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Guide to Regional Arbitration (volume 5 - 2017)

Worth a Closer Look: Asia Pacific

02 November 2016

Asia's also home to some other "local" institutions that – for the right sort of disputes – are more than suitable. Here's our current selection for those who prefer to always make an informed choice.

Australian Centre for International Commercial Arbitration (ACICA)

Why's ACICA an institution to watch?

It's backed by some very driven individuals who think they've got an excellent case to make for Sydney as an arbitral centre.

Do they have a point?

Certainly. Australia has an excellent UNCITRAL-inspired law, as well as high-quality lawyers and arbitrators – and all available at a more affordable price than its nearest arbitral neighbours. Of course, there is a "but"…

What's the "but"?

Sydney is nearly as far from Beijing as Paris is. And depending where you come from, you're in a pretty rubbish time zone. "I've loved my four Australian cases," comments one US lawyer, "but being somewhere where day is night and night is day is frankly a pain."

What do the Australians say in response?

They know it's a long journey. But they say it's worth it when you get there. And it's only a medium-long trip if you're starting from Asia – then you're only shifting from your normal day by a couple of time zones. Sydney can also make the case that it's less subject to China's influence than either Singapore or Hong Kong.

Australia, and New Zealand too, will soon have a chance to showcase their merits to the wider arbitration world as the joint hosts of the 2018 ICCA congress.

So how's it doing?

It's very active and has a well-established brand – it held its 30-year anniversary in 2015. ACICA's recent past president, Doug Jones, set a strong pace here and others have kept it up, promoting it and securing memoranda of understanding with other organisations around the world. Jones himself believes that momentum is building, although at the time of going to press, no case figures were available on ACICA's website (www.acica.org.au) to confirm this.

Beijing Arbitration Commission (BAC)

Why's it worth a closer look?

The BAC has many admirers, including the Economist Intelligence Unit. It described BAC as "the only local arbitration commission which meets global standards". Anecdotal evidence in Hong Kong's arbitration community supports this.

What makes it so popular?

"Professionalism, competence and transparency," according to one respected source, speaking at GAR Live Hong Kong a few years ago. They called it the standout option among China's 200-odd local arbitration commissions (CIETAC's local competition). Although the BAC has probably lost that title to one of the CIETAC breakaways (for instance, the Shanghai International Arbitration Commission) it's still seen as more user-friendly than most and better than CIETAC at taking on board feedback.. There's possibly less concern over state interference too. On top of that, some elements of BAC's rules are particularly foreigner-friendly. For example, they allow for a change of arbitrators mid-case in the event of unsuccessful med-arb (bearing in mind med-arb is often imposed during foreign-related disputes).

Who gets credit for all that?

The BAC's secretary general is Wang Hongsong. BAC also insists that all arbitrators joining its list go on an intensive training programme.

Does it have much experience with international work?

Yes. The most recent statistics peg the centre's foreign-related matters at around 550 since it launched – 52 of which have been international. It handles around 1,300 to 1,500 new matters each year. It has recently adopted an alternative name – the Beijing International Arbitration Centre (BIAC) – as a statement of purpose.

The BAC can also be commended on a truly excellent website, available in several languages and offering regular English newsletters. The most recent annual report does drill down into the figures for those who care to explore.

Are there any things to look out for?

As with any Chinese mainland arbitration, it won't be as in-depth a process as some might want. BAC aims to complete all matters within six months. And the award, once you have it, is possibly not as simple to enforce as one from CIETAC. Like all Chinese arbitration commissions that aren't CIETAC, the BAC suffers from a lack of name recognition with judges. Therefore they tend to be slightly skeptical about what they're looking at, especially in provincial courts (near to Beijing you should be fine).

On the upside, the staff are helpful and often fluent in English, if sometimes a little slow according to some with first-hand experience. The BAC also has the benefit of a serious case-management system. Its hearing rooms also have a lovely view of Beijing.

Med-arb is also a regular feature; the BAC uses an "evaluative", rather than "adjudicative" style.

China International Economic and trade Arbitration Commission (CIETAC)

Why is it worth a closer look, rather than being on the white list?

CIETAC is China's home-grown international arbitration institution, and government rules have gifted it a huge caseload and created decades of experience (it handled over 1,000 cases in 2013, the most recent available statistics). It's also the best-known Chinese arbitration provider among China's judiciary, giving it an enforcement advantage.

On the other hand, for a number of reasons – some of which it has no power over – it remains an acquired taste.

What are the complaints?

The main one is its locale, which is hardly CIETAC's fault. China just isn't a very good seat.

