resources Pte Ltd [2014] 1 SLR(R) 174, [16]. Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1. Swift-Fortune Ltd v Magnifica Marine SA [2006] 2 SLR 323. The Titan Unity [2013] SGHCR 28. Tjong Very Sumito vs Antig Investments Pte Ltd [2009] 4 SLR(R) 732. Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57. Turner (East Asia) Pte Ltd v Builders Federal (Hong Kong) Ltd & Anor [1988] SLR 1037.

Legislative Materials Arbitration Act (Cap 10, 2002 Rev Ed), ss 6, 21, 21(1), 22, 46, 48(1)(a)(vii), 49(5). Arbitration (Foreign Awards) Act 1986. Arbitration (International Investment Disputes) Act (Cap 11, 2012 Rev Ed). Building and Construction Industry Security of Payment Act (Cap 30B, 2005). Estate Agents (Dispute Resolution Schemes) Regulations 2011. International Arbitration Act (Cap 143A, 2002 Rev Ed), parts I, II, III, IV; ss 2(1), 3(1), 5(1), 5(2)(a), 6, 6(2), 10, 11, 18, 19, 24(b), 27(1), 31; (amended in 2010), ss 12A(4), 12A(6). New York Convention, Arts V, V(2). Private Education (Dispute Resolution Schemes) Regulations 2010. Rules of Court, Order 110, Rules 9, 23, 25, 32. SIAC Rules (6th edition, 1 August 2016), Rules 6.1, 6.3. UNCITRAL Model Law (1985 version) Arts 1(3), 8, 16, 16(3), 18, 34, 34(2)(b)(ii), 35, 36. UNCITRAL Model Law, Art 7 Option 1, Art 17H; Chapter VIII.

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Books, Journal Articles, Websites and Other Materials Goldsmith, Peter, ‘The London Principles 2015’ (2015) 81(4) Arbitration 407. Hwang, Michael, ‘Commercial Courts and International Arbitration—Competitors or Partners?’ (2015) 31 Arbitration International 193–212. Law Reform Committee, Singapore Academy of Law. Report of the Law Reform Committee on Right to Judicial Review of Negative Jurisdictional Rulings. January 2011. Lim, Charles, ‘The Development Life Cycle of International Arbitration Legislation—Singapore IAA Case Study’ (2011) 7 Asian International Arbitration Journal 1–28. Menon, Sundaresh, Arbitration in Singapore: A Practical Guide (Sweet and Maxwell, 2014). —— Patron’s Address at the Chartered Institute of Arbitrators London Centenary Conference, 2 July 2015. —— Rethinking Arbitrability in the Context of Corporate Disputes. Paper presented in the Mauritius International Arbitration Conference 2010. Queen Mary University of London School of International Arbitration. ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’. http://www.arbitration. qmul.ac.uk/docs/164761.pdf. Report of the Sub-committee on Review of Arbitration Laws 1994. Shanmugam, K, Second Reading Speech on the International Arbitration (Amendment) Bill. Singapore Parliamentary Debates, Official Report (5 October 2001), volume 73.

Chapter 8: Philippines Cases Co v Regional Trial Court of Pasig, GR No 88578, 19 March 1990. Del Monte Corporation-USA v Court of Appeals 351 SCRA 373 (2001). Equitable PCI Banking Corporation v RCBC Capital Corporation 574 SCRA 858 (2008). In the Matter of the IBP Membership Dues Delinquency of Atty Marcial A Edillon, IBP Administrative Case No MDD-1, AC No 1928, 3 August 1978. Manchester Development Corporation v Court of Appeals, GR No 75919, 7 May 1987. National Union Fire Insurance Company of Pittsburg, PA v Stolt-Nielsen Philippines, Inc 184 SCRA 682 (1990). Reyes v People, GR No 193034, 20 July 2015. Tuna Processing Inc v Philippine Kingford 667 SCRA 287 (2012). Urbano v Chavez, GR No 87977, 19 March 1990. Vibelle Manufacturing Corporation v Sheridan Marketing Inc, Special Proceedings SP7-050-MM, Regional Trial Court, National Capital Judicial Region, Branch 74, Malabon City.

Legislative Materials Constitution of the Philippines (1973 version) Art X s 5(5). Corporation Code of the Philippines s 133. Executive Order No 1008 (Construction Industry Arbitration Law) ss 3, 4, 5, 11, 12, 13, 16, 17.

Indonesia

 319

Implementing Rules and Regulations of the Alternative Dispute Resolution Act of 2004, Department Circular No 98, Department of Justice, 2009. New York Convention. Office of the Court Administrator of the Supreme Court Circular No 103-2015. Republic Act No 386 (Civil Code of the Philippines) Arts 2038, 2039, 2040, 2042–2046, 2044, 2045. Republic Act No 876 ss 3, 6, 7, 8, 11, 14, 23–25, 23, 24. Republic Act No 6397. Republic Act No 7942. Republic Act No 9285 (Alternative Dispute Resolution Act of 2004) ss 2, 3(a), 19, 22, 23, 24, 26, 28, 32, 33, 39, 40, 41, 42, 43, 45, 46, 52. Revised Rules of Procedure Governing Construction Arbitration, ss 8.2, 16.1. Rules of Civil Procedure (1997 version) Rule 43 s 1. Rules of Court of the Philippines Rule 139-A. Presidential Decree No 181. Presidential Decree No 442 Arts 337, 338. Special Rules of Court on Alternative Dispute Resolution, Rules 1.1, 1.3, 2.1, 2.4, 3.18(B), 5.1, 5.2, 5.13, 11.2, 11.4, 11.9, 12.13, 13.11, 19.7, 20.1. UNCITRAL Arbitration Rules (1976 version) Art 21. UNCITRAL Model Law (1985 version) Arts 8(1), 16. UNCITRAL Model Law Arts 5, 13, 16, 17, 34, 35.

