A panel of arbitrators at GAR Live Singapore considered how the shift in economic power from west to east and China’s Belt and Road initiative will change arbitration, whether more use should be made of tribunal-appointed experts and how the legalisation of third-party funding has affected the region.
Moderating the session, Australian arbitrator Michael Pryles began by reading out a question from Tom Glasgow of Australian funder IMF Bentham – “how will China and Asia’s economic development and increasing influence change the way international arbitration is conducted?”
Pryles observed that given arbitration’s Eurocentric development, the growth in Asian participation is bound to change it. “I remember 20 years ago the prevailing view was there wouldn’t be much dispute resolution in Asia,” he said “I thought it was inevitable that arbitration would follow economic activity. Arbitration has the ability to accommodate those changes and must do so.”
Paul Friedland, head of international arbitration at White & Case in New York, noted that the Chinese government has recently announced US$900 billion of investment in its Belt and Road project – an initiative to build infrastructure projects in mainland China and other countries located along the ancient Silk Road and Maritime Silk Road.
Although it is inevitable that disputes will arise as a result of such a large project, it is not a certainty that arbitration will be the preferred method of dispute resolution, he said. Even if it is, it “might not be the type of arbitration we are comfortable with”. China has already announced the opening of “courts” in Beijing, Xi'an and Shenzhen to deal with Belt and Road disputes – where the language, process and applicable law is expected to be Chinese.
“You can expect international parties to push back on that,” Friedland said, but warned that the alternatives may not be ideal for them either, comprising arbitration under CIETAC rules or under the auspices of other Chinese-spearheaded arbitration institutions such as the China Africa Joint Arbitration Centre in Johannesburg (CAJAC).
These centres were created “by and for entities from China and Africa” and are therefore not ideal to deal with disputes concerning parties from elsewhere in the world, he said.
“A happier situation for us would be for disputes to be submitted to SIAC or the HKIAC,” he said.
Jane Davies Evans, a barrister at 3 Verulam Buildings in London, cast doubt on the possibility of a new player such as CAJAC being able to meet the demand of Belt and Road disputes. In her experience, she said disputes relating to Chinese investment in Africa have thus far almost always been resolved through UNCITRAL or ICC proceedings.
Singaporean arbitrator Lawrence Boo suggested that economic growth in the east has led to another notable change. More and more contracts are being signed in both English and Chinese, with both documents legally binding on the parties, he said. Equally, requests for bilingual arbitrations are on the rise.
“Those of us who have become so used to conducting everything in the English language must be prepared to accommodate this change,” he said.
From the floor, Geeta Thakerar, a legal compliance consultant based in Singapore, asked whether Asian jurisdictions have to overcome a perception that they do not go far enough to stamp out corruption to capitalise on economic growth and be attractive seats.
Joongi Kim, a South Korean arbitrator professor at Yonsei University in Seoul, noted that Singapore, Hong Kong and Korea are all well-established seats known to respect the rule of law and do not suffer from this perception. He said that it is in China’s interest to show that its dispute resolution offering works to ensure that Belt and Road deals can proceed without problem.
Davies Evans agreed that comparing Asia with Latin America, Africa and Russia, in her experience, Asia is not perceived as suffering much more in this regard.
And Friedland said that, if there is a perception of corruption, it normally arises with regard to enforcement proceedings in the courts of Asian jurisdictions, which are sometimes perceived as favouring local parties.
Tribunal-appointed experts: yay or nay?
The next question considered by the panel, posed by Jonathan Ellis of Accuracy, was whether arbitrators should make more used of tribunal-appointed experts to assist their understanding of complex matters.
Davies Evans said that on the occasions she had encountered tribunal-appointed experts, mainly when acting as counsel, the experience had been “terrible”. “The only time I think they are helpful is when you have a respondent who is unwilling to participate in the arbitration,” she said. “In that situation, it can be good to have an extra expert report prepared by a tribunal-appointed expert to give the award an extra level of credibility when you get to enforcement.”
Otherwise, Davies Evans felt that tribunal-appointed experts are generally used in two circumstances: where the party-appointed experts have completely failed to engage with one another or where their reports are diametrically opposed.
Pryles agreed that these scenarios can be problematic. He once heard a case where the claimant’s expert suggested a liability of US$900 million, while the defendant’s expert suggested it was zero, he said. “Sometimes, the English view that a party-appointed expert is an officer of the tribunal simply doesn’t accord with reality. An expert appointed by the claimant almost always provides a report which is in accordance with their views, and vice versa for a respondent.”
Friedland suggested that hot-tubbing or witness conferencing might help bring experts closer together in situations where they have given wildly divergent valuations, but not always.
But even in this scenario, Davies Evans did not accept that a tribunal-appointed expert is the answer, as he or she often simply offers a third methodology that the panel then has to consider, greatly increasing the difficulty of its task.
In one complex construction case in which she acted, a tribunal requested its own expert report and then took six years to unravel the discrepancies and make determinations, she said.
“Commercial arbitration came about because clients didn’t want judges – they wanted people with experience of their business sector to make quick decisions about their disputes. We shouldn’t lose sight of this,” she said.”
Boo agreed with Davies Evans. He said he had once been part of a tribunal that used its own expert and found it wasn’t useful. “If this third expert report demolishes the assumptions raised by the party-appointed experts, what are you left with?” Ellis, who had posed the question, clarified from the floor that he was not suggesting that decision making should be taking from the tribunal and placed in the hands of a tribunal-appointed expert but thought having one could be useful if it wanted to understand the financial implications of certain aspects of its decision.
What he envisaged was not having three experts offering views on the same issue, two appointed by the parties and one by the tribunal, he explained – but one expert, jointly appointed to shed light on matters arising from the tribunal’s deliberations.
The effect of third-party funding in Asia
The final question was posed by Quentin Pak of Burford Capital in Singapore: Has the legalisation of third-party funding in Singapore and Hong Kong affected parties’ choice of seat, lawyers and expert witnesses? he wanted to know.
Broadly, Friedland said that third-party funding is having a major impact on international arbitration; with law firms are increasingly pitching to funders to finance cases. The preferred mode at the moment is facility funding – where a funder will make a multi-million dollar budget available to a law firm, which is then dipped into as cases come in, he said.
Kim added that the laws on funding in Asia has made seats like Singapore and Hong Kong more attractive, providing certainty and clarity where it was once lacking.
However, playing devil’s advocate, he suggested that parties that are likely to be the respondent in a case may consider the availability of funding a disadvantage and opt to refer disputes to other jurisdictions where the rules surrounding its legality are less clear.
A deep-pocketed defendant, who is likely to face claims from a less wealthy claimant, might be particularly inclined to do this, he said – as it maximises the chance of the claimant being unable to proceed owing to impecuniosity.
Kim also pointed out that the new rules on third-party funding in both Hong Kong and Singapore dictate that the funder has to be disclosed. This could lead certain claimants to opt to seat cases in Tokyo or Taipei, where disclosure is not compulsory, he suggested.
Co-chaired by White & Case partner Matthew Secomb and Simmons & Simmons partner Amanda Lees, GAR Live Singapore was held at Maxwell Chambers on 16 May, during Singapore Arbitration Week.
The event was supported by Debevoise & Plimpton, 3 Verulam Buildings, Reed Smith and Mintz Group. The refreshment breaks sponsor was Clyde & Co and the speakers’ dinner was hosted by Freshfields Bruckhaus Deringer.