The Asian Infrastructure Investment Bank’s (AIIB) second Legal Conference and Law Lecture, held recently at the bank’s headquarters in Beijing, attracted more than 80 top-level counsel from the region and around the world. The theme of this year’s conference was one essential to large-scale infrastructure projects: International Organizations and the Promotion of Effective Dispute Resolution. The two-day conference explored a number of issues associated with dispute resolution at an international level, many of which were discussed within five panel sessions covering various themes. Here, the speakers from one panel, which explored Dispute Resolution and Procedural Innovation, have shared summaries of their speeches for the benefit of our readers.
GONZALO FLORES explores international investment law and modernizing the rules and regulations of the International Centre for the Settlement of Investment Disputes
THE INTERNATIONAL Centre for the Settlement of Investment Disputes (ICSID) is the world’s largest and most experienced international organization dedicated to investment dispute resolution. Established in 1965 by a multilateral treaty, the ICSID Convention, it now has 154 member states and eight further signatory States. The United Mexican States became ICSID’s latest full member on 26 August 2018.
In October 2016, ICSID launched a fourth process for the modernization of its rules and regulations. This is the first amendment effort since 2006, and the most comprehensive to date, seeking to update current rules for arbitration, conciliation and fact-finding, and introducing new mediation rules.
On 3 August, 2018, ICSID issued a working paper which proposed changes to its rules and regulations. States and the general public have been invited to comment by 28 December on the paper’s proposals.
Ultimately, a package of amendments will go to the ICSID member states, in 2019 or 2020. Amendments to the ICSID rules require the approval of two-thirds of its members, and amendment of the additional facility requires majority approval.
Main objectives of amendments
First, ICSID seeks to give states and investors a range of modern dispute settlement options to resolve their disputes, so in addition to amending the existing rules, the proposed amendments include a new set of investment mediation rules under the additional facility.
Second, there is a continued modernization of ICSID procedures. The Secretariat’s experience in the administration of cases and discussions on ISDS reform have suggested ways to further improve the investor-state dispute resolution process.
Third is a simplification of the rules, which have been fully redrafted in plain, modern, gender-neutral language. They have also been reorganized in a user-friendly manner, with each topic in one place and in a sequential format. A few inconsistencies found with the English, French and Spanish-language versions of the rules have been resolved, so that the rules read the same in all three languages.
Fourth, and likely the main objective, is reducing time and cost. Cost is a prominent concern, which is directly affected by the length of proceedings. Timelines have been specified for numerous procedures, and in many cases, reduced.
Finally, reducing the paper burden of proceedings will further reduce time and cost, and respect environmental concerns. As a rule, all filing will be done electronically unless otherwise agreed.
Scope of amendments
This is the most comprehensive set of amendments to the ICSID rules and regulations so far attempted by the centre. It extends to: arbitration and conciliation proceedings under the ICSID Convention; arbitration, conciliation and fact-finding proceedings under the ICSID additional facility rules; administrative and financial regulations applicable to each set of rules; and a new set of mediation rules.
Amendments to the ICSID Convention are not considered in this process. Amendment of the Convention requires approval by all member states. While ICSID is not proposing amendments to the Convention now, it is a possibility within the centre’s overall vision.
Transparency is one of the most important and difficult areas considered in the modernization of investor-state dispute settlement. For ICSID, the most important aspect of increasing transparency is ensuring that decisions, orders and awards are public, thus enhancing consistency and coherence in the process. Proposals in this regard are made for each set of rules.
A new rule on provisional measures sets the criteria for such measures (i.e. urgency and necessity) and gives examples of measures that the tribunal may recommend, taking into account all the circumstances. It also requires parties to advise when the circumstances upon which a provisional measure was granted have changed.
A new standalone rule is also proposed, allowing a tribunal to order security for costs. The tribunal must consider the relevant party’s ability to comply with an adverse decision on costs and any other relevant circumstances. If a party fails to comply with such an order, the tribunal may suspend the proceeding for up to 90 days, and thereafter, may discontinue the proceeding after consulting with the parties. Parties must advise the tribunal of any change in the circumstances upon which security for costs was ordered.
