Adr jan 2014 text combine by Claris Tam

Asian Dispute Review

Since 1999

January 2014

January 2014 pp. 1 - 56

Sponsored by

Hong Kong International Arbitration Centre

Chartered Institute of Arbitrators (East Asia Branch)

Hong Kong Institute of Arbitrators

Hong Kong Mediation Council

Contents

The Publishing Team General Editors

January 2014

Consulting Editor

Arbitration & ADR in Asia 4 Romesh Weeramantry

John Choong

Professor Julian DM Lew QC

Robert Morgan

Editorial Board Peter Caldwell (Editorial Board Chairman) (Hong Kong International Arbitration Centre) Chiann Bao (Hong Kong International Arbitration Centre) Paul Barrett (Chartered Institute of Arbitrators, East Asia Branch) YK Chan John Choong Khong Cheng Yee William Leung (Chartered Institute of Arbitrators, East Asia Branch) Julian Stargardt (Hong Kong Mediation Council) Mary Thomson Christopher To Paul Varty Samuel Wong (Hong Kong Institute of Arbitrators) Asian Dispute Review is sponsored by: Hong Kong International Arbitration Centre Chartered Institute of Arbitrators, East Asia Branch Hong Kong Institute of Arbitrators Hong Kong Mediation Council

Albert Monichino SC & Alex Fawke 15

Advertising Contact Abid Shaikh Tel: (852) 5190 6061 abid@ninehillsmedia.com

Will Emergency Arbitration Find a Place under PRC Law? Lei Shi

Obtaining Security in Malaysia for Maritime Claims in Arbitration Ahalya Mahendra in-house counsel focus

Challenges to Arbitrators for Bias: How Concerned Should We Be? Nerys Jefford QC nuts & bolts lecture

Factual and Expert Evidence in Arbitration John Cock mediation

The Impact of a Mediator’s Conduct on Disputing Parties Dr Lim Lan Yuan

LexisNexis Editor Bruce Andrews Design Helen Ng

Enforcement of Foreign Arbitral Awards, Issue Estoppel and Comity: Developments in Australia

Publisher

LexisNexis (A division of Reed Elsevier (Greater China) Ltd) 3901, 39/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong Tel: (852) 2965 1400 Fax: (852) 2976 0804 www.lexisnexis.com.hk

Increasing Influence of Asia in International Arbitration

case notes 40

Defining the Scope of an Arbitral Tribunal’s Authority and Setting Aside of Awards in Cases Involving a State Party Suraj Sajnani

Treatment of Arbitration Provisions in Illegal PRC Contracts Margaret Tsau

Co-Publisher

book review essay Hong Kong International Arbitration Centre 38/F, Two Exchange Square, 8 Connaught Place Central, Hong Kong Tel: (852) 2525 2381 Fax: (852) 2524 2171 Website: www.hkiac.org Circulation: 7500 copies www.asiandr.com All enquiries relating to Asian Dispute Review should be directed to Bruce Andrews (adr-editor@ninehillsmedia.com) Copyright in all material published in the Asian Dispute Review is retained by the Hong Kong International Arbitration Centre (HKIAC) on behalf of the sponsoring organizations. No part of this journal may be reproduced or transmitted in any form or by any means, including recording and photocopying without the written permission of HKIAC, application for which should be addressed to HKIAC. Written permission must also be obtained before any part of this publication is stored in a retrieval system of any nature. The journal does not accept liability for any views, opinions, or advice given in the journal. Further, the contents of the journal do not necessarily reflect the views or opinions of the publisher, the editors, or HKIAC or the other sponsoring organizations and no liability is accepted in relation thereto.

Mediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal Systems Mediation Ordinance: Commentary and Annotations

News

Events

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editorial We have great pleasure in introducing readers to this January 2014 issue of the Asian Dispute Review. It is the third issue of the Review in which the new-look format has been adopted. In the past two issues, we have made various adjustments to the Review's design, article layout and paper quality. The publishers have been very helpful in implementing these refinements and in taking on board suggestions from readers and the Editorial Board. We now have a standard format which will be carried through to future issues of the Review. Nonetheless, we remain open to further suggestions and comments on the look and feel of the Review, so please do keep these coming. In this issue, we commence with the Keynote Address of Professor Julian Lew QC, delivered at the Inaugural ICC-HK / HK 45 event held in 2012. The Address has already created a good deal of interest and was cited, for example, by Rimsky Yuen SC, Hong Kong's Secretary for Justice, in a Keynote Address in 2013. Also included in this issue is an article by Albert Monichino SC and Alex Fawke on the recent Gujarat case in Australia, involving attempts to resist enforcement of an award, on the same grounds as were unsuccessfully used when challenging the award at the seat of the arbitration; an article by Lei Shi on potential problems that may occur in enforcing emergency arbitrator decisions in the PRC; an article by Ahalya Mahendra on obtaining security in the Malaysian courts (such as in the arrest of vessels), for satisfying maritime arbitration awards; and an article by Dr Lim Lan Yuan, on the importance of mediator conduct. Our In-House Counsel Focus section is written by Nerys Jefford QC, who provides a practical insight into the ever increasing challenges to arbitrators on the ground of bias. The Nuts & Bolts Lecture for this issue is by John Cock and features an informative analysis of factual and expert evidence in arbitration. The case notes are on a case in Malaysia arising out of the Thai-Lao Lignite Co arbitration against Laos, contributed by Suraj Sajnani, and an English case that dealt with enforcing an arbitration agreement in a contract that was illegal in the PRC, written by Margaret Tsau. Finally, Robert Morgan has written a Book Review Essay on two new publications on mediation in Asia. We hope you enjoy the contributions in this issue, and we take this opportunity to wish you all the very best for 2014.