Why isn't China a good seat?

The courts interfere too much. On top of that, the Chinese law firms one is likely to encounter in CIETAC cases will tend to fall into the category of the worst sort of opponent (though standards of behaviour are said to be improving). "Even if you lower your expectations, it's still not enough," one source told GAR a few years back. It's therefore better to get the opponents off their home turf. Of course, sometimes, you don't have the option. At those times, CIETAC is often a perfectly serviceable option. The only advice is to go in with your eyes open.

What should a newcomer to CIETAC know in advance?

The process can be "frighteningly fast", as GAR has reported in the past – and not always very surgical. A speaker at a GAR Live Hong Kong once gave it "5 out of 10 for efficiency", saying that speed without accuracy isn't much help. CIETAC is fast because takes an inquisitorial approach: and very little time is devoted to testing evidence.

At other times – usually if it's asked to handle a complex multiparty case, or because it is attempting to administer a matter under another institution's rules (which happens from time to time) or if an opponent is politically connected and doesn't want an award anytime soon – CIETAC can be frustratingly slow.

The secretariat also has far more of a case-management role than is perhaps the norm. It likes to take charge of all procedural matters, things that would usually be the domain of the tribunal. CIETAC is also not the most multilingual of organisations. Finally it has a tendency to impose med-arb, although that is not necessarily a bad thing.

Isn't med-arb viewed with distrust?

That's a Western view. In Asia, where parties often would like to negotiate but are too proud to make the first move, it can be very welcome. Med-arb allows talks to start without anyone suffering a loss of face. Over CIETAC's 50-year lifespan, between 10 and 20 per cent of all cases have ended through negotiation or voluntary withdrawal of one side.

Med-arb is also procedurally less scary than once. There are more safeguards in place if the med-part fails.

Why is CIETAC so busy?

Governmental rules prevent any foreign arbitral provider from administering mainland-seated arbitrations. Yet at the same time they require all arbitrations in China to be administered – by some sort of arbitration organisation. Therefore Chinese providers have a monopoly, with CIETAC taking the lion's share.

CIETAC often makes practical sense. If your side may need to request some form of court support during a dispute CIETAC is probably the best option. As it is best known institution its awards also tend to be more easily enforceable in the Chinese courts.

What does CIETAC say in response to naysayers?

It's worked hard over the years to take on board people's complaints and improve both its offering and China as a seat. It would dearly love to play more on the international stage.

How international is it?

Panels of arbitrators are still usually all-Chinese, or two Chinese and one Chinese-speaking foreigner. That said, it is now possible to appoint an all-foreign tribunal. For various reasons (usually pay) it's seldom achieved.

How independent are the arbitrators appointed?

Experiences vary. People have had mainland arbitrators who they'd give "one out of 10" for independence or "who are clearly partisan or communicating with one of the parties". They've also had others  "who deserve 10 out of 10". Individuals who do arbitration as a sideline rather than as their main career tend to be more independent.

How up-to-date are the rules?

The rules were revised in 2014, to introduce emergency arbitrator provisions and provisions on the consolidation and joinder of third parties in complex disputes, as well as raise the threshold value for cases that can be disposed of by a summary arbitration procedure. They also include provisions on the administration of arbitrations by CIETAC's Hong Kong sub-commission, which was established after the 2012 rules came into effect as the body's first office outside mainland China.

Hasn't CIETAC had some difficulties recently?

In 2006 its secretary general was arrested (now released) and, in 2012, two of its city branches – in Shenzen and Shanghai – broke away. As serious as both incidents seemed at the time, it's fair to say they haven't had a lasting effect. CIETAC is busier than ever and just appointed a new secretary general, Wang Chengjie, previously of CIETAC's sister mediation institution. With Wang replacing the highly regarded Yu Jianlong, who moves on after 10 years in the post, reactions have been guarded so far, with some calling the appointment a missed opportunity.

Where does  CIETAC Hong Kong fit in?

CIETAC Hong Kong opened in 2012. Although figures are hard to come by, it appears to have been a successful launch. You can see the logic too. CIETAC Hong Kong offers the upside of regular CIETAC (easier enforcement) without its big disadvantage (mainland China as a seat).

Japan Commercial Arbitration Association (JCAA)

Why is it worth a closer look?

It's Japan's only international arbitration provider, founded in the 1950s.

So why isn't it better known?

It's never gained much traction. On average the JCAA gets only 15 to 20 new cases a year.

On a brighter note, the majority of those are international. One caveat: the JCAA counts its case numbers a little differently. Often, JCAA figures record claims and counterclaims as separate cases.