A new rule codifies suspension generally, allowing it on the agreement of the parties, request of a single party, or on the initiative of the tribunal, with or without conditions.
A new, optional, expedited arbitration is also introduced. The parties must select this procedure within 20 days of registration and, if they do, must select a tribunal within 30 days of registration.
Further to this limited overview of amendments, a comprehensive document has been posted by ICSID on its website explaining the potential amendments and the reasoning behind each proposal.
Gonzalo Flores is a deputy secretary-general at the International Centre for Settlement of Investment Disputes
MALIK DAHLAN examines dispute resolution and the institutional development of the Asian Infrastructure Investment Bank with respect to the normative legal implications of the Belt and Road Initiative
CHINA’S BELT and Road Initiative (BRI) has the potential to redefine international trade governance and the laws that establish its order. The official basis of the BRI is the “The vision and actions on jointly building the silk road economic belt and the 21st century maritime silk road”, according to a Belt and Road document, which is “a statement of policy, a strategic orientation or a form of proclamation paper”, as commented on by noted Chinese legal academic Lingliang Zeng.
As a result, new international legal norms are emerging that are characteristically “Eastern”. Four fundamental concepts can be observed in the Belt and Road document, namely harmony, co-operation, free trade and development. With this new emerging international trade and investment architecture, inevitable disputes will emerge in its interpretation and indeed its implementation.
However, current dispute resolution mechanisms, including investor-state dispute settlement (ISDS), may not be efficient in resolving disputes between the BRI’s participating states, or its investors. In order to overcome this practical challenge, it is necessary to examine some important legal aspects of the BRI and offer a new concept of “dispute regulation”.
Let me firstly introduce the BRI and its relationship to the Asian Infrastructure Investment Bank (AIIB), and explore that relationship. “Even though the AIIB was not established specifically for the BRI, the AIIB will always be ready to provide [financial] support, since projects proposed by the BRI correspond with the AIIB’s investment strategy,” notes Liqun Jin, president of the AIIB. After this must be tackled selective legal aspects, norms and questions that surround the BRI. The central argument: mediation is the essential alternative dispute resolution mechanism for the new Eastern BRI paradigm.
This is supported by the special nature of the BRI, and the unique characteristics of countries participating in it. From an international perspective, mediation has played an increasingly important role in ISDS in recent years. For example, the International Mediation Institute is now establishing criteria for international settlement training so as to create a credible panel of international settlement mediators.
Within China, the second conference of the central “All-round and deep reform leading team” has deliberated on and approved the Opinions on Establishing the ‘B&R Initiative’ Dispute Resolution Mechanism and Institute. In response to the opinions, the Supreme People’s Court (SPC) enacted the Provisions of the Supreme People’s Court on Several Issues Concerning the Establishment of International Commercial Courts on 25 June 2018.
In order to set up a “one-stop shop” international commercial dispute resolution mechanism effectively connecting mediation, arbitration and litigation, the Supreme People’s Court established the International Commercial Expert Commission, and selected qualified international commercial mediation institutions, international commercial arbitration institutions and international commercial courts.
Compared with mechanisms such as the World Trade Organization and the North American Free Trade Agreement, which provide different resolution methods, a unified approach is not only much easier to manage, but would also reduce litigation costs and facilitate implementation. Furthermore, a very light appeals mechanism would be more effective for protecting the rights and interests of relevant parties.
In looking at the BRI, the establishment of a permanent dispute resolution “registry” is recommended to regulate disputes. For international credibility and independence, it could take the shape of a centre affiliated with the AIIB – just as the International Centre for the Settlement of Investment Disputes (ICSID) is under the World Bank – because the AIIB is an international organization with international standards.
However, the centre could also resolve disputes between states, in addition to states and investors. In other words, the centre would be mandated to deal with international commercial, investment and trade disputes. I also presented the feedback of working staff from the ICSID, the Centre for Effective Dispute Resolution (CEDR) and the Energy Charter Treaty (ECT) on this proposal. Relevant questions include: Under what specific circumstances would relevant parties choose conciliation/mediation?; what are the elements that determine relevant parties’ choices among various dispute resolution institutes?; what characteristics will relevant parties pay attention to when choosing the arbitrator/conciliator?; what specific measures will relevant dispute resolution institutions consider taking to make themselves more attractive?