General Editors

contributors John Cock EC Harris Hong Kong

Ahalya Mahendra Chartered Arbitrator Malaysia

Alex Fawke Linklaters LLP Dubai

Albert Monichino SC Barrister, Arbitrator and Mediator Melbourne, Australia

Nerys Jefford QC Keating Chambers London

Robert Morgan Barrister (England & Wales, Queensland) Consulting Editor, Asian DR, Hong Kong

Lei Shi Clifford Chance Hong Kong

Suraj Sajnani Hong Kong

Professor Julian DM Lew QC Barrister and Arbitrator London

Margaret Tsau Chambers of Andrew Liao SC Hong Kong

Dr Lim Lan Yuan Senior Master Mediator Singapore

Arbitration & ADR in asia

Increasing Influence of Asia in International Arbitration Professor Julian DM Lew QC

This article discusses the factors that have led since the 1990s to the increasing profile of Asia in international commercial arbitration and offers prognoses for future development. It is an edited version of the authorâ&#x20AC;&#x2122;s Inaugural ICC-HK/HK45 Keynote Address delivered at the Royal Hong Kong Yacht Club on 15 October 2012, during Hong Kong Arbitration Week 2012. Introduction

drivers of its structure. Arbitration is based on party autonomy.

I would like to explore and share with you some thoughts about

Over time, arbitration has provided real value. Hence its ever

the changing world of international arbitration and how the

increasing acceptance in all corners of the world.

activities of business, and economic and industrial development, have and will continue to influence and bring about changes

The real strengths of international arbitration have been its

to the way in which and where international arbitration is

existence within the confines of national legal systems, and

conducted around the world. This, I suggest, may increasingly

yet at the same time its free regulation through non-national

be the case in Asia.

instruments and international conventions. It has managed to remain relatively free from the control, strictures and prejudices

Asia is a big place â&#x20AC;&#x201C; with different languages, political, cultural

of national laws. Developments and changes come because

and economic systems and different stages of economic

they are made by parties, arbitration institutions and arbitrators,

development. That is, however, also true of Europe and

and national laws follow because they must.

elsewhere, and yet the arbitration world has grown with and perhaps despite those differences.

The changes that have occurred over the past few years may inform both the short and long term approaches to how the

This subject is important because, unlike national legal systems

business world will see and use arbitration in Asia, how the law

and procedures, international arbitration is autonomous and

has and will continue to develop, and what lawyers will need

grows organically rather than being developed and controlled

to do to serve their clients best and help develop international

by legal and political bodies. Commercial realities are the real

arbitration practice.

Arbitration & ADR in asia … [I]nternational arbitration … has managed to remain relatively free from the control, strictures and prejudices of national laws. Developments and changes come because they are made by parties, arbitration institutions and arbitrators, and national laws follow because they must.

and economic characters and made new and different friends. Thirdly, the emergence of successful political and economic groups, including in particular the BRIC countries. Realignment of economic power In the past two decades, the balance of economic power has moved from the so-called developed world to the emerging economies. The Economist has reported that GDP in the ‘Rich’ countries is still below its 2007 level, whereas emerging economies have grown by over 20% in that period. The combined output of

Key points

emerging economies has doubled since 1990, which means

I will deal briefly with four key points:

a commensurate reduction in the output of the developed countries. Commodity consumption is where the emerging

(1) The changed political backdrop.

countries lead the world. They consume 60% of the world’s

(2) The realignment of economic power.

energy, 65% of all copper and 75% of all steel, and in 2011 were

(3) The development of international arbitration in Asia.

expected to account for 50% of capital spending. Emerging

(4) Challenges to international arbitration in Asia.

economies are responsible for only 19% of world debt. That is a telling figure at a time when the economies of Europe and the

I start with two historical facts:

USA are reeling from the pressures caused by excessive debt.