Chapter 9: Indonesia Cases Astro Nusantara International BV (Astro) PT Ayunda Prima Mitra, Central Jakarta District Court Decision 01K/Pdt.Sus/2010. Astro Nusantara International BV (Astro) PT Ayunda Prima Mitra, Supreme Court Decision 877K/ Pdt.Sus/2012. Bankers Trust Company and Bankers Trust International Plc v PT Jakarta International Hotels and Development, Central Jakarta District Court Decision 02/Pdt/Arb.Int/1999/PN.JKT.PST. Bankers Trust Company and Bankers Trust International Plc v PT Mayora Indah Tbk, Central Jakarta District Court Decision 01/Pdt/Arb.Int/1999/PN.JKT.PST. Constitutional Court Decision 15/PUU-XII/2014. Karaha Bodas, District Court of Central Jakarta Decision 86/Pdt.G/2002/PN.JKT.PST. Karaha Bodas, Supreme Court Decision 01/Banding/Wasit-Int/2002. PT Nizwar v Navigation Maritime Bulgare, Supreme Court Decision 2944K/Pdt/1983.

Legislative Materials Civil Code Art 1338. General Elucidation to the Arbitration Law, Art 617. Het Herzeiene Indonesisch Reglement, Staatsblad (1941, No 44) Arts 197(1), 200(1), 225(1), 377. ICSID Convention. New York Convention.

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Law 1 of 1950 on the Supreme Court. Law 1 of 1967 on Foreign Investment. Law 5 of 1968 on Settlement of Disputes between States and Nationals of other States on Capital Investment. Law 25 of 2007 on Foreign Capital Investment Art 32. Law 30 of 1999 on Arbitration and Alternative Dispute Resolution, Arts 1(1), 2, 3, 4, 4(1), 4(2), 5, 5(1), 9, 9(1), 10, 11, 13(1), 27, 28, 34(1), 34(2), 56(2), 59(1), 59(4), 60, 60 (Elucidation), 61, 62(1), 62(2), 62(3), 64, 65, 66(a), 66(b) and Elucidation, 66(c), 66(d), 66(e), 67, 68(1), 68(2), 68(3), 70, 70 (Elucidation), 71, 72(1), 72(3). Presidential Decree 34 of 1981. Reglement op de Burgerlijke Rechtsvordering (Rv) Arts 615–51. Rechtsreglement Buitengewesten, Staatsblad 1917:127 Art 705. Supreme Court Regulation 1 of 1990 on Procedures for the Enforcement of Foreign Arbitral Awards, Art 4(2). UNCITRAL Model Law.

Books, Journal Articles, Websites and Other Materials Aspandi, Ali, Menggugat Sistem Hukum Peradilan Indonesia Yang Penuh Ketidakpastian [in Indonesian] (Indonesia: Lembaga Kajian Strategis Hukum Indonesia dan Lutfansah Mediatama, 2002). Batubara, Suleman, and Purba, Orinton, Arbitrase Internasional: Penyelesaian Sengketa Investasi Asing Melalui ICID, UNCITRAL Dan SIAC [in Indonesian] (Indonesia, Raih Asa Sukses, 2013). Budidjaja, Tony, ‘Arbitration in Indonesia’ in Shahla F Ali and Tom Ginsburg (eds), International Commercial Arbitration in Asia 3rd edn (New York, Juris, 2013). —— ‘Indonesia’ in The Asia-Pacific Arbitration Review 2016 (London, Law Business Research, 2016). —— Public Policy as Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral Awards in Indonesia (Indonesia, Tatanusa, 2002). —— ‘The Future of Indonesia’s Legal Profession: A Lawyer’s Perspective’. Jakarta Post. http:// www.thejakartapost.com/news/2013/04/11/the-future-indonesia-s-legal-profession-a-lawyer-s-­ perspective.html. 11 April 2013. Butt, Simon, ‘Foreign Investment in Indonesia: The Problem of Legal Uncertainty’ in Vivienne Bath and Luke Nottage (eds), Foreign Investment and Dispute Resolution Law and Practice in Asia (New York and London, Routledge, 2011). —— ‘Surat Sakti: The Decline of the Authority of Judicial Decisions in Indonesia’ in Tim Lindsey (ed), Indonesia: Law and Society 2nd edn (Australia, Federation Press, 2008). —— ‘The Eksekusi of the Negara Hukum: Implementing Judicial Decisions in Indonesia’ in Tim Lindsey (ed), Law and Society in Indonesia (Australia, Federation Press, 1999). —— ‘The Position of International Law within the Indonesian Legal System’ (2014) 28(1) Emory International Law Review 1–28. Butt, Simon, and Lindsey, Tim, ‘Unfinished Business: Law Reform, Governance and the Courts in Post-Soeharto Indonesia’ in Mirjam Kunkler and Alfred Stepan (eds), Democracy and Islam in Indonesia (New York, Columbia University Press, 2013). Goodpaster, Gary, ‘Law Reform in Developing Countries’ in Timothy Lindsey (ed), Law Reform in Developing and Transitional States (London and New York, Routledge, 2007). Heath, Jared, ‘Dispute Resolution in Indonesia: Arbitration vs Litigation’. Mondaq. http://www. mondaq.com/australia/x/352526/Arbitration+Dispute+Resolution/Dispute+resolution+in+Indo nesia+arbitration+vs+litigation. 9 November 2014.

