Arbitration in the Asia-Pacific Region

The latest developments in enforcement and venue selection.

October 03, 2013

The 2013 Asia-Pacific Regional Arbitration Group (APRAG) Conference brought together a group of respected experts to discuss the region’s future in arbitration. Among the panelists at the conference was Latham & Watkins partner Ing Loong Yang who spoke about Hong Kong on the “Enforcement of Arbitral Awards in the Region” panel. In this Q&A interview Yang shares key takeaways from the panel, as well as other regional trends in arbitration he sees in his day-to-day practice.

What is the New York Convention? Are all countries that are signatories equally arbitration-friendly?

Yang: The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention in short) is an international convention that close to 150 countries have signed. Essentially these 150 countries have agreed to enforce arbitral awards made in the other member states that are signatories to the Convention. New York Convention arbitral awards are enforced through the local courts, so each member state will pass legislation to give effect to the Convention.

If, for example, you are the successful claimant in an international arbitration in Singapore (which is a Convention country) and you seek to enforce it against the respondent’s assets in Mainland China (which is another convention country), China should give effect to the arbitral award and recognize and enforce the award as if it were a Chinese domestic arbitral award. That's how the system of arbitration works. However, not every country applies the Convention in the same way, so some countries may be slightly more restrictive in their interpretation of the Convention, while others are more liberal. In other words, there are certain jurisdictions that are more arbitration-friendly than others, in that the Courts of those jurisdictions actively support international arbitration and readily enforce arbitral awards made in other Convention countries. Hong Kong and Singapore are two of the most arbitration-friendly jurisdictions in this region.

There was some concern recently that Hong Kong had become less arbitration-friendly. Where did this concern come from and is it well founded?

Yang: Hong Kong is a very pro-arbitration jurisdiction. In general, its courts will recognize and enforce all international arbitration awards. However, recently there were two cases where the awards from other jurisdictions were not enforced in the first instance (although these decisions were reversed on appeal). These cases are exceptions, rather than the rule. The arbitral awards in these cases were not enforced because of peculiar circumstances in the underlying arbitrations themselves which, in the opinion of the first instance court, made it unsafe for the court to enforce them. The New York Convention provides (in Article V) that, exceptionally, an international arbitration award need not be recognized and enforced in certain specifically defined circumstances. One example would be if the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was unable to present its case. If a party was not given a fair hearing, the resulting award would not be recognized because of the failure to meet procedural standards.

However, in both of these two recent cases in Hong Kong, the decision at first instance not to enforce the awards was reversed on appeal. The appellate court’s readiness to reverse the decisions of the first instance court, and to recognize and enforce the awards, in fact lends strong support to the view that Hong Kong remains very much a pro-arbitration jurisdiction.

The People’s Republic of China (PRC) is generally considered to be less pro-arbitration than Hong Kong. Is this expected to change?

Yang: This was an important takeaway point from the session at the APRAG conference. The PRC has always been perceived as a country that is not particularly supportive of or friendly to the enforcement of foreign arbitration awards. But, in recent years there seems to have been a marked improvement in the record of enforcement, although the evidence is more anecdotal than statistical. The Chinese Supreme Court judge who spoke on the panel (and who sits in the PRC court division handling the enforcement of arbitral awards) gave a presentation highlighting the cases where enforcement was granted. The message from the judge was that China is committed to enforcing arbitral awards.

What prevents Japan from becoming a popular arbitration venue?

Yang: Japan is certainly very supportive of arbitration, but the number of cases that come to Japan for enforcement are few and far between, according to the speaker from Japan. Japan is not as popular an arbitral venue as it could be, partly because of the language issue — in Japan arbitrations tend to be conducted in Japanese, so a lot of international investors prefer not to arbitrate in Japan. There is also a cultural issue; Japanese companies are, by their nature, not particularly active users of arbitration because they tend to try to avoid confrontation.

With so many choices of arbitration venue in the region, are you seeing any new trends emerging?

Yang: One trend I have seen in the course of my work is of more Chinese companies agreeing to arbitrate outside Mainland China. Traditionally, Chinese companies have tended to be very conservative and have required their arbitrations to be conducted on Chinese soil. In the past, when contracting with a foreign party, the Chinese party would routinely insist that the arbitration provision provide for arbitration in Mainland China at the Chinese International Economic and Trade Arbitration Commission (CIETAC) or one of the local arbitration commissions.

These days, because Chinese companies are more often involved in outbound investments and transactions, they are better exposed to international rules and foreign law. Now, many Chinese companies are willing to arbitrate outside Mainland China.

Hong Kong’s legal system is different from that of Mainland China and, for arbitration purposes, it is also considered separate. Chinese companies’ preference for an overseas arbitration currently remains the Hong Kong International Arbitration Centre (HKIAC) in Hong Kong because it is closer to home. If Hong Kong is not acceptable to the other side for some reason, Chinese parties may agree to Singapore as a compromise venue. For Chinese parties Singapore is an attractive option because it is in the same time zone and it is becoming increasingly well-known to Chinese parties as an arbitration venue  through the marketing efforts of the Singapore International Arbitration Centre (SIAC).

Are you seeing any other trends in terms of the growth of arbitration in the region?

Yang: Further trends include the rise in prominence of other arbitration centers in Asia, including Seoul, South Korea and Kuala Lumpur, Malaysia. Korean lawyers are quite familiar with international arbitrations and have strong English language capabilities. South Korea is starting to pitch the Korean Commercial Arbitration Board hard as an arbitration venue.

Malaysia is marketing the Kuala Lumpur Regional Center for Arbitration as a venue that offers good quality legal services at lower rates, and they are also refurbishing a dedicated building for arbitral hearings. However, Malaysian legislation is still somewhat restrictive in allowing international lawyers to practice arbitration on Malaysian soil and that may deter users of international arbitration, since one of the attractions of international arbitration is that parties can engage lawyers from any jurisdiction of their choice to represent them.

 

 
 
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