(1) International arbitration has been led by European and

Asia is the world’s fastest growing economic region. The

Western countries.

economy of Asia comprises more than 60% of the world’s

(2) International arbitration has been Eurocentric in terms

population, living in 46 different States. China is the largest

of the principal arbitration institutions and the five major

economy in Asia and the second largest in the world. Other

arbitration seats.

large economies in Asia, in terms of both nominal and gross domestic product, are Japan, India, South Korea and Indonesia.

Economic and political power over many generations has resided with Western and former colonial powers, which controlled large

The effect of this, put simply, is that economic power, ie the

swathes of the world, politically and economically. In recent years,

need to do business, has moved to the emerging economies

however, there has been a shift of economic power from the so-

and Asia in particular. Manufacturing has become too expensive

called rich world to the emerging world, ie from the West to the

and is outsourced primarily to Asia, where costs are lower. Sales

South and East.

opportunities are greater in Asia, with green field markets for goods and services.

The changed political backdrop I suggest three factors have driven the changes. Firstly, the

This translates to a negotiating power for Asian businesses:

unravelling of the colonial system. Secondly, the former colonial

they have options for doing business with partners who offer

countries have reduced their dependence on the former colonial

the best terms, including the applicable of law and the form and

powers. They have developed their own independent political

venue of international arbitration.

[2014] Asian Dispute Review

Arbitration & ADR in asia Development of international arbitration in Asia

The watershed for the development of arbitration law in Asia came with the enactment of the UNCITRAL Model Law in 1985. … In fact, Asia has the highest concentration of Model Lawbased arbitration laws. This may, in future, result in Asian countries being reluctant to submit to arbitration in countries that have not enacted the Model Law.

Asia’s past contribution to international arbitration has been small. The Asian region was largely a bystander to the development of international arbitration and had little influence and perhaps little interest. In the process of adopting international treaties, there was insufficient participation from Asian developing countries. The watershed for the development of arbitration law in Asia came with the adoption of the UNCITRAL Model Law in 1985. This was at the time many Asian countries recognised that international commerce was essential to their economic development and stability, and that there was no reason always to resolve disputes in Western fora. Unlike major arbitration fora in the West, many Asian jurisdictions have based their arbitration legislation on

when necessary through the courts of Model Law countries. This

the UNCITRAL Model Law. In fact, Asia has the highest

will result in conformity in legal application and understanding

concentration of Model Law-based arbitration laws. This may,

among its adopters. It may also leave the traditional arbitration

in future, result in Asian countries being reluctant to submit to

countries and venues on the side.

arbitration in countries that have not enacted the Model Law. This will present a different relationship between business

Asian venues have long been part of international arbitration,

partners in Model Law countries in Africa, Europe and Latin

but the growth in recent times has been significant. In particular,

America and those in Asia.

we see the cementing of Hong Kong and Singapore as powerful commercial and financial centres and attractive and acceptable

This should place the countries that have adopted the Model

arbitration seats. Other fast-growing arbitration institutions

Law in the vanguard of the development of “a free-standing

and centres include CIETAC, Japan, Korea, Australia and Kuala

global substantive arbitration law”, to adopt the words of Chief

Lumpur.

Justice Menon of Singapore in his Keynote Address to the ICCA Congress in Singapore in 2012.1 This will be effected through

Statistics show continued growth for arbitration in Asian

reliance on the Model Law and the development of its principles

centres:

International Arbitrations at Institutions: 1997 – 2012 YEAR

HKIAC

AAA

CIETAC

ICC

JCAA

KCAB

KLRCA

LCIA

SIAC

1997

218

320

723

452

2000

298

510

543

541

2010

291

888

1325

793

N/A

237

140

2011

275

899

1435

795

N/A

224

188

2012

293

891

1060

759

N/A

277

235

Arbitration & ADR in asia Other statistics from the ICC are equally interesting:

(1) Since 2002, Hong Kong has hosted the Asian component of the Willem C Vis Moot competition, which had

•

Between 2000 and 2010, the percentage of Asian parties involved in ICC arbitrations doubled from 10% to 20%.

•

The number of Asian-based arbitrators increased from 6 in 1992 to 87 in 2010.

•

previously been organised only in Vienna. (2) In 2006, the AAA/ICDR and SIAC formed a joint venture in Singapore. (3) In 2007, the Permanent Court of Arbitration signed an

Asian places of arbitration increased from 8 in 1992 (there

agreement with the Singapore Government to set up its

were 40 Asian parties), to 46 in 2000 (out of 149 Asian

first Asian facility in Singapore.

parties), to 50 in 2010 (out of 255 Asian parties).

(4) In 2008, the ICC International Court of Arbitration opened an office of its Secretariat in Hong Kong. This was the first

What is not recorded in these figures is the number of arbitrations

ICC case administration team located outside of the main

under the UNCITRAL rules and at LCIA India. This is probably

headquarters in Paris.

the reason why the number of arbitrations in Asian arbitration institutions has not grown even faster. Of course, all statistics should be looked at with care and some scepticism, as it is often suggested that one can present statistics to prove anything. In this case, I believe there are hard facts to support the increased acceptance of Asian fora as desirable arbitration seats. Other developments recognising the importance and power of Asia and the move of arbitration influences to Asia include the following.