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Hukumonline. ‘Empat Lembaga Alternatif Penyelesaian Sengketa Keuangan Siap Beroperasi’ [in Indonesian]. http://www.hukumonline.com/berita/baca/lt553f580b5aab9/empat-lembaga-alternatifpenyelesaian-sengketa-keuangan-siap-beroperasi. 28 April 2015. —— ‘Inilah Cara Badan Arbitrase Kurangi Sengketa’ [in Indonesian]. http://www.hukumonline.com/ berita/baca/lt527b79ff53406/inilah-cara-badan-arbitrase-kurangi-sengketa. 7 November 2013. —— ‘Putusan Arbitrase Seharusnya Dipatuhi’ [in Indonesian]. http://www.hukumonline.com/­ berita/baca/lt4bb37cbb9b46f/putusan-arbitrase-seharusnya-dipatuhi. 31 March 2010. International Commission of Jurists, Ruler’s Law: Mission to Indonesia: The Report of the International Commission of Jurists (Geneva, ICJ, 1999). International Commission of Jurists and the Netherlands Institute of Human Rights, Indonesia and the Rule of Law: Twenty Years of ‘New Order’ Government: A Study (edited by Hans Thoolen, ­London, Frances Pinter, 1987). Junita, Fifi, ‘Experience of Practical Problems of Foreign Arbitral Awards Enforcement in Indonesia’ (2008) 5 Macquarie Journal of Business Law 369–92. Kadir, Andi Yusuf and Rahmaniar, Putri Anita, ‘Indonesia’ in Baker & McKenzie (eds), The Baker & McKenzie International Arbitration Yearbook 2014–2015 (New York, Juris, 2016). Konsorsium reformasi Hukum Nasional, and Lembaga Kajian dan Advokasi untuk Independensi Peradilan, Menuju Independensi Kekuasaan Kehakiman: Position Paper [in Indonesian] (Jarkarta, Indonesian Center for Environmental Law, 1999). Lev, DS, ‘Judicial Authority and the Struggle for an Indonesian Rechtsstaat’ (1978) 13 Law and Society Review 37–71. —— ‘Judicial Institutions and Legal Culture in Indonesia’ in Claire Holt (ed), Culture and Politics in Indonesia (New York, Cornell University Press, 1972). Lindsey, Tim, ‘Indonesia: Devaluing Asian Values, Rewriting Rule of Law’ in RP Peerenboom (ed), Asian Discourses of Rule of Law (London and New York, RoutledgeCurzon, 2004). —— Indonesia: Law and Society 2nd edn (Australia, Federation Press, 2008). Linnan, David, ‘Commercial Law Enforcement in Indonesia: The Manulife Case’ in Tim Lendsey (ed), Indonesia: Law and Society 2nd edn (Australia, Federation Press, 2008). Lubis, Todung Mulya and Burke, Maurice, ‘International Arbitration Developments in Indonesia’ Jakarta Post, 10 December 2004. Mahkamah Agung (Supreme Court of Indonesia). Blueprint for the Reform of the Supreme Court of Indonesia (Indonesia, Supreme Court of Indonesia, 2003). Mills, Karen ‘Debunking the Myth: Enforcement of Foreign Arbitral Awards in Indonesia’ (2015) 4 Lawyer Issue 4–9. —— ‘Enforcement of Arbitral Awards in Indonesia’ (2000) 3(6) International Arbitration Law Review 192–95. —— ‘Enforcement of Arbitral Awards in Indonesia & Other Issues of Judicial Involvement in Arbitration’ (2006) 4 Transnational Dispute Management https://www.transnational-dispute-­ ­ management.com/article.asp?key=804. Pompe, Sebastiaan, The Indonesian Supreme Court: A Study of Institutional Collapse (New York, ­Cornell Southeast Asia Program Publications, 2005). Rubins, Noah, ‘The Enforcement and Annulment of International Arbitration Awards in Indonesia’ (2004) 20 American University International Law Review 359–401. Sukirno, Timur, Kadir, Andi Yusuf, and Hirdarisvita, Reno, ‘Indonesia’ in Baker & McKenzie (ed), The Baker & McKenzie International Arbitration Yearbook 2011–2012 (New York, Juris, 2012). Winata, Frans, ‘Indonesia Country Report on Public Policy for IBA APAG’. International Bar Association. http://www.ibanet.org/Document/Default.aspx?DocumentUid=35A890AC-0D364953-BC10-22E1BF3F89AD.