Why doesn't it get more cases?

Opinions vary. Some think it's the Japanese legal culture, which is averse to disputes and perfectly satisfied with Japanese courts. But there are statistics on the amount of domestic arbitration in other institutions that give the lie to that. So it seems to be down to "soft factors".

What soft factors?

All companies are a bit risk-averse when it comes to clauses in the bigger contracts. But neither Tokyo nor Osaka, as places of arbitration, give local companies much reason to throw caution to the wind and "have a punt". Neither has much of a local arbitration bar (in contrast to, say, Hong Kong or Seoul, the nearest alternatives) or a large number of potential arbitrators. One well-placed source reports that "only two or three names come to mind immediately" as suitable for a big international case. Another says that the institution isn't very adept at appointing the good people whom it does have on its list – too often appointing people with more of a litigation bent. And then on top of that the JCAA itself is rather expensive. Comments one source: "For the size of the filing fee, you might as well go to the ICC." Add to that renting hotel rooms or a conference centre (there's no hearing facility). Japan isn't cheap!

Is there anything in the JCAA's favour?

If you use the JCAA you can probably forgo a tribunal secretary. The JCAA supplies a staff member for every hearing who will happily perform that role.

Why are you listing it in this section?

Things aren't all that gloomy. The JCAA's service has been steadily getting better and better according to those in the know. One foreign counsel who sat there as arbitrator recently said his experience was very good and "very different" from previous occasions: "They provide a very good service now. I would absolutely recommend them in the right case." Japanese business is also now lending its weight, and using negotiating power to push JCAA arbitration during international deals.

Why is that?

In part thanks to the JCAA's promotional efforts. It has stepped these up in recent years, especially now that it has new rules.

When did it enact new rules?

They came into force in February 2014. New features include: an emergency arbitrator system; amendments to the provisions on interim measures granted by arbitral tribunals (in line with the UNCITRAL Model Law); and the option of expedited procedure regardless of the amount of relief requested (it used to be capped at US$200,000), among other tweaks. The rules package also introduced the option of mediation for the first time.

Are there any pitfalls to be aware of?

Not with the JCAA per se. But there is a debate about whether foreign lawyers can work on arbitrations seated in Japan At first blush, the Ministry of Justice's bar rules seem clear. Foreign counsel can work on arbitrations in Japan, so long as it's international. The dispute is over what amounts to international. If one side is part of a larger international company, does that make the arbitration international? Foreign lawyers say it does, whereas their Japanese counterparts prefer to see those matters as all-Japanese disputes.

Korean Commercial Arbitration Board (KCAB)

Why is the KCAB worth knowing more about?

The KCAB – and lawyers in Korea – have serious plans to become an international arbitration destination. It's already busy with domestic work – and for various reasons the next logical step is seen as servicing cases that have no connection with Korea.

How busy is "busy"?

It's accepted more than 400 new cases this year, 74 of them international. While the domestic cases rose this year, the international total is down from 87 in 2014.

What are its rules like?

It has separate rules for international arbitrations. They're regarded as embodying all of the key LCIA/ICC norms.

So what's it doing to attract more international business?

There are various developments in the pipeline. One is to introduce a "real" rate of pay at the KCAB. By tradition, Korean arbitrators have viewed the job as an honour – something undertaken alongside the (remunerative) day job. But for international arbitrators, who expect to live off their earnings, this pro bono approach has made Seoul unattractive.

Does Seoul have an international arbitration hearing centre?

The Seoul International Dispute Resolution Centre – an arbitration hearing facility – recently opened in the heart of downtown Seoul. Though smaller than some, it's been kitted out with technology to make up for its lack of size. The project wouldn't have happened without the backing of various local law firms, the Metropolitan City Council of Seoul and various other arbitral providers who've signed MOUs to use it. For example, the LCIA, ICDR and HKIAC are all on board and will have people there.

Can Seoul really join the ranks of the world's leading seats?

Why not? Korea is surrounded by major economies – Russia, China, Japan and Mongolia – that could all come to regard it as a safe neutral seat. It could emerge as a Switzerland for North Asia. Helpfully, it's also a civil law jurisdiction, which gives it added appeal in a region where the current major providers – chiefly Hong Kong and Singapore – are all common law.

Plus, Seoul has a sizeable pool of arbitration talent, much of it home-grown.

How come?

South Korea's currency crisis in the late 1990s made its corporations early adopters of arbitration – or at any rate forced them to become familiar with it, as ICC figures testify (for a while South Korea was one of the bigger sources of ICC work). Local law firms noticed this trend and astutely skilled up, so they could represent their regular clients in this new activity.

