Challenges and Opportunities for International Commercial Arbitration and Investor-State Dispute Set
By Dr. Nobumichi Teramura
The following guest blog derives from a project on Asia-Pacific international business dispute resolution funded jointly over 2019 by the University of Hong Kong and the University of Sydney. It will be tabled at a second symposium on 15 November. Versions are also published by Kluwer Arbitration Blog.
More than a year has passed since the com
On 15 July 2019, the University of Hong Kong Asian Institute of International Financial Law (AIIFL), jointly with Sydney Law School, organised an international symposium: “Challenges and Opportunities for International Commercial Arbitration and Investor-State Dispute Settlement in the Asia-Pacific Region”. The symposium, supported by Transnational Dispute Management (TDM), brought together leading experts in international business law from the Asia-Pacific region. Building on Reyes & Gu (eds), The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia-Pacific (Hart, 2018) and Chaisse and Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018), the symposium examined more recent challenges and opportunities for ICA and ISDS: the proliferation of international commercial courts; the 2018 UN Convention on enforcement of mediated settlement agreements; dispute resolution mechanisms for the Belt & Road initiative; and the impact of evolving investment treaty practices and high-profile cases on public attitudes towards ICA and ISDS. The main focus of the symposium was Australia, Japan, China, Hong Kong and Singapore.
The first presentation topic was: “International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards”. Professor Luke Nottage (Sydney Law School) discussed Australia’s revived ambition to become a major hub for ICA. According to the recent marketing from the Australian government around last year’s ICA Congress in Sydney, the country has potential for: a harmonised legal framework for ICA in line with international standards; sophisticated arbitration institutions; and some of the world’s leading arbitration practitioners. While agreeing with these points, Professor Nottage stated that the country was required to make further efforts to promote itself as an arbitration hub. Challenges include remaining legislative uncertainties, the structural problems of the court system (the shared ICA jurisdiction of State and Territory Courts alongside the Federal Courts) and persistent delays in court-related ICA matters under the International Arbitration Act.
Professor Chester Brown (Sydney Law School) then introduced ‘An Australian Perspective on Investment Treaty Negotiations and Investment Arbitration’. He stated that Australia’s approach to investment treaty, in particular to ISDS, is on a case-by-case basis in light of the national interest but, for now, the government still generally supports to the dispute resolution platform and recently agreed to ISDS in the FTA with Hong Kong. The unexpected victory for the centre-right coalition in the federal election on 18 May 2019 would not dramatically impact on the country’s direction on trade and investment negotiations; this would have changed if the Australian Labor Party had won the election as the party pledged to negotiate the removal of ISDS clauses. Professor Brown also introduced Australia’s recent participation in the work of UNCITRAL’s Working Group III that aiming to reform ISDS.
The next presentation, Professor James Claxton (Kobe Law School), was on “Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream?”. Japan has long been regional backwater market for ICA, but the Japanese government has recently become keen to promote the country as another regional centre for international business dispute resolution services. The presentation assessed new initiatives including: the promotion of existing arbitration institutions (the Japan Commercial Arbitration Association and Tokyo Maritime Arbitration Commission); the establishment of new arbitration institutions and facilities (the International Arbitration Center in Tokyo and the Japan International Dispute Resolution Center Osaka); and the establishment of the Japan International Mediation Center – Kyoto. Professor Claxton discussed whether the initiatives would provide Japanese ADR businesses with enough support to survive the fierce competition from other regional venues for dispute resolution services. He concluded that the country should pursue a consistent, coordinated and ambitious strategy to catch up with foreign dispute resolution service providers including (more) niche marketing for international arbitration and multi-tiered dispute resolution (med-arb or arb-med).