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Chapter 10: Vietnam Cases Ecom Argoin Industrial Corp Ltd v 19 May Textile Company of Hanoi Ltd (2014). Strategic Think Tank LLC and 260 Architects v Sudico (2014). Thu Do II Company v PT Vindoexim (Indonesia) (2005). Tyco Services Singapore Pty Ltd v Leighton Contractors (VN) Ltd (2002). Vinalines v SK Engineering & Construction (2014).

Legislative Materials Decision 204/TTg of the Prime Minister on the organisation of the Vietnam International Arbitration Centre, dated 28 April 1993. Decree 59/CP of the Government Council of the Democratic Republic of Vietnam, dated 30 April 1964. Decree 116/CP on organization and operation of economic arbitration, dated 05 September 1994. Decree 63/2011/ND-CP, dated 28 July 2011. Decree 22/2017/ND-CP on commercial mediation, dated 24 February 2017. Law No 4/HDNN8 on Foreign Investment in Vietnam, dated 29 December 1987, Art 25. Law No 54/2010/QH12 on Commercial Arbitration, dated 17 June 2010 (‘LCA’), Arts 7, 12.1(c), 20.1, 44.4, 71.10, 73–79. Ordinance No 08/2003/PL-UBTVQH11 on Commercial Arbitration, dated 25 February 2003 (‘OCA’), Arts 49, 54, 57. Resolution No 01/2014/NQ-HDTP on the implementation of some specific articles in the Law on Commercial Arbitration of 2010, Judge’s Council of the People’s Supreme Court of Vietnam, Art 2.4(a). UNCITRAL Model Law.

Books, Journal Articles, Websites and Other Materials Dang, Hop X, ‘Legislative changes on International Commercial Arbitration in Vietnam’. Paper presented at the SIAF Conference on the future for international arbitration, Singapore. June 2011. —— ‘The 2010 LCA of Vietnam compared to the 2006 Model Law’. Paper presented at the Conference on the UNCITRAL Model Law on International Commercial Arbitration in Asia, National University of Singapore, Singapore. 29 May 2015. —— ‘The Vietnamese Legal System, the Past 25 Years, the Present and the Future’ in Ann Black and Gary Bell (eds), Law and Legal Institutions in Asia (Cambridge, Cambridge University Press, 2011). —— ‘Towards a Stronger Arbitration Regime for Vietnam’ (2007) 3(1) Asian International Arbitration Journal 80–98. —— ‘Vietnam Supreme Court Passed New Arbitration Resolution’ (2015) 1 Asia Pacific Arbitration Reporter. Do, Van Dai and Hai, Tran Hoang, Collection of Vietnamese Courts’ Judgments and Decisions on Commercial Arbitration [In Vietnamese: Tuyển tập các bản án, quyết định của Tòa án Việt Nam về trọng tài thương mại, NXB Lao Động] (Vietnam, Labour Publishing House, 2010).

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Garnett, Richard and Nguyen, Kien Cuong, ‘Enforcement of Arbitral Awards in Vietnam’ (2006) 2(2) Asian International Arbitration Journal 137–50. Judicial Research Academy, ‘The Practice of Enforcement of Foreign Arbitral Awards in Vietnam— Recommendations’. Paper presented at Conference on 20 years of implementing the New York Convention 1958 on recognition and enforcement of foreign arbitral award, organised by the Ministry of Justice, Hanoi. 21 November 2014. Nguyen, Huyen Cuong, ‘The Practice of Enforcement of Foreign Arbitral Awards in Hanoi Courts— Recommendations’ Paper presented at Conference on 20 years of implementing the New York Convention 1958 on recognition and enforcement of foreign arbitral award, organised by the Ministry of Justice, Hanoi. 21 November 2014. Singapore International Arbitration Centre. ‘Annual Report 2015’. http://www.siac.org.sg/images/­ stories/articles/annual_report/SIAC_Annual_Report_2015.pdf. VNExpress, ‘Vinalines chính thức thua vụ kiện 3 triệu USD’ [in Vietnamese]. http://kinhdoanh.vnexpress.net/tin-tuc/doanh-nghiep/vinalines-chinh-thuc-thua-vu-kien-3-trieu-usd-3092571.html. 13 October 2014. Vietnam International Arbitration Centre. 2014 Annual Report. Vietnam International Arbitration Centre. ‘2015 Annual Report’. http://www.apragbali2016.baniarbitration.org/filepaper/VIAC_2015AnnualReport_APRAG.pdf.