(5) In April 2009, LCIA launched its first independent subsidiary in India. (6) 2010 saw the establishment of Maxwell Chambers in Singapore. (7) The ICCA Congress was held in Singapore in 2012 (it has been held twice in India and also in Beijing).

The question is whether … [prospective new Asian venues] have, and can persuade others that they have, a supportive arbitration regime, the infrastructure, a strong legal profession, and the necessary support facilities such as arbitration venues, translators, transcription services, and no need for (or at least no delays in) obtaining visas to attend hearings. Even more important, is there a supportive, efficient and accessible court system that will uphold the arbitration agreement, enforce awards and not seek to second-guess the chosen tribunal? [2014] Asian Dispute Review

Arbitration & ADR in asia inefficient, cumbersome, erratic, unpredictable and expensive, both generally and in respect of international arbitration. Some have been consistently hostile to international arbitration. Increasingly with the adoption of the Model Law, and recognising that arbitration generates significant financial and reputational benefits in its own right, national courts in some countries have recognised the special character of international arbitration and sought to uphold it. For example, in May 2012, the Hong Kong Court of Appeal unanimously held that there had been no “serious” or even (8) In May 2013, the Seoul International Dispute Resolution Centre (IDRC) was established.

“egregious”procedural violations by a tribunal that had ordered a sequential exchange of submissions in place of a previously ordered simultaneous exchange. The Court emphasised that

Moreover several institutions have recently refined their

Hong Kong courts would not readily interfere with the decisions

arbitration rules to reflect the requirements and expectations of

of arbitral tribunals.2

users. This includes in particular the 2012 CIETAC Rules, and the 2013 Rules of both HKIAC and SIAC. These refinements

Indian courts have always been very heavily criticised for brazen

are introducing new cutting edge arbitral procedures such as

interference in international arbitration practice, even where

emergency arbitrator appointments.

arbitrations have been held in a venue outside India. They could not resist interfering where Indian law or an Indian party were

Challenges for international arbitration in Asia

involved. This was changed by the decision of the Supreme

There is a need, I suggest, for at least one additional neutral

Court of India in Bharat Aluminium Co Ltd v Kaiser Aluminium

seat for international arbitration in Asia in addition to Hong

Technical Service Inc.3 The Supreme Court held that Indian courts

Kong and Singapore and, of course, China. India, Japan, Korea,

did not have supervisory authority over and the right to annul

Malaysia and Indonesia are all candidates. There is a vacuum to

foreign arbitrations, and affirmed that the law of the seat of

be filled.

arbitration governs the conduct of the arbitration in accordance with the principles of the Model Law.

The question is whether these countries have, and can persuade others that they have, a supportive arbitration regime, the

This decision will not have resolved many of the arbitration-

infrastructure, a strong legal profession, and the necessary

unfriendly approaches of the Indian courts, but it was in clear

support facilities such as arbitration venues, translators,

language that the Supreme Court held that the separate and in

transcription services, and no need for (or at least no delays

part autonomous nature of arbitration must be respected.

in) obtaining visas to attend hearings. Even more important, is there a supportive, efficient and accessible court system that will

The Supreme Court of Singapore in AJU v AJT4 also made

uphold the arbitration agreement, enforce awards and not seek

clear the very limited bases on which a court can reopen the

to second guess the chosen tribunal?

decision of an arbitral tribunal, even on an issue of public policy. This ‘minimal review’ of awards approach by Singapore courts

We all know of jurisdictions whose courts by reputation are slow,

recognises the autonomy of the arbitration process and that

Arbitration & ADR in asia the courts should only review the award in specific and limited

Conclusion

circumstances.

These are both challenging and changing times for international arbitration in Asia. The growing economy is driving the growth

Finally, a recent Pakistani case, whilst not really arbitration-

of international arbitration in this part of the world. Asia will

friendly, does show a recognition by the Pakistan Supreme Court

continue to become an attractive venue for arbitration so long as

of the nature and role of international arbitration. Pakistan has

the influence of government and national courts in arbitration

long taken its own approach to arbitration – ordering arbitrators

is limited but at the same time helps to ensure a level and fair

outside Pakistan to stop proceedings and restraining parties

playing field. In short, in my view there are exciting opportunities

from proceeding with or participating in an arbitration outside

ahead for international arbitration in Asia. adr

Pakistan. In this latest case, generally known as Reko Diq,5 the Supreme Court, instead of ordering the party that initiated the

arbitration to restrain from prosecuting it, ordered that party to request the ICC not to take further steps and appoint the tribunal so that the Supreme Court could review and finally dispose of the matter. Nothing has really changed, but some commentators suggest there may be a softening of approach on the part of the Supreme Court of Pakistan towards international arbitration. One swallow may not mean summer – but if not here, it’s coming, hopefully swiftly. There are other factors which, I suggest, show the enormous

Editorial note: See The Hon Chief Justice Sundaresh Menon, International Arbitration: The Coming of a New Age for Asia (and Elsewhere) at para 17 – http://www.arbitration-icca.org/media/0/13398435632250/ags_ opening_speech_icca_congress_2012.pdf. Reprinted in A.J. vanden Berg (ed.) International Arbitration: The Coming of a New Age (2013, Wolters Kluwer) at pp 6-27.

