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Guide To Regional Arbitration (volume 4 - 2016)

Ones to Watch: Asia Pacific

03 November 2015

Asia’s also home to some institutions that are worth keeping an eye on. These organisations have potential, if they can sustain their current momentum.

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, 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 have a chance to showcase their merits to the wider arbitration world soon 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. The 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 one to watch?

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). 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.

What does the future hold?

Most of China’s local arbitration commissions are expected to do well because of the cloud hanging over CIETAC (see below). BAC, as the class of the field, should do better than most. It may be BAC’s big chance to shine.

Does it have much experience with international work?

Yes. The most recent statistics peg the centre’s foreign-related matters at around 494 since it launched. It handles around 1,300 to 1,500 new matters each year.

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. On the upside, the staff are helpful and often fluent in English, and BAC also has the benefit of a really effective case-management system. Its hearing rooms also have a lovely view of Beijing. Med-arb is a regular feature; BAC uses an “evaluative”, rather than “adjudicative” style.

Chinese International Economic Arbitration Commission (CIETAC)

Why is it one to watch – why hasn’t it been put on the main list?

CIETAC is China’s home-grown international arbitration institution, and government rules have given it a huge caseload and created decades of experience (it handled over 1,000 cases in 2013, the most recent available statistics). 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 the locale, which isn’t CIETAC’s fault. China just isn’t a very good seat – yet. Its courts interfere.

If the courts were better, would you give it a higher recommendation?

No – but again, that’s for reasons that have nothing to do with CIETAC. Chinese opponents (and law firms) can be difficult in a contentious scenario (though their behaviour is said to be improving). “Even if you lower your expectations, it’s still not enough,” one source told GAR in 2012. It’s therefore better to get the opponents off their home turf. Of course, sometimes, you don’t have the option.

Let’s assume the opposition is behaving and the courts are not a problem. Would it be recommended more highly in that case?

Absolutely. As long as you go in with your eyes open.

What should a newcomer to CIETAC know in advance?

The process can be “frighteningly fast”, according to one panel member at GAR Live Hong Kong 2012 – and not always precise. Indeed, another speaker on the same panel gave CIETAC 5 out of 10 for efficiency, saying that all too often speed and sloppiness go hand in hand. The reason it’s so fast is its use of the inquisitorial approach – very little time is devoted to testing evidence. If you hail from a civil law jurisdiction, this may be less of a big deal.

Paradoxically, CIETAC can be extraordinarily slow, the same people reported. That usually occurs because it’s a complex multiparty case, or CIETAC is attempting to administer a matter under another institution’s rules. For various reasons this happens from time to time (CIETAC has a habit in particular of accepting ICC clauses).

There’s also a tendency to impose med-arb, although that is not necessarily a bad thing.

Isn’t med-arb viewed with distrust?

It can be – in the West. In Asia, it’s often welcome. Asian parties frequently to want to negotiate but are too proud to make the first move. So med-arb allows them to engage without either suffering a loss of face. After all, they’re being ordered to (by the arbitrators). 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 less scary than it used to be, procedurally. These days there are safeguards in place if the med-part fails (including at CIETAC).

How come CIETAC is so busy if its process leaves something to be desired?

Its market share is boosted by governmental rules. Those prevent any foreign arbitral provider from operating on the mainland (while also requiring that all arbitration in China be administered by an organisation). So CIETAC and a number of city-backed arbitration commissions, such as Beijing (see above) are the only option.

There can be strategic reasons for accepting CIETAC too. For example, if it’s a dispute where one will need to preserve evidence on the mainland or invoke Chinese court support it’s the best bet. Chinese courts won’t enforce orders or requests delivered from outside.

What does CIETAC say in response to naysayers?

To its credit, CIETAC has worked hard over the years to improve its offering and China as a seat. It would dearly love to play on the larger international stage.

How international is it?

An all-Chinese panel used to be the norm – or mainly Chinese, with one Chinese-speaking foreigner. Recent reforms have made it easier to achieve an all-foreign tribunal, and after a slow start there’s some evidence that some of these are being appointed.

How independent are the arbitrators appointed?

Experiences vary. A panellist at GAR Live Hong Kong 2012 said he’d seen Mainland Chinese arbitrators “who are clearly partisan or communicating with one of the parties”. He gave those one 1 of 10 for independence. But he’d also seen others “who deserve 10 out of 10”.

Another speaker on the same panel said arbitrators who sit as a sideline (rather than as their main career), and with the aim of “giving back” to society, are less prone to such failings. He said he’d award Chinese arbitrators he’d seen “a perhaps naïvely high 8 out of 10” for independence.

Has anything changed of late?

Yes. It revised its rules in 2014, introducing emergency arbitrator provisions and provisions on the consolidation and joinder of third parties in complex disputes, as well as raising 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.

Why did it redraft the rules so soon?

This is actually the third revision of CIETAC’s rules in a decade, following revisions in 2005 and 2012.