Chapter 11: India Cases A Ayyasamy v A Paramasivam & Ors, Civil Appeal Nos 8245 & 8246 of 2016. AK Balaji v Government of India (2012) 32 KLR 290 (Mad). Associate Builders v Delhi Development Authority (2015) 3 SCC 49. Bharat Aluminium Co (BALCO) v Kaiser Aluminium Technical Service & Ors (2012) 9 SCC 552. Bhatia International v Bulk Trading SA (2002) 4 SCC 105. Citation Infowares Limited v Equinox Corporation (2009) 7 SCC 220. Indtel Technical Services v Atkins Rail Ltd (2008) 10 SCC 308. Konkan Railway Corporation Ltd & Anr v Rani Construction Pvt (2002) 2 SCC 388. McDermott International v Burn Standard Company Ltd & Ors (2006) 11 SCC 181. MD Army Welfare Housing Organisation v Sumangal Services Pvt Ltd (2004) 9 SCC 619. Oil & Natural Gas Corp v SAW Pipes (2005) 5 SCC 705. ONGC v Western Geco Int’l Ltd (2014) 9 SCC 263. Phulchand Exports v OOO Patriot (2011) 10 SCC 300. Renusagar Power v General Electric (1993) Supp. 1 SCC 644. SBP & Co v Patel Engineering & Anr (2005) 8 SCC 618. Shri Lal Mahal v Progetto Grano Spa (2014) 2 SCC 433. Swiss Timing Limited v Organizing Committee, Commonwealth Games 2010, Delhi (2014) 6 SCC 677. Thana Singh v Central Bureau of Narcotics (2013) 2 SCC 590. Union of India v MS Singh Builders (2009) 4 SCC 523. Venture Global v Satyam Computers Services Ltd (2008) 4 SCC 190. White Industries Australia Ltd v Republic of India 2011, November 30, UNCITRAL Arbitration Final Award. World Sport Group (Mauritius) v MSM Satellite Ltd (2014) 11 SCC 639.

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Legislative Materials Advocates Act 1961, ss 24(1)(a), 29. Aircraft Act 1934. Arbitration Act 1940. Arbitration and Conciliation (Amendment) Bill 2003, s 37A. Arbitration (Protocol and Convention) Act 1937. Arbitration & Conciliation Act 1996, ss 2(2), 5, 8, 11, 11(1), 11(8), 11(9), 16, 28, 29A (newly added), 30(1), 34, 34(2)(b)(i), 44(b), 48, 48(2)(a); Parts I, II, III; Part II Chapters 1, 2; Preamble. Atomic Energy Act 1962. Bar Council of India Rules 1975. Code of Civil Procedure 1908, s 89. Commercial Courts, Commercial division and Commercial Appellate Division of High Courts Act 2015, ss 3(3), 4(2). Constitution of India 1949, ss 129, 215, 348. Foreign Awards (Recognition and Enforcement) Act 1961. ICA Rules of Arbitration & Conciliation, Rules 10, 12. Industrial Disputes Act 1947. Jammu & Kashmir Conciliation & Arbitration Act 1997. LCIA India Rules Articles 28.4, 32.6. New York Convention Art V(1)(e). Singapore International Arbitration Act 1994, s 8(2). The Arbitration and Conciliation (Amendment) Act 2015, ss 2(II), 3, 4, 5, 6, 6(ix), 8, 9, 10, 12, 15, 17, 18, 18(III), 19, 22, 27; Schedules 4, 5. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015. UNCITRAL Model Law (1985 version), ss 1(2), 1(3), 9, 11(5). UNCITRAL Model Law, ss 2A, 7.

Books, Journal Articles, Websites and Other Materials Altenkirch, Markus and Frohloff, Jan, ‘Global Arbitration Cases Still Rise—Arbitral Institutions’ Caseload Statistics for 2015’. Global Arbitration News. https://globalarbitrationnews.com/globalarbitration-cases-still-rise-arbitral-institutions-caseload-statistics-2015/. 25 August 2016. American Arbitration Association, ‘B2B Dispute Resolution Impact Report: 2015 Key Statistics’. http://info.adr.org/2015-key-statistics/. Arbitration & Conciliation Centre Bengaluru. ‘Panel of Arbitrators and Conciliators’. http://www. arbitrationcentreblr.org/Panel_of_%20Arbitrators.html. Bhat, KN, ‘Ad-Hoc Arbitration or Institutional Arbitration—Which Is Better for India?’ (2009) 43(4) Indian Council of Arbitration Quarterly 4–7. Born, Gary B, International Commercial Arbitration 2nd edn (Alpen aan den Rijn, Kluwer Law International, 2014). Chatterjee, Sujoy, ‘Judicial Import of the Model Law: How Far Is Too Far?’ (2015) 4(1) Indian Journal of Arbitration Law 19–25. DAKSH, State of the Indian Judiciary (edited by Harish Narasappa and Shruti Vidyasagar, Lucknow, Eastern Book Company, 2016). Delhi High Court Arbitration Centre, ‘DAC Panel of Arbitrators’. http://www.dacdelhi.org/topics. aspx?mid=20.

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Chapter 12: Australia Cases Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2014] FCAFC 83. Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45. CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345. Eisenwerk v Australian Granites Ltd [2001] 1 Qd R 461. Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109. QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd [1991] FCA 637; [1991] 33 FCR 227. Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332. TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5. Traxys Europ SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276. Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131.