2 See Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRD 1. (Since this lecture was delivered, this decision was upheld by the Hong Kong Court of Final Appeal: see Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2013] HKEC 248 (21 February 2013), unreported.) 3

(2012) 9 SCC 649.

[2011] SGCA 41 (22 August 2011), unreported.

Editorial note: See Supreme Court seeks time from ICC to settle Reko Diq case, The Express Tribune (Pakistan), 7 February 2012 – http:// tribune.com.pk/story/332965/supreme-court-seeks-time-from-iccto-settle-reko-diq-case; Umer Akhram Chaudry, Pakistani Court Interference in Arbitration Proceedings – Yet Again!, Kluwer Law International – http://kluwer.practicesource.com/blog/2012/pakistanicourt-interference-in-arbitration-proceedings-yet-again and hyperlink to the Court’s order at http://www.supremecourt.gov.pk/web/user_files/ File/C.P.796of2007.pdf.

increase in expectations for international arbitration in Asia. Many leading so-called international law firms, from Europe and the US, have expanded and are continuing to place arbitration specialists in their Asian offices. Asian ‘home grown’ firms have begun providing expert advice for international arbitration proceedings in the region. Asian practitioners have become active in international arbitration proceedings, more often as Counsel. Still, there are many fewer Asian arbitrators compared to the pool of Western arbitrators. An ever increasing number of Asian students are studying abroad. In the School of International Arbitration’s main LLM course on International Commercial Arbitration at Queen Mary, University of London, more than one-third of students are from Asian countries. International arbitration is now taught all over the world, including in many Asian universities.

[2014] Asian Dispute Review

Arbitration & ADR in asia

Enforcement of Foreign Arbitral Awards, Issue Estoppel and Comity: Developments in Australia Albert Monichino SC & Alex Fawke

This article discusses, by reference to recent Australian case law, the vexed question of whether a party who fails to set aside an arbitral award at the seat of the arbitration should be permitted to rerun its failed arguments in resisting enforcement overseas, and questions whether the court of the seat has a special status in international commercial arbitration. Introduction

jurisdictions. The latest case to consider it, Gujurat NRE Coke

Speed, finality and ease of enforceability are said to be among

Ltd v Coeclerici Asia (Pte) Ltd1 indicates that, at least in Australia,

the great advantages of arbitration. So long, that is, as one

the answer is only in “exceptional” cases.

wins. Once a party loses, however, these features become much less attractive. And so, time and again, the award debtor

The facts of Gujurat

cannot help but seek a second (and sometimes third) bite of

An award was made by an arbitral tribunal in London in

the arbitral apple.

favour of a Singaporean company against an Indian company and its managing director. The award debtor unsuccessfully

One manifestation of this phenomenon is where an award

sought to have the award set aside in England on the basis

debtor who unsuccessfully challenges the award before a

that it was not given a reasonable opportunity to present its

court at the seat of the arbitration proceeds undeterred to

case.2 Application was then made to enforce the award in

resist enforcement in another jurisdiction on similar grounds.

the Federal Court of Australia under s 8 of the International

This gives rise to the question: when, if ever, should a party

Arbitration Act 1974 (Cth) (the ‘IAA’), which gives effect to art

be able to rerun an unsuccessful challenge made at the seat?

V of the New York Convention. The award debtor held shares

This question has been answered in various ways across

in Australian companies. The award creditor sought orders,

Arbitration & ADR in asia in aid of enforcement, appointing receivers over the shares in

seat of the arbitration. Under the [New York] Convention

question in order to avoid their dissipation.

and the IAA, any application to set aside the Award must be made in that Court. Even if there were no issue estoppel

The parties’ submissions

or res judicata, it would generally be inappropriate for this

The award debtor resisted enforcement of the award on two

Court, being the enforcement court of a Convention country,

bases. First, it submitted that it was not permitted a reasonable

to reach a different conclusion on the same question as that

opportunity by the arbitral tribunal to put its case in the

reached by the court of the seat of the arbitration. It would be

arbitration proceedings (s 8(5)(c) of the IAA). Secondly, and in

a rare case where such an outcome would be considered

the alternative, it submitted that the said failure by the tribunal

appropriate.”8 (Emphases added)

meant that there was a breach of the rules of natural justice in connection with the making of the award and consequently it