As for recognition and enforcement of mediation agreements, during the process of accepting a new member to the centre, relevant parties could be required to acknowledge that any final decision, award or judgment regulated under the centre would be recognized as the final decision made by their local judicial platform. Nevertheless, the contracting party could hold reservations with regard to this provision when joining the centre.
Malik Dahlan is a professor of international law and public policy at Queen Mary University of London
MATTHEW GEARING QC traces the evolution of HKIAC from 1985, when it was established as a regional arbitration centre, to its present status as one of the world’s major international dispute resolution organizations
“IF REGIONAL arbitration has a home, it is in Asia. More specifically, in Hong Kong. The HKIAC’s success inspired many others … regional arbitration pretty much began with HKIAC. No regional arbitral institution has been running for so long, or with such success.” – GAR Guide to Regional Arbitration 2018.
The Hong Kong International Arbitration Centre (HKIAC) was founded in 1985 as a non-profit organization – a company limited by guarantee under Hong Kong law. It provides dispute resolution services including arbitration, mediation, adjudication, domain name dispute resolution and hearing facilities.
In October 1994, the government granted HKIAC a lease on favourable terms for premises comprising half of 38/F, Two Exchange Square. In 2012, it expanded to occupy the entire 38/F.
In May 2013, HKIAC opened its first overseas office in Seoul, and in November 2015, it opened its second overseas office in Shanghai – the first offshore arbitral institution to open an office in Mainland China.
The centre has handled more than 9,500 cases in the past 33 years, with a growing number of high-value cases referred for arbitration. The total amount in dispute increased from US$2.5 billion in 2016 to US$5 billion in 2017 (a 100% increase). The average amount in dispute in 2017 was US$30.6 million.
The main types of disputes continue to be corporate & finance, construction, maritime and international trade. PRC parties remain top foreign users (34.7% of new arbitrations filed in 2017 involved a PRC party), and the centre continues to handle the largest number of arbitration cases involving PRC parties among arbitral institutions outside of Mainland China. In 2017, HKIAC registered 103 arbitrations involving a PRC party (a 77.6% increase from 58 in 2016).
HKIAC started to provide administrative support for investment treaty cases when two such cases were registered in 2018. The centre has also handled numerous cases involving state-owned enterprises.
The centre actively participates in legislative reforms in and outside of HK. It has provided constructive submissions on proposed amendments to the Hong Kong Arbitration Ordinance in recent years, and facilitates arbitration reforms in Mainland China primarily through the Shanghai office. The opening of the Shanghai office in 2015 was considered as a milestone event, and many considered that as a positive step in opening the Chinese arbitration market to offshore arbitral institutions.
HKIAC maintains regular dialogue with the 4th Civil Division of the Chinese Supreme People’s Court (SPC), and participates in discussion to improve the judicial practice of enforcing foreign awards and interim measures in Mainland China.
On a wider scale the centre works closely with various arbitral institutions, professional bodies and governments to run capacity-building initiatives in numerous jurisdictions, and to provide training on international dispute resolution to local legal and business communities in jurisdictions including: Mainland China, Mongolia, Indonesia, Vietnam, Myanmar, India, the Philippines, South Korea, Taiwan, Japan, Macau and Russia.
HKIAC clauses have also been used in an international organization’s employment contracts. The organization is a trust fund of a multilateral development bank, and in 2017, it began discussions to explore the use of HKIAC arbitration and mediation for disputes between a person and the organization under an employment agreement. The organization eventually decided to include a HKIAC arbitration clause in its template letter of appointment.
Hong Kong has long been the premier gateway for Chinese outbound investment and an ideal platform that connects China and the rest of the world. With its core advantages in financial and professional services, the territory plays a critical role in supporting the Belt and Road Initiative (BRI), and is establishing itself as the dispute resolution hub for BRI projects, receiving recognition and support from China’s central government and judiciary, as well as international organizations.
He Rong, the former vice president of the SPC, recently said: “In view of contributing to the One Belt One Road initiative, Hong Kong’s geographic location, world class services and excellent talent in professional services give the city a competitive edge. The Chinese Supreme Court is committed to supporting Hong Kong as the international dispute resolution centre for the One Belt One Road initiative, and as the driving force of China’s reform and opening-up policies.”