Legislative Materials ACICA Appointment of Arbitrators Rules 2011. ACICA Arbitration Rules 2016, Arts 3.1, 3.2, 16.3. Australian Consumer Law. Commercial Arbitration Act 2010 (Cth) (‘CAA’), ss 27D, 27E, 27F, 34A. Commercial Arbitration Act 2011 (SA) s 27D. Commercial Arbitration Bill 2011 (QLD). ICSID Convention. International Arbitration Act 1974 (Cth) (‘IAA’), ss 7, 7(2)(b), 7(5), 8, 8(5), 8(7), 8(7)(b), 18, 18(3), 18A, 21, 21(1), 22, 23, 23C–23G, 23C, 23D, 23G(1)(a), 23J, 23K, 28(1), 28(2), 35, 39(2), 40; Part 2; Schedule 1. International Arbitration Regulations 2011 (Cth). New York Convention Arts 2, 8, 11(3). Trade Practices Act, ss 52, 67, 68, 86; Part V. UNCITRAL Model Law, Arts 1(3), 7, 8, 11(3), 11(4).

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INDEX

‘arbitration friendly’ jurisdictions  2, 283 arbitration institutions ‘essential’ element of arbitration reform  280, 283 Asia Pacific pattern of reform  299 Australia  290–91 awareness of best international arbitration practices  297–8 benefits of arbitration reform  16, 300 China  287–8 coordinated judicial and institutional reform  297 dynamic of institutions, increasing  297–8 enhancing competitiveness  296, 297 globalised localism  296–7 Hong Kong  288 India  292, 293, 294–5 Indonesia  292, 293 Japan  291 Malaysia  289–90 nature of an economy, and  299–300 niche arbitration  296, 297, 298 Philippines  292, 293, 294 predictions  297–8 Singapore  288 South Korea  288–9 stages of  286–7 Taiwan  291–2 transparency, increasing  298 Vietnam  292, 293, 294 see also hypothetical model for arbitration reform Australia development of arbitration  290–91 drivers of reform legislative, judicial and institutional elements  268–9, 270 obstacles to reform  270 top-down versus bottom-up reform  269 future of the arbitration system enhancing competitiveness, independence and professionalism  272–6, 277 legislative, judicial and institutional reform  271–2 geographically distant from the major finance centres  15–16, 260, 290 institutional framework  257–60 ad hoc arbitration  257 appointment of arbitrators  258 arbitration institutions  258, 260, 268 institutional arbitration  257–8 qualification requirements for arbitrators  259 judicial framework  253, 254, 260–61

‘judicialisation’  270, 276, 290 legislative and regulatory framework  251, 252, 253, 254, 255, 256 arbitration agreements  256–7 legislative and regulatory reform initiatives  261–2 concurrent jurisdiction  265 confidentiality  263–4 immunity of arbitrators and entities appointing arbitrators  264–5 impartiality and independence of arbitrators  263 interim measures  265–6 New York Convention  262 recognition and enforcement of ICA awards  265 scope of the CAAs  266 UNCITRAL Model Law  263 writing requirement  264 number of arbitration cases  269 reforms of the arbitration system judicial initiatives  266–8 legislative and regulatory initiatives  261–6 capacity-building element of arbitration reform, as  283 China arbitration institutions  13, 287–8 drivers of reform  35, 38 fast-developing economy and weak rule of law  34–5 legislative, judicial and institutional elements  33 top-down versus bottom-up reform  33–4 future of the arbitration system enhancing competitiveness, independence and professionalism  36–7 legislative, judicial and institutional reform  35–6, 37–8 institutional framework  21–3 ad hoc arbitration  23 local arbitration commissions  21–2 panel arbitration system  23 qualification requirements for arbitrators  22 judicial framework  24 judicial reform initiatives enforcement of foreign arbitral awards under the New York Convention  26–7 judgments concerning foreign institutional arbitration seated in China  25–6 judicial interpretation on Arbitration Law  24–5

332  legislative and regulatory framework arbitration commission rules  19 Arbitration Law  18 ‘arbitration with Chinese characteristics’  17 dual-track mechanism  20–21 international agreements  19 judicial interpretations  18–19 State Council regulations  18 number of arbitration cases  64 reforms of the arbitration system  24 CIETAC’s fragmentation  28–31 competitive arbitration market  27–32 judicial initiatives  24–7 legislative and regulatory initiatives  24 rising competition among local arbitration commissions  31–2 ‘competence-competence’  11 ‘developing world’ of arbitration  298–300 notions of  16 foreign direct investment (FDI)  2 arbitration reform, and  285 GDP growth  2 arbitration reform, and  285 globalised localism  6, 296–7 Hong Kong approach to arbitration  288 categories of awards  44 consolidation of arbitrations  53 credibility and competitiveness of international commercial arbitration  13–14 development of arbitration 1997–2009  51–2 2010–present  52–4 colonial era  49–51 drivers of reform judiciary’s pro-arbitration approach  55–6 legislative, judicial and institutional elements  49–54 top-down versus bottom-up reform  55 emergency arbitrator procedure  53, 59 enhancing competitiveness, independence and professionalism education and training  59–61 infrastructure and support services  63 promotion of arbitration services  61–3 expedited arbitration  58–9 future of the arbitration system enhancing competitiveness, independence and professionalism  59–63 legislative, judicial and institutional reform  56–9, 64 institutional framework  41–3 ad hoc arbitration  42–3 Hong Kong International Arbitration Centre (HKIAC)  41–2 qualification requirements for arbitrators  43 joinder of additional parties  53