Consequently, His Honour enforced the award and appointed

would be contrary to the public policy of Australia to enforce

receivers over the shares in question.

the award (ss 8(7)(b) and 8(7A)(b) of the IAA). The decision on appeal The decision at first instance

The Full Court of the Federal Court (comprising Allsop CJ,

Foster J found on a brief review of the facts that the award

Besanko and Middleton JJ) affirmed Foster J’s decision.9 It

debtor had been given a reasonable opportunity to present

found it unnecessary to determine whether an issue estoppel

its case. In doing so, he noted that the lex arbitri (the English

applied, observing that the question whether issue estoppel

Arbitration Act 1996) and procedural rules chosen by the

applies in an application to enforce an international arbitral

parties (the LMAA Terms (2012 Edn) of the London Maritime

award is “one of importance and difficulty [and] is not resolved

Arbitrators Association) required speed, efficiency and a

in a clear way by any authority binding on this court” [at 64].

minimum of formality in the arbitral procedure.3

It also said that:

Separately, Foster J noted that an application had been

“ … [A]t the very least, the primary judge was correct

made by the award debtor at the seat of the arbitration to set

to hold that it will generally be inappropriate for … the

aside the award on the basis that it was infected by “serious

enforcement court of a Convention country to reach a

irregularity”.4 In doing so, the award debtor relied upon the

different conclusion on the same question of asserted

same facts and matters relied on to resist enforcement of

procedural defects as that reached by the court of the seat

the award in Australia.5 In the circumstances, His Honour

of arbitration.” [at 65]. (Emphasis added)

held that an issue estoppel precluded the award debtor from raising the same arguments to resist enforcement of

The Court endorsed and applied the following observations

the award.6 That is, the award debtor was precluded from

by Colman J in Minmetals Germany GmbH v Ferco Steel Ltd10 as

advancing the same arguments to resist enforcement as it had

to the weight to be given to the views of the court at the seat:

raised (unsuccessfully) before the English court. In reaching this conclusion, His Honour did not rely on any authority in

“ … [O]utside … exceptional cases [for example, where

support of the proposition that issue estoppel applied in the

the powers of the supervisory court are unduly limited,

enforcement of foreign arbitral awards.7

or where the supervising court is corrupt] any suggestion that under the guise of allegations of substantial injustice,

Foster J proceeded to say: “The English High Court of Justice is the court of the

procedural defects in the conduct of an arbitration which have already been considered by the supervisory

[2014] Asian Dispute Review

Arbitration & ADR in asia court should be reinvestigated by the English courts on an enforcement application, is to be most strongly deprecated” (Emphasis added) Comment The Full Court declined to decide whether the legal doctrine of issue estoppel operates in the context of enforcing a foreign arbitral award, but nevertheless held that (as a matter of legal policy) principles of international comity should generally lead an enforcement court to follow decisions of the court of the

same argument advanced by the award debtor as a ground for

seat on the same issue – certainly where the issue concerns

setting aside the award. For example, in Gao Haiyan v Keeneye

fairness of the arbitral process.

Holdings Ltd,12 the Hong Kong Court of First Instance refused

… [W]here an award debtor … unsuccessfully challenges the award before a court at the seat of the arbitration [and] proceeds undeterred to resist enforcement in another jurisdiction on similar grounds … [, t]his gives rise to the question: when, if ever, should a party be able to rerun an unsuccessful challenge made at the seat?

to enforce an award from Mainland China on public policy grounds, even though the Xi’an Intermediate People’s Court had refused to annul the award when presented with similar arguments. However, the Hong Kong First Instance decision was reversed on appeal.13 At the abstract level, the Gujurat case gives rise to the same debate as to whether the court at the seat has any special role in international commercial arbitration. In other words, is the enforcement court bound to follow the decision of the court at the seat or is it free to come to its own conclusions? There is something to be said for each view. On the one hand, it should be recognised that the parties chose (directly or indirectly) the seat of arbitration. They therefore consented to the authority of a particular judicial system to supervise

The relationship between the enforcement court and the court

their arbitration, including to invalidate the award. That choice

at the seat of the arbitration has been debated for many years

should be respected.14 Further, the principle of comity is both

in international arbitration jurisprudence. Most notably the

long standing and valuable. Other things being equal, courts

question has arisen in circumstances when the enforcement

in the international arena should endeavour to respect each

court is called upon to enforce an award that has been set aside

other’s decisions.15 Moreover, this view promotes certainty and

(ie annulled) by the court at the seat of the arbitration. There

finality. That is, if parties know that a decision of the court at

are numerous conflicting cases and commentaries on this

the seat will essentially bind enforcement courts, the award

point.11 The question in the Gujurat case was slightly different

debtor is less likely to resist enforcement in other jurisdictions

(ie whether the enforcement court is compelled to follow the

on the same grounds.

earlier decision of the court of the seat). In this regard, there have been cases in which an enforcement court has refused to

Conversely, some court decisions are so manifestly wrong or

enforce an award even if the court at the seat has rejected the

unjust that it is undesirable for other courts to defer to them.