Three experts on China presented their research on ICA and ISDS. A/Professor Jeanne Huang (Sydney Law School) spoke as “Procedural Models to Upgrade BITs: China’s Experience”. The methods of upgrading BITs may be categorised into four models: the Co-existence Model (parties to an old BIT join an existing or new one); the Replacement Model (replace an old BIT with a new one); the Amendment Model (amend an old BIT by a protocol); and the Joint Interpretation Model (diplomatic announcements on the interpretation of a BIT). According to her, the first two models are the most frequently adopted. Professor Vivienne Bath (Sydney Law School) shared her research on “China and International Investment Arbitration: Chinese Arbitral Institutions and ISDS Rules”. Recently, Chinese arbitration institutions such as the China International Economic and Trade Arbitration Commission and the Beijing International Arbitration Center have issued new rules that enable them to facilitate ISDS in China. Professor Bath explained how the new developments would affect China’s investment practice in the context of Belt and Road Initiative (BRI) questioning whether foreign counterparties would agree to the new facilities compared to others in third countries. Another topical issue was discussed by A/Professor Weixia Gu (the University of Hong Kong Faculty of Law). Her paper on “China’s Belt and Road Development and A New International Commercial Arbitration Initiative in Asia” anticipated the creation of a new Asian ICA legal order revolving around the BRI – with China helping lead harmonisation. Her view was that harmonisation of the public policy exception to arbitral enforcement was crucial for increasing investor confidence and commercial certainty in the region.
Professor Shahla Ali (the University of Hong Kong) reported on ‘ICA and ISDS Developments in Hong Kong in the Context of the Belt and Road Initiative’. Currently, it is expected that the initiative will contribute to the growth of the dispute resolution service in Hong Kong because the increase of outward investment from China may lead to a rise in the number of Chinese and Hong Kong investors involved in legal disputes in BRI countries. However, she pointed out that the situation was not that straightforward. She first introduced recent movements of dispute resolution services in the context of BRI. For example, in January 2018, the Supreme People’s Court in Beijing announced the establishment of the China International Commercial Court (CICC) whose purpose is to solve broadly-defined international commercial disputes related to the BRI. In April 2018, HKIAC announced ‘the Belt and Road Programme’ with the aim of taking full advantage of opportunities arising from the BRI. One may find similar efforts in CIETAC Hong Kong and ICC Hong Kong. Professor Ali commented that Hong Kong dispute resolution institutions would work alongside the Chinese arbitration institutions and recommended that Hong Kong ISDS services should also focus on investor-state mediation.
Justice Anselmo Reyes (Singapore International Commercial Court: SICC) shared his insights on how the SICC could play a role in ISDS. He first introduced typical features that distinguish litigation in (proliferating) international commercial courts from that in ordinary courts: language; simplified procedural rules; use of foreign judges; possibility of representation by foreign lawyers; way in which direct jurisdiction is established; reasonable costs; possibility of appeal; and binding (or at least persuasive) jurisprudence. Justice Reyes discussed to what extent some or all of those features would be conducive to ISDS. He also considered the primary concern of potential SICC users, in other words, recognisability and enforceability of ICC judgements elsewhere, taking into account the 1971 and 2005 Hague Conventions on Recognition and Enforcement of Foreign Judgments, and the Diplomatic Council meeting of the Hague Conference in June 2019. Justice Reyes concluded his presentation by expressing concerns including excessive competition: too many courts and ISDS centres may be chasing too few ISDS cases.
Chiann Bao (arbitrator and former secretary-general of the Hong Kong International Arbitration Centre) provided a wider perspective on the continued expansion of investment treaty signings (and related ISDS proceedings) involving Australia and Asian states. Interesting developments included the 2018 Singapore-Sri Lanka BIT adding the option for investors of invoking the new investment arbitration rules if the Singapore International Arbitration Centre, and the frequent references to the possibility of mediation or amicable settlement (albeit without requiring mediation before filing for arbitration, except in the recently-signed Australia-Indonesia FTA if the host state first requests mediation with the investor. Olga Boltenko (Fangda Partners) illustrated some of the complexities of deciding whether to set up projects and pursue dispute resolution under individually negotiated investment contracts rather than or in addition to investment treaties. Dr Dean Lewis (Pinsent Mason) compared the new regimes in Hong Kong and Singapore regulating third-party funding for arbitration. This was deregulated in Australia in 2006 through a High Court judgment, but does not seem to have generated many extra Australia-seated ICA cases.
Overall, the symposium at the University of Hong Kong succinctly presented a comprehensive overview of the latest regional trends in international business dispute resolution, including significant opportunities (such as niche marketing especially perhaps by traditionally less popular venues) and challenges (attracting new types of cases to new types of processes, including international commercial courts or mediation). A follow-up symposium will take place at the University of Sydney Law School on Friday 15 November (before Australia Arbitration Week in Brisbane).