Index judicial framework  43–4 judicial independence  55 judiciary’s pro-arbitration approach  55–6, 64–5 legislative and regulatory framework  39–41 Hong Kong Arbitration Ordinance (HKAO)  39–40 ‘localised globalism’  63 mediation services  49 number of arbitration cases  64 principles for enforcement of awards  47–8 reforms of the arbitration system competition between arbitration service providers  48–9 judicial initiatives  46–8 legislative and regulatory initiatives  45–6 rule of law  55 third party funding  56–8 hypothetical model for arbitration reform analysis by country, table  281–2 elements of  3, 4, 279–80, 295–6 adoption of the Model Law  280 arbitration institutions  280, 283 capacity-building  283 ease of doing business  285 foreign direct investment (FDI), and  285 GDP growth, and  285 judicial support  283 parties to the New York Convention  280 regular updating of legislation  284 rule of law  4–5, 284–5 see also Asia Pacific pattern of reform India ad hoc arbitration  222, 224, 225, 232–3, 243 barriers to effective arbitration reform  241 litigation culture  242–3 weak rule of law  241–2 drivers of reform legislative, judicial and institutional elements  239–40 top-down versus bottom-up reform  240–41, 248–9 enhancing competitiveness, independence and professionalism  244–6 culture of arbitration  247–8 foreign lawyers  246 future of the arbitration system  243 enhancing competitiveness, independence and professionalism  246–8 legislative, judicial and institutional reform  243–6 institutional framework  226 ad hoc arbitration  224, 225 arbitration institutions  225–6 judicial framework  226–7 appointment of arbitrators  228 Bhatia problem  229–30 ease and rate of enforcement  227 judicial law-making  228–30 public policy defence  229

Index judicial reform initiatives arbitrability of fraud claims  232 judicial intervention in foreign arbitrations  231 public policy  232 legislative and regulatory framework Arbitration and Conciliation Act (ACA)  223–4 sources of arbitration law  224 legislative and regulatory reform initiatives  234–5, 238–9 increasing judicial support  236 promoting efficiency and fairness  236–8 reducing judicial intervention  235 number of arbitration cases  226 reforms of the arbitration system  230–31 judicial initiatives  231–2 legislative and regulatory initiatives  234–9 market for arbitration services and arbitrators  232–4 slow development of arbitration  15, 221, 222, 248, 294–5 Indonesia development of arbitration  293 difficulties in enforcing arbitration awards  15, 189, 190, 191, 192 drivers of reform  203 legislative, judicial and institutional elements  202 top-down versus bottom-up reform  202 future of the arbitration system enhancing competitiveness, independence and professionalism  203 legislative, judicial and institutional reform  203 institutional framework  193 judicial framework annulment of awards  195 registration and enforcement  193–5, 196 judicial reform initiatives annulment of foreign awards  201–2 arbitration as an alternative to judicial process  196–9, 203 judicial approach to enforcement and annulment  199–200, 203–4 public policy exception  200–201, 204 tort claims  202 legislative and regulatory framework  190–93 reforms of the arbitration system judicial initiatives  196–202 legislative and regulatory initiatives  196 international commercial arbitration development of  1 Japan demand for arbitration  14, 96–7, 98, 103, 104, 105, 107–8, 291 drivers of reform legislative, judicial and institutional elements  98–100, 101–2, 108 top-down versus bottom-up reform  100–101 future of the arbitration system enhancing competitiveness, independence and professionalism  103–7

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legislative, judicial and institutional reform  102–3 institutional framework ad hoc arbitration  85 appointment of arbitrators  87 arbitration institutions  85–6 performance of arbitrators  89–90 qualification requirements for arbitrators  87–8 judicial framework  90 legislative and regulatory framework  83–4 reforms of the arbitration system judicial initiatives  93–6 legislative and regulatory initiatives  90–93, 97–8 restrictive use of public policy to set aside awards  94–6 separability doctrine  93–4 judicial support essential element of arbitration reform  283 Korea see South Korea localised globalism  5 ‘London Principles’  160–61 Malaysia corruption  14, 289–90 drivers of reform awareness of arbitration practice and laws in neighbouring countries  139 legislative, judicial and institutional elements  138–9 top-down versus bottom-up reform  139, 289 enhancing competitiveness, independence and professionalism  126, 140–41 future of the arbitration system  139–40, 141 enhancing competitiveness, independence and professionalism  140–41 legislative, judicial and institutional reform  140 institutional framework ad hoc arbitration  124 arbitration institutions  124 Chartered Institute of Arbitrators (CIArb)  138 institutional arbitration  124 Kuala Lumpur Regional Centre for Arbitration (KLRCA)  124–5, 138 Malaysian Institute of Arbitrators (MIArb)  125–6, 138 judicial framework  126 judicial reform initiatives court decisions on arbitration seated in Malaysia  132–8 judicial interpretation on Arbitration Act 2005  129–32 legislative and regulatory framework  123–4 number of arbitration cases  125 reforms of the arbitration system judicial initiatives  129–38 legislative and regulatory initiatives  126–8