Arbitration & ADR in asia The most extreme example of this situation is a court decision tainted by corruption.16 Understandably, an enforcement court may not wish to support and give effect to such decisions and, similarly, one can sympathise with an award debtor in that situation who seeks to resist enforcement of the award on the same basis as proved unsuccessful before the court of the seat. Moreover, the English-language version of the New York Convention says that an enforcement court “may” refuse enforcement of an award set aside at the seat,17 suggesting (according to some courts and commentators) that enforcement courts have such discretion. The debate is particularly interesting because it feeds into

… [T]he Gujurat case gives rise to the same debate as to whether the court at the seat has any special role in international commercial arbitration. In other words, is the enforcement court bound to follow the decision of the court at the seat or is it free to come to its own conclusions?

the larger contest over the juridical nature of an arbitral

something of a balance between the competing views on

award.

three

whether an enforcement court is bound to follow the court of

alternative models to explain the theoretical underpinnings of

the seat. That is, the enforcement court should ordinarily follow

international commercial arbitration, each ascribing different

decisions of the court at the seat, but this is not absolute. The

emphasis to the importance of the seat:18

Full Court endorsed an English authority21 which held that

Professor

Gaillard

famously

articulated

“exceptional circumstances” (such as corruption) are required (1) the first model emphasises the importance of the seat (chosen by the parties);

before an enforcement court should depart from a decision of the court at the seat. This allows for the award debtor to have

(2) the second model holds that international commercial

some recourse against particularly outrageous decisions of

arbitration is rooted in multiple national legal orders,

courts of the seat, but should deter opportunistic attempts by

including the seat, but also all other systems in which the

award debtors to rerun a failed challenge.

award may be recognised or enforced; and (3) the third model postulates that international commercial

Subsequent to the Gujurat case, the Chief Justice of the Federal

arbitration is a distinct transnational legal order,

Court of Australia (who presided over the appeal in the Gujurat

independent of any national legal order, wherein the

case) made the following extra-curial remarks:

arbitrator’s authority is derived from the consent of the parties.

“Perhaps what should be developed is a broad and flexible approach by enforcing courts…[t]his will involve

As can be seen, it is only under the first model that the court of

a fresh look at comity and the need for courts to be willing,

the seat is uniquely significant. On this view, the award exists

on proper evidence with the necessary degree of cogency,

only because of, and is thus tied to, the national legal order at

to examine the reliability and quality of justice in other

the seat of the arbitration.20 The other models would allow for

jurisdictions.”22 (Emphasis added)

deviation by the enforcement courts from the decision of the court at the seat.

With respect, this suggestion23, entailing the spectre of adducing evidence before an enforcement court as to the reliability and

While the Full Court in Gujurat was not inclined, or required,

quality of justice before the courts at the seat, may go too far.

to enter into this theoretical debate, it did seek to strike

While one suspects that enforcement courts subconsciously

[2014] Asian Dispute Review

Arbitration & ADR in asia consider such matters, the idea that there should be an overt forensic examination of the quality of justice before the court of the seat, and that the enforcement court should rule upon it, is a slippery slope. Certainly, such a review should not be

4 Under ss 68(2)(a) and (c) of the English Arbitration Act 1996. 5

Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (note 3 above) at [89].

Ibid, at [102]. Indeed. His Honour opined that "the matter is probably also res judicata."

His Honour simply relied on authority for the proposition that issue estoppel is capable of application when the issue has been determined in a prior judgment of a foreign court: see Armacel Pty Ltd v Smurfit Stone Container Corp (2008) 248 ALR 573 at [56] – [82] per Jacobson J (Federal Court of Australia).

Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (note 3 above) at [103].

undertaken unless there is a specific allegation of corruption or the like. A separate, and difficult, question is the complexion of the evidence that might be adduced in respect of the reliability and quality of justice in a particular jurisdiction. In the authors’ view, as a matter of comity, enforcement courts should be extremely loath to embark upon a general review of the quality of justice in the courts of the seat. A further question is whether the enforcement court should follow decisions of earlier enforcement courts, where the award is sought to be enforced in more than one place.24 This question does not give rise to the same theoretical debate concerning the supposed primacy of the court of the seat in international commercial arbitration. It does, however, give

9 Note 1 above. 10

[2011] 3 HKC 157.

Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627. See also Dallah Real Estate & Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2010] 3 WLR 1472 (UK Supreme Court).

rise to similar questions of international comity.

14 FA Mann, ‘Lex Facit Arbitrum’, in P Sanders (Ed), International Arbitration, Liber Amicorum for Martin Domke (1967, Leiden: Martinus Nijhoff), pp 157-162.

