Arbitration in Asia: the present and future

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Arbitration has gained a greater level of acceptance and greater enforceability across the Asian countries than ever before. It is very much a result of the trend that countries in Asia are increasingly involved in international business and playing more important roles in various economic sectors. The universally accepted standards, or international standards, usually help to improve the efficiency of the business. Increasing cross-border business inevitably results in an increase in the demand for dispute resolution to meet international standards.

International arbitral tribunals are apparently better venues for such international standards to be applied than the local courts because of the lack of international exposure of the latter. The New York Convention is also an important factor. The more international transactions, the more disputes to arise, and the more demands for the enforcement of arbitral awards. In light of the visible shift of the economies from the West to Asia, Asian countries acknowledge the importance of enforcement of decisions over the disputes that they are involved in, and recognize the advantage of international arbitration in this regard.

arbitration-in-asia-the-present-and-futureThanks to the economic achievements made by countries in Asia in recent years, the need for international arbitration has grown dramatically. In this region, markets that traditionally favour arbitration have contributed to a steady growth in cases, and in addition to that, China, India, Indonesia, Singapore, Australia and some other economies, especially the developing ones, have also become the key users of ICC arbitration in the region.

It can be expected that China will use ICC arbitration even more frequently in the near future, because its One Belt, One Road (OBOR) initiative is bringing more business opportunities for China and the countries along the OBOR routes, which will inevitably see more arbitration. The PRC Supreme People’s Court (SPC) has also become friendlier towards arbitration, which will encourage Chinese parties to choose arbitration to resolve disputes in their transactions.

Emerging markets in Asia are also growing more in favour of arbitration because they are increasingly involving themselves in international business and playing more important roles in a variety of economic sectors. For instance, India recently amended its Arbitration Act to bring it on a par with other developed national legislation. Additionally, Singapore emerged as the fourth-most often used seat for ICC arbitration in the world, while retaining its position as the top seat for ICC arbitration in Asia for a fifth consecutive year. ICC arbitration disputes arising out of Australia also saw a steady increase in numbers.

Another important factor that contributes to the growth of arbitration in Asian markets is the international investment made to improve infrastructure, which has created a lot of demand for dispute resolution that meets international standards.

HIGH-PROFILE CASES

The Longlide case ruling by the SPC has been very much discussed in the past couple of years. It confirmed that an ICC arbitration agreement with a seat in mainland China is valid, which demonstrated the friendly attitude of the SPC towards international arbitration. The Singapore High Court, in JVL v Agritrade International, set aside an arbitral award on the grounds that the arbitral tribunal – in deciding the case on the basis of an issue that the defendant had not advanced – had failed to grant the claimant a fair hearing. This ruling is a testament to the endorsement of the basic principles of natural justice by a sophisticated arbitration jurisdiction such as Singapore.

The famous satellite arbitration, Devas v Antrix, saw two rounds of arbitration followed by Indian court litigation. Antrix, a commercial arm of the Indian Space Research Organization, first lost before an ICC tribunal on the ground that its repudiation of the contract with Devas was unlawful. In the investor-state arbitration, Devas lost before a tribunal of the United Nations Commission on International Trade Law (UNCITRAL). This case provides a holistic view of the possibilities in a high-stakes arbitration, where the parties have resorted to commercial arbitration, bilateral investment treaty arbitration, local litigation, and now criminal proceedings have been initiated against the erstwhile management of Antrix.

SUSTAINABLE DEVELOPMENT

For Asian parties involved in conducting arbitration proceedings, it is important to learn the international standards, not only in the field of business but also in legal practice. Due to the lack of international exposure and legal traditions of arbitration, some Asian countries may have legal practitioners with limited training in international arbitration to meet international standards, which in individual cases will probably lead to unsatisfactory outcomes of the arbitration advocacy. Asia needs a pool of arbitrators and its lawyers, a better legal education, a drive to attend arbitration training and courses, and a committed interest in the field of arbitration. This will be important for a sustainable development of international arbitration in the region.

Fan Mingchao is the North Asia director of ICC Arbitration and ADR; Abhinav Bhushan is the South Asia director of ICC Arbitration and ADR