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Index

New York Convention  8–10 joining essential element of arbitration reform  280 recognition and enforcement of arbitral awards  8–10 niche arbitration  296, 297, 298 Philippines appeals on the merits of an arbitral award  176–7 arbitration market  173–4 construction arbitration  166–7, 182–3, 185, 186 corruption and cronyism  15, 187, 294 development of arbitration  294 drivers of reform cost factor as obstacle  184 culture factor as obstacle  183 enforcement factor as obstacle  183–4 legislative, judicial and institutional elements  174–83 top-down versus bottom-up reform  183 enforcement of arbitral awards extended period for filing petitions  182 greater access to courts  181 foreign arbitral awards adherence to the New York Convention  177–8 future of the arbitration system enhancing competitiveness, independence and professionalism  186 factors to consider  187 legislative, judicial and institutional reform  184–6 institutional framework Construction Industry Arbitration Commission (CIAC)  166–7, 185, 186 Philippine Dispute Resolution Center Inc (PDRCI)  167, 185, 186 interim relief  179–81 judicial framework  167–9 legislative and regulatory framework  163, 164, 165–6 private sector participation in commercial arbitration  179, 180, 181 reforms of the arbitration system judicial initiatives  171–3 legislative and regulatory initiatives  169–71 statutory recognition of appointing authority  174–6 rule of law arbitration reform, and  4–5, 284–5 Singapore development of arbitration  288 dispute resolution options available  157–9 drivers of reform legislative, judicial and institutional elements  159 public consultation  159 top-down versus bottom-up reform  159

future of the arbitration system  161 enhancing competitiveness, independence and professionalism  160–61 legislative, judicial and institutional reform  160 institutional framework ad hoc arbitration  145 appointment of arbitrators  146–7 arbitration institutions  145–6 institutional arbitration  145 qualification requirements for arbitrators  147 judicial framework  147 judicial reform initiatives  149 appeals against domestic arbitral awards  153 applications to set aside international arbitral awards  153–5 arbitrability  151–2 enforcement of awards  155–7 interim measures  152–3 staying of litigation in favour of arbitration  149–51 legislative and regulatory framework  143–4 dual-track legislative system  144–5 number of arbitration cases  64 reforms of the arbitration system judicial initiatives  149–57 legislative and regulatory initiatives  147–8 service-reliant economy  14, 288 South Korea competition strategy  14, 288–9 drivers of reform legislative, judicial and institutional elements  119–20 top-down versus bottom-up reform  120 future of the arbitration system enhancing competitiveness, independence and professionalism  121 legislative, judicial and institutional reform  121 institutional framework  111–12 judicial framework  112–13 law firms, reputation of  119 legislative and regulatory framework  110 legislative and regulatory reform initiatives  113–18 appointment of arbitrators  117–18 Arbitration Industry Promotion Act (AIPA)  118 competence-competence rulings  114 costs and interest  114–15 definition of arbitration  113–14 enforcement of arbitral awards  117 independence of KCAB  115 interim measures  116–17 taking of evidence  114 writing requirement for arbitration agreements  115–16 ‘localised globalism’  122 number of arbitration cases  64, 111, 112 reforms of the arbitration system judicial initiatives  118–19 legislative and regulatory initiatives  113–18 rule of law  120

Index Taiwan ad hoc arbitration  69, 70–71 arbitration fees  74–5 arbitration institutions  73 civil law country, as  77–8, 81 development of arbitration  291–2 drivers of reform legislative, judicial and institutional elements  74–7, 78 top-down versus bottom-up reform  77 future of the arbitration system enhancing competitiveness, independence and professionalism  81 legislative, judicial and institutional reform  78–81 institutional framework  69–70 ad hoc arbitration  69 foreign arbitrators  70 qualification requirements for arbitrators  69–70 ji pan li and zhi xing li  75–7, 81–2 judicial framework  70–71 legislative and regulatory framework  67–9 New York Convention unable to accede to  14, 81, 280, 292 reforms of the arbitration system judicial initiatives  72–3 legislative and regulatory initiatives  72 respect for international arbitration practice  81, 82

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UNCITRAL Model Law  10–13 adoption of  280, 296–7 content of  11–13 Vietnam development of arbitration  293–4 difficulties in enforcing foreign arbitral awards  15, 211–12 drivers of reform legislative, judicial and institutional elements  215–16 top-down versus bottom-up reform  216–17 future of the arbitration system  219 enhancing competitiveness, independence and professionalism  218–19 legislative, judicial and institutional reform  218 institutional framework  209–10 judicial framework  210–12 legislative and regulatory framework  206, 207 Decree  116/CP  207 Law on Commercial Arbitration (LCA)  209 Ordinance on Commercial Arbitration (OCA)  207–8 number of arbitration cases  215 reforms of the arbitration system judicial initiatives  213–14 legislative and regulatory initiatives  212–13

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