Very clever of them. How did they manage it?

They shared know-how as they gained it. If one Korean partner had a case (as co-counsel – in the beginning Korean firms were always co-counsel), he or she shared the knowledge gained with whoever was interested back in Seoul – colleagues and rivals alike. Today Korean lawyers are more likely to be the first chair as counsel and occupy leadership roles with all the international arbitration organisations such as ICCA, the ICC and the LCIA.

What's the process like if you do go to Seoul?

Korean arbitrators are pleasingly unfettered in their approach. They won't run the case like local litigation.

Anything else?

It'll probably be quite fast. Korean society reveres speed (tourists quickly become familiar with the phrase pali-pali ("hurry hurry")) and arbitration is no exception. You can expect to complete a domestic KCAB case within six months. "In exceptional circumstances, you go over a year," comments one source, "but then people really start to complain."

Language won't be much of an issue either. Younger Korean lawyers are usually educated abroad these days, and most speak excellent English. They're often dual-qualified.

Korea is opening up its legal market. Do you expect that to have an effect?

It would make sense. International firms will have every incentive to get on the KCAB bandwagon, leading to more clauses in contracts. In fact if you look at most of the major arbitration centres today, you'll notice they all have a contingent of international cross-border law firms.

Are there any pitfalls?

Make sure you select the international rules. If it's a dispute between a locally incorporated subsidiary and a Korean firm, there's a chance it could be viewed as a dispute between domestic companies. It's also worth keeping an eye on the courts – at least for a while.

Why is that?

Recently there have been two decisions that look bad for Korea as a seat. Local lawyers are keen to portray these matters as a blip – saying they'll be reversed on appeal. But it's something to be aware of.

Have there been any recent developments?

In 2016, the KCAB celebrated its 50th anniversary with an upgrade of its international arbitration rules. The revisions, which came into force in June, introduce several changes including a provision that authorises the secretariat to approve party-appointed arbitrators – to make it harder for parties to appoint someone non-independent or impartial. The institution has also introduced a Code of Ethics for Arbitrators. The revision was guided by a committee of international lawyers that included many well-known names.

What do non-Koreans think about it?

On the whole, foreign counsel quite like it. The rules are viewed as serviceable and the staff is energetic and well grooved thanks to the amount of domestic arbitration. One drawback is that the secretariat consists of non-lawyers, which may not be to everyone's taste given some of the tasks they have to perform, such as approving arbitrators.

Kuala Lumpur Regional Centre for Arbitration (KLRCA)

Why's it worth knowing more about?

After several years in the wilderness, the KLRCA embarked on a modernisation and revitalisation programme five years ago and is now a credible option, for the right case.

Why was it in the wilderness?

Malaysia's courts became inconsistent in their support for arbitration. That led users to avoid it as a seat.

So what changed?

The courts have been much better of late, and meanwhile the centre has had a makeover. In 2014 it moved to new premises inspired by the impressive facilities at Singapore's Maxwell Chambers. But its biggest shot in the arm came back in 2010, when the KLRCA gained a new director general, Sundra Rajoo. He very much took the centre by the scruff of its neck.

What did he do?

Since Rajoo's arrival the centre has revised its rules, upgraded its premises, brought in international names to direct its strategy and improved its secretariat. Rajoo himself has hit the road in a big way to promote it internationally.

Won't it be a bit of an uphill struggle, what with Singapore and Hong Kong already so well established?

Winning market share in international arbitration is never easy. The KLRCA has an advantage in that its government is behind it – which may not mean quite what it does in Singapore, but nevertheless counts for a lot. It helps a great deal when setbacks occur.

Have setbacks occurred?

At one point it looked as if Sundra Rajoo would leave. But he was reappointed after word reached the right people. Malaysia's courts, meanwhile, have for the most part avoided slipping into bad habits. If anything things are on the up. The centre heard five international cases last year. That should increase now the KLRCA is playing more to its natural advantages.

What are those?

Kuala Lumpur has become a big hub for Islamic finance, so the KLRCA has released some very intelligently composed and Islam-friendly arbitration rules (inspired by the Model Law), for which it received a GAR Award for Innovation in 2012. It could gain a lot of traction if dealmakers decide it's a better place than, say, Dubai, for arbitration with an Islamic angle.

Is that likely?

Well, neither seat is famous for its courts. But as one lawyer in Asia put it, "At least with Malaysia there's a chance the government will at some point just sort the whole mess out. That'll never happen in Dubai." So: yes.

When's the next set of rules coming out?

New rules are planned for 2017. The current set date from 2013.