This is an Insight article, written by a selected partner as part of GAR's co-published content. Read more on Insight
The past year has been yet another robust and fruitful year for Asian economies and the region’s practice of international arbitration. Economies within the Asia-Pacific region have largely been resilient to the recent global economic crisis. Together with relatively stable signs in the economy, arbitration is, as ever, gaining more recognition and reliance from industries as the desired method of dispute resolution and risk management. Signs indicating a thriving arbitration industry abound in the region. Arbitral institutions throughout Asia-Pacific are expanding their infrastructure – physical as well as legislative – to cope with a steady increase in demand for arbitration and to foster further growth. State-of-the-art hearing facilities are being built and expanded; arbitral rules are being updated to implement newly developed and efficient procedures; and national legislation is being amended to improve efficiency and effectiveness in the arbitration procedure and the enforcement of arbitration awards. All of these efforts combine to promote the Asia-Pacific region as a vibrant arbitration community replete with innovative practices, a pro-arbitration infrastructure and an arbitral culture. These trends are likely to continue in the foreseeable future, and will contribute to raising Asia-Pacific’s profile as one of the world’s premier destinations for international arbitration.
New infrastructural developments
In response to the growing demand in quality international arbitration venues in north-east Asia, the Korean Bar Association, the Korean Commercial Arbitration Board, the Seoul metropolitan government and the Ministry of Justice have made a collaborative effort to launch the Seoul International Dispute Resolution Centre (Seoul IDRC), in operation since 27 May 2013. Located in the centre of downtown Seoul, with easy access to law firms, businesses, hotels and historical landmarks, Seoul IDRC provides world-class hearing facilities. Hearing rooms are equipped with the latest in document-sharing technology, video conferencing, real-time transcription and other services necessary to maximise efficiency, ease and accuracy during a hearing. Seoul IDRC is modelled after the success of Singapore’s Maxwell Chambers, and hopes to provide a cost-effective option to parties, counsels and arbitrators to have hearings in north-east Asia. In particular, it hopes to host hearings of international arbitrations involving parties around the region such as Korea, China and Japan, as well as conferences and seminars. It has entered into cooperation agreements with major international arbitration institutions such as HKIAC, ICC, ICDR, LCIA, SIAC and WIPO.
Already known for its arbitration-friendly legal infrastructure and its pool of highly qualified arbitration practitioners, Korea is moving forward in playing its role to activate more interest in international arbitration in the region. The Seoul IDRC is but one of the many steps being taken to provide an optimum arbitration venue for international parties.
The Singapore International Arbitration Centre (SIAC) has undergone a significant change under its new revised rules, which came into force on 1 April 2013. Under the new rules, SIAC has established the Court of Arbitration which will be responsible for the case administration, appointment and challenge of arbitrators, and other relevant policy matters. The board of directors has been established to oversee the operation and business development matters of SIAC.
In addition to the changes in its governance structure, SIAC is now expanding its operations in India. In April 2013 SIAC launched its first oversees office in Mumbai, India. Trade between India and Singapore has been active in recent years, and this has naturally led to the use of arbitration by Indian parties, especially under SIAC rules. The SIAC office in Mumbai does not administer arbitration cases but will be focused on the marketing and promotion of international arbitration within India.
With the adoption of the new 2012 CIETAC Rules, the oldest arbitral institution in China has recently been engaged in some significant changes, which will need to be considered when parties contemplate arbitration in China. Article 2.6 of the revised CIETAC Rules states that where the arbitration clause does not clearly state a designated sub-commission, CIETAC Beijing will administer the case. Opposing this new rule, CIETAC Shanghai and CIETAC South China have established their own office as an independent entity. CIETAC Shanghai unveiled its own panel of arbitrators and a new set of arbitration rules, effective from May 2013. It now goes under the name of SIETAC (Shanghai International Economic and Trade Arbitration Commission) but it also uses SHIAC as an alternate abbreviation. CIETAC South China is now named SCIETAC, but is also known as the Shenzhen Court of International Arbitration (SCIA); it adopted its own rules and panel of arbitrators on 1 December 2012. Recent rulings regarding arbitration clauses containing the former CIETAC Shanghai sub-commission have raised concerns regarding the new changes, and future developments should be monitored.
To keep step with the growing use of international arbitration within the region, legislative initiatives are currently being undertaken by a few countries and are seen as welcome changes by those in the arbitration community.
China has taken a proactive step to fine-tune its arbitration regime by implementing some noteworthy changes in its Civil Procedure Law (CPL). Under Article 101 of the amended CPL, parties of a domestic arbitration case will no longer need to wait until arbitral proceedings have started to request a conservatory measure to preserve evidence or property. It is, however, unclear as to how this article will be applied to foreign-related arbitration cases.
