Myanmar Times | 16 February 2018
Devil will be in the detail for Belt and Road courts
by Thompson Chau
But as details have yet to emerge, it might be premature to judge.
The new Belt and Road courts could complement existing common law-based arbitration institutions and widen the choices for project parties, but the devil could be in the detail, such as the structure, composition of judges and governing rules, experts have warned.
In early February, the Chinese embassy in Yangon confirmed that Beijing will set up a Belt and Road dispute settlement mechanism involving new courts, while news media reported that three international commercial courts will be set up by China’s Supreme People’s Court in Xi’an, Shenzhen and Beijing.
In Myanmar, the proposed Kyaukphyu Special Economic Zone (SEZ) in Rakhine State is among the foremost mega projects in the Belt and Road Initiative. The proposed SEZ has huge implications on Rakhine’s development, Myanmar’s trade economy, foreign investments, infrastructure as well as human rights. U Kyaw Htin from CITIC Myanmar told The Myanmar Times on February 2 that they were only made aware of the development through news reports about the BRI courts, adding that since the parties involved are still in negotiations, the dispute settlement mechanism is not finalised.
Beijing’s decision to create a new mechanism came under fire earlier, with an academic lambasting such arrangements as “essentially tools for corporations to restrict access to justice”. But there are lawyers in Myanmar who defended and supported the proposal.
...this initiative could be perceived in such way as suggesting that the vehicle might be controlled by Chinese courts and ultimately the Chinese government, depending on its structure. - Filip Lauwerysen, EuroCham
More choices to settle dispute
Bodenheimer Herzberg, an international arbitration specialist in Europe, confirmed that when it comes to viability of the alleged plans, several well-established arbitration centres exist in the region, the ones in Singapore and Hong Kong being the most prominent. There are also alternatives such as Kuala Lumpur Regional Centre for Arbitration (KLRCA) in Malaysia or even existing institutions in mainland China, such as the China International Economic and Trade Arbitration Commission (CIETAC). The arbitration awards issued under the rules of the established arbitration institutions do bring about the advantage of being enforceable in most countries under the "New York Convention".
Filip Lauwerysen, chief executive of European Chamber of Commerce in Myanmar (EuroCham), outlined several prerequisites for the planned courts to be viable in the existing environment.
“Foremost, the initiative should not be seen as an envisaged replacement of arbitration as a means of settling disputes but rather serves as a companion rather than a competitor to arbitration as it might be one more option among a suite of viable alternatives to resolve transnational commercial disputes,” he stated.
The established arbitration institutions in Singapore and Hong Kong are embedded in a culture dominated by common law influence. This ignores that many countries in the region are based on civil law systems, including China. Setting up a court system might enable future parties to conduct proceedings also in Chinese without significantly higher costs if the infrastructure is provided.
Furthermore, the establishment of an international court allows for new approaches both with regard to implication of costs and the introduction of other means of dispute resolution such as mediation. Especially with respect to the likely disputes in connection with the BRI, the advantage of a developed jurisprudence, rather than confidential arbitration, and the facilitated ability to join third parties to disputes might make this project very viable. With regard to enforcement, decisions by the courts might be appealing for non-Chinese parties when it comes to enforcement in China.
Similarly, Dr William Wong, a Hong Kong senior counsel who advocated the city’s legal sector to capitalise on BRI opportunities, told The Myanmar Times that the proposal is meant to provide another choice for parties to resolve international commercial disputes.
“Rather, like the Singaporean International Commercial Courts and the Singaporean Arbitration Centre, parties can opt in a court system or an arbitration route. It is meant to provide a wider range of choices for the parties. The establishment of a wide range of reputable disputes resolution infrastructures is to be welcomed,” the barrister noted.
The proposal is only at an early stage, full details have to be worked out later. - Dr William Wong SC, Barrister
All depends on the details
However, the EuroCham chief said that the question regarding to what extent such a court would be perceived as a neutral dispute settlement venue will depend largely on its set-up and the composition of judges, regional or international.
“When looking at the foreseen structure, with Shenzhen covering the Maritime Silk Road, the court might also establish specialised competence in the field of maritime disputes.
“In the Myanmar context, the general tensions and disputes between the local population on Chinese infrastructure projects are also to be considered. Having a court in China ruling over such disputes could be counterproductive.
“I believe that this initiative could be perceived in such way as suggesting that the vehicle might be controlled by Chinese courts and ultimately the Chinese government, depending on its structure. Secondly, a more international setup could have been seen by establishing an ASEAN-Chinese arbitration panel or choosing a neutral third country arbitration centre or third country commercial court,” Mr Lauwerysen observed.
Likewise, James Bridgeman SC, president of the Chartered Institute of Arbitrators, stated that an international judiciary could help secure impartiality and independence of the courts.
“Parties to investment treaties and trade agreements require an effective dispute resolution mechanism that is independent, impartial, applies the rule of law and delivers enforceable determinations. How this is to be achieved is a matter for the parties themselves.
“It could be achieved by establishing a permanent court sitting in one or more jurisdictions with an international judiciary. There was strong support for this approach in the EU in the Transatlantic Trade and Investment Partnership [TTIP] negotiations with the USA,” he explained.
In the Myanmar context, the general tensions and disputes between the local population on Chinese infrastructure projects are also to be considered. Having a court in China ruling over such disputes could be counterproductive. - Filip Lauwerysen, EuroCham
Regulatory powers at risk
Daniel Aguirre, Greenwich University’s senior lecturer in law and former legal adviser of the International Commission of Jurists in Yangon, noted that the development is not surprising given how lucrative the investment arbitration market has become. Linking development projects along the BRI to a Chinese arbitration court would help China to establish a foothold in international arbitration market. But this would take a long time to set up and negotiate existing investment agreements between China and the countries involved.
He highlighted that any new investment arbitration centre must be governed by rules that protect the ability of host countries to pass regulation protecting national development policies, human rights and the environment even if these conflict with the interests of Chinese investors.
“States should not be pressured to sign away their legitimate regulatory powers in exchange for Chinese investment,” Dr Aguirre argued.
Unfortunately, those eager to scrutinise the details and pass judgement will be disappointed. According to Dr Wong, the proposal is only at an early stage and more details have to be worked out later.
States should not be pressured to sign away their legitimate regulatory powers in exchange for Chinese investment. - Dr Daniel Aguirre, Senior lecturer in law