'The worst of times, the best of times'
Before the economic meltdown of 2008, the burgeoning economies of East Asia had enjoyed not only unprecedented demand for consumer goods at home, but also an export boom to the west, with which were established substantial trade surpluses, while the west consumed much more than it could afford; funded by cheap and readily available credit, often provided by the exporter state itself. And so, many nations became used to, and complacent about, guaranteed year-on-year, decade-on-decade growth in prosperity and living standards, though careless of those in many of the poorest parts of the world, who became still poorer.
But then the world experienced global economic turmoil on a scale not seen for 70 years. Indeed, given that the global economy had been transformed beyond recognition in just 30 years, with the tiger economies of the Asia-Pacific providing much of the muscle behind the unprecedented economic growth, one might say that the downturn was on a scale never before witnessed.
The world's stock markets went on a white-knuckle ride, the drops so significant as to be measured not in the traditional points, but in percentages that sometimes reached double digits in single 24-hour periods. And while many of the most dramatic declines were in western markets, with despair in New York and London, as the Dow Jones, Nasdaq and FTSE yo-yoed at breakneck speed, the fireworks were no less spectacular on the Nikkei, the Hang Seng, the Kospi and other Asia-Pacific markets.
In the second half of 2008, the manufacturing giants of the Asia-Pacific saw huge falls in share values, with the woes of the great steel industries typifying the region's distress.
Even the Chinese powerhouse took a battering, with the growth in China's GDP slowing for five consecutive quarters up to October 2008, and we saw the spectacle of Singapore falling into recession, as consumer demand from the west dropped inexorably in response to the west's own emergency measures.
South Korea, Japan and China were but three of many in the region that moved to stabilise their economies with multibillion-dollar guarantees of foreign borrowing and with the re-capitalisation of their financial institutions.
In many of the world's leading economies, interest rates were drastically cut in an effort to stimulate growth, with all eyes on the US Federal Reserve, whose lead the rest of the world watched with intense interest, though with some caution, as it was the first chill wind from the innocuous-sounding 'sub-prime lending' in the US, which had picked up into a gale, then a storm and finally the maelstrom of 'toxic assets' at the very heart of the crash.
The collapse of businesses and business relationships inevitably fuels a boom in litigation and arbitration, from which all of those involved in the field, whether as arbitrators, advocates, or administrators benefit, even as we see our personal pension funds battered and the value of our real property plummet, and there has been a surge of contentious work from the Asia-Pacific region.
But we have also seen quite unprecedented cooperative efforts at damage limitation, with hitherto unheard-of pooling of resources and injections of capital, whether by individual governments or governments collectively, of their taxpayers' money, or through the International Monetary Fund, or with those handful of economies most insulated from the worst effects of the downturn, such as the wealthiest Gulf States, making huge loans to shore up ailing financial markets.
And there are other indicators of how we are now more willing to be outward-looking in bad times. India, for example, has benefited, as some of the UK's leading law firms outsource hundreds of millions of dollars' worth of high-volume work to the pool of high-quality, English-speaking, common-law-qualified Indian lawyers.
We have, then, had the most piercing of wake-up calls, which must surely lead to a new global economic order, at the heart of which will, once again, be the great tiger economies of the Asia-Pacific, which have had not only to rethink economic strategy regarding their export markets and foreign investments, but also to manage the expectations of their huge populations for improvements in their quality of life, while minimising the environmental impact of growing consumer demands. And it is in addressing these twin problems that new industries and services will emerge and grow, and out of which, for better or for worse, another generation of arbitral work will emerge.
Meanwhile, the leading arbitral institutions continue to plan for growth in the Asia-Pacific region, with the ICC, for example, planning a branch of its secretariat in Hong Kong and a liaison office in Singapore, while the Permanent Court of Arbitration has entered into a host country agreement with the government of India, to facilitate the dispute resolution activities of the PCA in India and on the Indian sub-continent.
The LCIA, similarly, continues with its plans to establish a branch office in New Delhi. Certainly, India is considered by many contracting parties to be unfriendly to international commercial arbitration, and this reputation has not been helped by the decision of the Supreme Court of India in Venture Global Engineering v Satyam Computer Services Limited (JT2008 (1) SC, 468), in which the Supreme Court held that a foreign arbitral award could be set aside in India, even though India was not the seat of the arbitration.
It is, however, the experience of the LCIA, in extended discussions at the highest level, with government, judiciary and Bar, that there is a growing willingness in India to address these criticisms and to acknowledge that so unwelcome a reputation for flying in the face of accepted international arbitral practice, represents a significant hole in the fabric of the Indian economic miracle.
Though the LCIA would not presume to interfere in the judicial and executive processes of India, it does believe that it is better able to serve contracting parties from India and the wider Asia-Pacific region from a prominent base in the region and that, in so doing, it may play some small part in raising confidence in the local arbitration regime, as it makes the promised advances towards alignment with the wider international arbitration community.
Finally, it is perhaps worth reminding ourselves, in this difficult global economic climate, of the common objective of the major arbitral institutions to support effective and sustainable cross-border trade by facilitating the binding resolution of disputes between international parties.
Thus, for example, on the inauguration of the LCIA in 1892, the Law Quarterly Review reported that 'this Chamber is to have all the virtues which the law lacks. It is to be expeditious where the law is slow, cheap where the law is costly, simple where the law is technical, a peacemaker instead of a stirrer-up of strife'.
And just as the LCIA was heralded as a 'peacemaker', so the ICC was founded, in 1919, when the horrors of the First World War were etched in the public psyche, 'to create an institution that would foster reconciliation and peace through the promotion of international commerce', with the ICC's Court of Arbitration being established in 1923 to provide the means of resolving disputes arising out of international commerce, in the furtherance of that primary object.
It may be that these noble sentiments are equally applicable in times of purely economic hardship as they were in times of military conflict, and that arbitration will play a small but significant part in the restructuring of the economies of South East Asia, as elsewhere.
- The views expressed in this article are those of its author and are not expressed on behalf of the LCIA.