The 2012 rules were passed in the auspicious Year of the Dragon, but proved anything but. Within months of them being unveiled, the Shanghai and Shenzhen sub-commissions of CIETAC had announced they were breaking away from Beijing in objection to what they perceived as the centralising effect of the new provisions.

They have since set themselves up as independent arbitration institutions, with their own rules and panel of arbitrators.

Why aren’t those sub-commissions included in the ones-to-watch section?

They may be one day. Shenzhen, when it was part of CIETAC, was something of an innovator within the organisation. Right now, though, the sub-commissions are facing a bit of an uphill task guaranteeing that awards they produce will be enforced. You are probably okay if you’re enforcing within the sub-commission’s own province. But away from home things may go awry. It’s probably safer, for now, to avoid the issue and start a new case (if you can) at CIETAC Beijing. Alternatively, use the current uncertainty to negotiate arbitration away from the mainland until it blows over.

Would CIETAC’s Hong Kong Arbitration Centre be a better option?

Absolutely. It’s CIETAC arbitration in a much better seat. At the moment, it mainly receives cases based on agreements that specify it as the forum; other than that, it provides assistance to disputes on the mainland, such as organising oral hearings in Hong Kong. Unfortunately, there are no statistics available on the Hong Kong caseload at present.

Japan Commercial Arbitration Association (JCAA)

Why is it one to watch?

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. And Tokyo and Osaka don’t give those companies many reasons to “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.

The JCAA itself is also rather expensive. The same source thinks: “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 quietly been 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.

Korean Commercial Arbitration Board (KCAB)

Why is a Korean organisation on a list of up-and-coming institutions?

The KCAB is promoting itself – and Korea – vigorously as a provider/seat, aided by the bigger Korean arbitration firms. But it’s still early days. Though busy, most of the KCAB’s work is domestic.

How busy is “busy”?

More than 300 new cases per year, and a growth of 20 per cent in 2012 (the last available statistics), with 85 international cases.

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 the more professionalised international arbitrator this pro bono approach has made Seoul unattractive.

How has the Korean bar been helping the KCAB?

It’s largely down to the Seoul International Dispute Resolution Centre, an arbitration hearing facility in the heart of downtown Seoul. Though small, it’s been kitted out with technology to make the best of its size. It has the support of the major 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? It’s surrounded by major economies – Russia, China, Japan and Mongolia – that could do with somewhere they all consider neutral to settle disputes. So if Korea plays its cards right, it could emerge as a Switzerland for North Asia. It’s also a civil law jurisdiction, which ought to be a plus in a region where its rivals – chiefly Hong Kong and Singapore – are 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 will 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.

Kuala Lumpur Regional Centre for Arbitration (KLRCA)

Why’s it one to watch?

After a number of years in the wilderness, the KLRCA has embarked on a modernisation and revitalisation programme and is now reaping the benefits.

Why was it in the wilderness?

Malaysia’s courts were a bit inconsistent in their support for arbitration. That led users to avoid it as a seat.

So what changed?

Various things. The courts have been much better of late, and in 2014 it moved to new premises inspired by the wonderful 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?

Of course. Winning market share in international arbitration is never easy. The KLRCA, though, has government backing – although, it has to be said, the Malaysian state doesn’t have quite the same reputation for ruthless efficiency as Singapore (Singaporeans like to quip that Malaysians do 90 per cent of a job, then go for a cigarette). But nevertheless things are looking up.

Why is that?

There was a fear, at one point, that they might lose Sundra Rajoo. However, he was reappointed in 2012 – so that was one bullet dodged. In addition, Malaysia’s courts have for the most part avoided slipping into bad habits, and rumblings about a negative attitude towards foreign lawyers (and a suggestion that they be barred from practising in Malaysia and in particular sitting as arbitrators) have faded away. More importantly, though, the KLRCA is starting to use a natural advantage.

What is that?

Kuala Lumpur has become a big hub for Islamic finance, so the KLRCA has released some very intelligently composed 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.

LCIA India

What’s special about the LCIA India?

It’s an attempt to offer LCIA-quality arbitration to one of the world’s potentially biggest, but also most difficult, markets.

Why’s it difficult?

Indian arbitration is beset by numerous problems. One is the tendency to appoint retired judges as arbitrators.

What do they do?

They take a long time over every single case!

How is the LCIA India getting around that?

It came up with a number of India-specific rules, one of which removed the parties’ right to choose the chair. The LCIA India chooses the chair in every case. There is also no default seat. The institution decides the seat according to the unique circumstances of the case.

However, the rules are under revision again following the recent changes at its London parent.

Is it proving popular?

Sources within LCIA India say so. It’s currently handling disputes in excess of US$2.9 billion. But the main thing is that several Indian conglomerates are now routinely inserting LCIA India clauses into contracts.

Apparently the experience of the LCIA India rules in operation is also positive. Sources say they couldn’t be more impressed with the arbitrators appointed on those early cases.

The centre also has the effect of enhancing the business of LCIA itself. In 2014, Indian nationals make up just under 6 per cent of the parties to LCIA arbitrations commenced this year, which ranks Indian corporates among the top 10 users of the LCIA clause.