Another significant change that will reinforce PRC’s status as an arbitration-friendly jurisdiction is article 237. Article 237 has narrowed the scope of the grounds for refusing to enforce a domestic award, much like the grounds for setting aside the award under article 58 of its Arbitration Law. Furthermore, under article 154 of the CPL, when a PRC court refuses to enforce an award it is now obliged to state the reason for doing so – whereas before, a simple ruling was all that was required to set aside an arbitral award.
These significant changes in the legislation of the PRC are indications of China’s willingness and proactive stance towards arbitration, and it is a welcome move that many have been waiting for in the region.
Not one to fall behind its mainland counterpart, Hong Kong revised its Arbitration Ordinance in June 2011 to unify its domestic and international arbitral regimes based on the UNCITRAL Model Law and to stay current with the advancing field of international arbitration. However, the Arbitration Amendment Bill 2013 was introduced to the Hong Kong Legislative Council in April 2013 and was passed on 10 July 2013.1
The main changes that were instituted include the following:
- Enforcement of a relief awarded by an emergency arbitrator would be possible, whether appointed under institutional rules or other arbitration rules and whether the decision is granted in or outside Hong Kong.
- If the costs of the arbitration are to be taxed, it will be done so on a ‘party and party’ basis.
- Awards in Macao and Hong Kong are now mutually enforceable following an agreement, signed in January 2013, called the Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong SAR and the Macao SAR.2
In mid-2012, the Ministry of Justice organised a special task force to identify issues to be included in the amendment to the Arbitration Act, which was adopted in 1999 to reflect the 1985 UNCITRAL Model Law. This year, the Ministry expanded the task force into a special commission, composed of scholars, practitioners and officials, with a mandate to recommend possible amendment to the Arbitration Act reflecting the development in the international arbitration law and practice, including the 2006 UNCITRAL Model Law and recent amendments to laws of other major jurisdictions. It is expected that the committee make a recommendation in the first half of 2014.
Recent changes in institutional arbitration rules
The Hong Kong International Arbitration Centre (HKIAC) has played a prominent role is raising Hong Kong’s status as a respected seat of arbitration. Initially administering international arbitral proceedings using the UNCITRAL Rules, HKIAC established its own Administered Arbitration Rules in 2008. In order to stay current with the developing international arbitral arena, HKIAC revised its rules under the review of the Rules Revision Committee, which will come into effect on 1 November 2013. The changes include the following:
- Additional parties may now be joined to an arbitration when requested by one of the existing parties, provided that the additional party is bound by a valid arbitration agreement.
- Upon the request of a party, claims from multiple contracts may be made in a single arbitration, provided that: parties are bound by each arbitration agreement; a common question of law or fact arises; the rights to relief arise out of the same transaction(s); and arbitration agreements are compatible.
- Where the amount in dispute does not exceed HK$25 million, or in cases of exceptional urgency, a party can request to have the case administered under the expedited procedure. A sole arbitrator will be appointed unless parties request otherwise, and the award is to be made within six months.
- A party can apply for interim or conservatory relief prior to constitution of the arbitral tribunal, to preserve assets or evidence, and other forms of relief. An emergency arbitrator is appointed within two days, and a decision is made within 15 days.
To promote international arbitration, the former rules of the Korea Commercial Arbitration Board (KCAB) were revised to facilitate reliable, cost-effective arbitration at a convenient location in northeast Asia. The most prominent feature of the revisions is the default application of the international arbitration rules when one of the parties, at the time of the conclusion of the arbitration agreement, has its place of business in a state other than Korea, or the place of arbitration expressed in the arbitration agreement is in a state other than Korea.
Another noteworthy feature of the KCAB International Rules is the new expedited procedure, detailed in Chapter VI. This speedy procedure applies if the claim amount does not exceed 200 million won, or if the parties agree to the procedure. A sole arbitrator is generally appointed by the secretariat, and the award is rendered within three months of the constitution of the arbitral tribunal.
Other revisions include a cap on administrative fees for cases at 150 million won, and the expanded role of the international arbitration committee which includes consultation regarding challenges, replacement, removal or appointment of arbitrators. The KCAB continues to update its services and its rules to facilitate an effective and satisfactory resolution for all parties involved, and all efforts are being made to promote international arbitration within the region.
One such effort is the organisation of the regional rounds of the Foreign Direct Investment Arbitration Moot Competition (FDI Moot regional rounds) in Seoul from 22–24 August, 2013. This year will mark the first regional rounds for the Asia-Pacific region, and 18 teams have currently registered. Together with the Korean Ministry of Justice, the Center for International Legal Studies (CILS) and the Korean Council of International Arbitrators (KOCIA), the KCAB will be hosting the regional rounds to promote interest in investment arbitration.