HKIAC has significant experience in handling disputes involving parties from BRI countries. One-third of arbitrations submitted to the centre in 2017 were between a PRC party and a party from a BRI jurisdiction.
In April 2018, HKIAC launched a dedicated Belt & Road programme which includes a Belt & Road advisory committee, a Belt & Road resource centre and an outreach programme. The advisory committee has 12 members with expertise across a range of BRI industry sectors including finance, infrastructure, construction and maritime. The online resource centre contains a BRI knowledge database and a list of past and upcoming BRI events, while the outreach programme organizes HKIAC events in Mainland China and other BRI jurisdictions.
Matthew Gearing QC is chair of the HKIAC and also a partner and global co-head of the international arbitration group at the Hong Kong office of Allen & Overy
TAO JINGZHOU explores new developments of resolving disputes in China, and how the nation has started to reshape its legal environment for international dispute resolution
CHINA’S UNIQUE and complex political and economic environment renders it somewhat difficult to predict the destiny of international dispute resolution institutions such as ICC and others that are eager to enter into China’s dispute resolution market. However, positive signals are being communicated.
For the past three years, China’s Supreme People’s Court (SPC) has been a catalyst for improving the judicial environment of dispute resolution in China. For example, a series of judicial interpretations were issued by the Supreme Court in answering the state’s call for judicial support to its Belt and Road Initiative (BRI).
Several innovative measures are also issued with respect to China’s free trade zones in order to allow the conduct of ad hoc arbitrations in free trade zones (FTZs), and to redefine the concept of “foreign-related arbitration”.
These developments are all quite encouraging, and demonstrate the government’s determination to turn China into a regional, if not international, arbitration hub. However, arbitration is a very competitive market, and judicial excellence is a requirement in order to persuade the arbitration users to select a centre for their future disputes. Paris, London, Singapore and others are all well prepared to maintain their attraction for arbitration, and China is still way behind these competitors.
China has also set up multiple arbitration centres in the context of BRI. The Wuhan Arbitration Commission was the first to set up the China One Belt One Road Arbitration Centre. Beijing Arbitration Commission (BAC) used the transnational arbitration centre buildings to house such a facility.
Together with Shanghai International Arbitration Commission and Shenzhen International Arbitration Commission, they have jointly established the China-Africa Joint Arbitration Centre (CAJAC) with Kenyan and South African arbitration institutions. BAC has also set up a Belt and Road Arbitration Initiative together with Kuala Lumpur and Cairo arbitration institutions.
Other than commercial arbitration, both CIETAC and Shenzhen Court of International Arbitration (SCIA) have attempted to improve their arbitration rules in order to take on future investment arbitrations. The promulgation of CIETAC investment arbitration rules in September 2017 and the establishment of the CIETAC Mediation Centre in May 2018 should be considered among the major efforts and moves adopted by CIETAC in order to retain its leading role and competitive edge in China.
China established the China International Commercial Court (CICC), in June 2018. The judgments and rulings made by the CICC are final and binding on the parties and have legal effect, instead of traditional two-stage court model procedures.
The court can accept documents in English, without a Chinese translation, and documents obtained overseas will not need to be notarized or certified by Chinese consulates.
The CICC has set up the International Commercial Expert Committee, which comprises 32 Chinese and foreign experts invited by the Supreme Court. The members may mediate cases entrusted by the CICC to resolve international commercial disputes for parties, provide advisory opinions on specific legal issues in international commercial dispute cases for the courts, and give advice and suggestions on relevant judicial interpretations and judicial policies formulated by the Supreme Court.
Compared with other international commercial courts, such as Dubai International Commercial Court and Singapore International Commercial Court, CICC has yet to decide whether it would be appropriate to have foreign judges to hear its cases, whether foreign lawyers can appear before the CICC, and whether the hearing can be conducted in English-only, in order to make CICC a more attractive option for foreign companies.
Tao Jingzhou is a member of the advisory committee of China International Economic and Trade Arbitration Commission, and managing partner, Asia, of Dechert