The Kuala Lumpur Regional Centre for Arbitration (KLRCA) has also revised its arbitral rules to better enhance the procedural aspects of arbitrations administered under its rules. The revised rules, which came into effect on 2 July 2012, track the provisions of the Arbitration Amendment Act of 2011 that reinforced the enforceability of arbitral awards, and reflect the feedback and opinions that KLRCA has gathered from parties, arbitrators, and administrators. A few of the revisions are as follows:
- The period for appointment of arbitrator(s) has been reduced to 30 days.
- The arbitrators that are appointed by parties, or any appointing authority agreed by them, must now be confirmed by the director of the KLRCA. An agreement by the parties to appoint an arbitrator shall be deemed as a nomination, not an appointment.
- New provisions regarding challenge of arbitrators have been included in the revisions, which enable the KLRCA to administer challenge procedures and the KLRCA director to make the final decision.
- Procedural provisions relating to rendering of awards have been revised to better clarify with regards to the extension of time and delivery of arbitral awards and the release of awards.
An equally important achievement for the KLRCA is the launch of the KLRCA i-Arbitration Rules on 20 September 2012. The i-Arbitration Rules is the first set of rules that adopts the UNCITRAL Arbitration Rules, while also allowing for the resolution of disputes arising from any contract that may contain aspects of shariah law, including Islamic finance and halal products. The intent behind the creation of the i-Arbitration Rules is to provide for international commercial arbitrations for Islamic commercial transactions, premised on Islamic principles. As globalisation advances and cross-border transactions and disputes increase, the i-Arbitration Rules well suit those who wish to settle their disputes via arbitration while observing Islamic principles. The rules ensure a shariah-compliant adjudication of disputes by providing that, whenever the arbitral tribunal must form an opinion on an issue related to shariah principles or decide on a dispute arising from the shariah aspect of an agreement, the tribunal shall refer the matter to a shariah expert or advisory council, who will advise the tribunal as to the resolution of such issues.3
As mentioned above, SIAC has unveiled its newly revised rules which include a number of noteworthy changes.4 These changes include, among others, the following:
- Under Rule 22.5 of the new SIAC Rules, witness interviews prior to his or her appearance at the hearing are expressly permitted. This new change reflects current practices under institutional rules and guidelines, such as the IBA Rules of the Taking of Evidence in International Arbitration.
- The arbitral tribunal can now enjoy broader powers under Rule 24(e) of the new Rules regarding the inspection of any property or item. Unlike the former rule, which required the inspection to be conducted in the parties’ presence by an expert or tribunal, the new rule does not require such a condition.
- Rule 24(n) enables the tribunal to decide any new issue that was not raised before in the submissions, as long as there is notice and the other party has been given sufficient opportunity to respond to such issue.
- It is now possible to review an award that has been published by SIAC under Rule 28.10. The names of the parties will, of course, be redacted but this opportunity to have access to the awards will be welcomed by many.
A welcome progression
Rich in minerals, gas and other natural resources, Myanmar has been the centre of attention for many foreign investors, and the recent decision to accede to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) has added another layer of stability for investors. Myanmar deposited the instrument of accession with the secretary-general of the United Nations on 16 April 2013 and the New York Convention will enter into force on 15 July 2013. Although Myanmar’s Arbitration Act 1944 has not been amended to meet the global standards for best practices in international arbitration as of yet, the accession to the New York Convention is a step forward in providing investors with a sense of stability that foreign awards will now be enforceable in Myanmar.
Without a doubt, Asia’s vibrant and dynamic economy has called for constant changes in legislation and institutional rules to better accommodate the growing needs of parties in international arbitration, and such demands are being met in various regions of Asia. Despite some growing pains, it is clear that international arbitration is considered a viable means of dispute resolution for the region, as reflected in the efforts of various governments to update and streamline their arbitral legislation and infrastructure. Although it remains to be seen how these changes will affect the use of international arbitration, it is clear that the constant development of innovative arbitral mechanisms is alive and well in the Asia-Pacific region.
- ‘Arbitration in Hong Kong and China: Recent Developments and Considerations for Asian Parties’, Korean Arbitration Review, August 2013.
- KLRCA i-Arbitration Rules: www.klrca.org.my/scripts/list-posting.asp?recordid=288.
- SIAC Arbitration Rules 2013: www.siac.org.sg/index.php?option=com_content&view=article&id=427&Itemid=204.