Conclusion It

remains

controversial

international

arbitration

jurisprudence whether the court at the seat has any special

Alan Redfern et al, Redfern and Hunter on International Arbitration (5th Edn, 2009, Oxford University Press), p 649 [11.86].

In the Yukos cases (note 11 above), for example, the suggestion was that the Russian State had essentially ordered the Russian court to annul the award (made in Russia), as part of its campaign against Yukos and its private owner.

Article V(1) of the New York Convention.

role to play, such that the enforcement court is bound to follow decisions of that court on disputed questions agitated before both courts. The decision in Gujurat, while not resolving this conundrum, provides a sensible position from a policy perspective. There will always be stubborn award debtors

18 See Emmanuel Gaillard, Legal Theory of International Arbitration (2010, Leiden: Martinus Nijhoff). 19

who refuse to acknowledge a lost cause. This decision should, however, mean that the wise ones will know when it is time to be satisfied with just one bite of the arbitral apple. It is to be hoped that future enforcement courts will follow the Gujurat decision and insist on truly exceptional circumstances before departing from decisions of courts of the seat on the same issues. adr

[2013] FCAFC 109, 30 September 2013, unreported.

Gujurat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] EWHC 1987 (Comm), 10 July 2013, unreported.

Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882 at [92], 30 August 2013, unreported.

[1999] 1 All ER (Comm) 315 at 331.

11 See, for example, Société Hilmarton Ltd v Société Omnium de traitement et de valorisation (OTV) (French Cour de cassation, 23 March 1994, Case No 92-15.137); Société PT Putrabali Adyamulia v Société Rena Holding (French Cour de cassation, 29 June 2007, Case No 05-18.053 and Case No 06-13.293); Yukos Capital SARL v OAO Rosneft (Court of Appeal of Amsterdam, 28 April 2009, Case No 200.005.269/01); Yukos Capital SARL v OJSC Rosneft Oil Coy [2012] EWCA Civ 855; Karaha Bodas Company LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F 3d 274. For the views of leading commentators, see AJ van den Berg, Enforcement of Awards Annulled in Russia (2010) 27(2) J Int’l Arb 179 and Emmanuel Gaillard, Enforcement of Arbitral of Awards Set Aside in the Country of Origin (1999) 14 ICSID Review 16.

Under this view, French courts have justified enforcing international arbitral awards notwithstanding that they have been set aside by the court of the seat. See Christopher Koch, The Enforcement of Awards Annulled in their Place of Origin: the French and US Experience (2009) 26(2) J Int’l Arb 267.

20 See van den Berg (note 11 above). 21

Minmetals Germany GmbH v Ferco Steel Ltd (note 10 above) at 331, per Colman J.

22 The Hon James Allsop, The Authority of the Arbitrator, 2013 Clayton Utz Sydney University International Arbitration Lecture, Sydney, 29 October 2013 – http://www.claytonutz.com.au/ialecture/2013/ speech_2013.html. 23

Which appears to be inspired by Yukos Capital SARL v OJSC Rosneft Oil Co (note 11 above) at [125].

24 This was addressed by the English Court of Appeal in Yukos Capital SARL v OJSC Rosneft Oil Co (note 11 above), as a Dutch court had already refused enforcement (ibid). The Court of Appeal held that there was no issue estoppel, as the question of whether Dutch public policy had been violated was a separate question to whether there had been a violation of English public policy.

Arbitration & ADR in asia

Will Emergency Arbitration Find a Place under PRC Law? Lei Shi

This article discusses whether (1) emergency arbitration (EA) decisions are enforceable in Mainland China, and (2) EA will affect the enforceability of final awards in Mainland China.1 Introduction

EA procedures treat decisions under them as interim or

An interesting yet common feature of recent amendments

conservatory measures.7

to major international arbitration rules is the adoption of emergency arbitration (EA) procedures. Among others, the

One view is that interim measures are not ‘awards’ under

Hong Kong International Arbitration Centre (HKIAC)2, the

the Convention on the Recognition and Enforcement of

International Chamber of Commerce (ICC)3, the Singapore

Foreign Arbitral Awards 1958 (the New York Convention).8

International Arbitration Centre (SIAC)4 and the Stockholm

Contracting States are therefore under no treaty obligation to

Chamber of Commerce (SCC)5 have all incorporated EA

enforce interim measures.9 Rather, it is left to them to decide

procedures in their latest rules.

how to deal with interim measures under their municipal laws.

For many of these institutions, PRC-related disputes have

Mainland China's position is that it will not enforce interim

significantly increased over the past few years.6 Many arbitral

measures granted by a foreign tribunal. This is reflected in

awards are and will be enforced in Mainland China. It is

Mainland China’s comments on UNCITRAL’s draft legislative

therefore opportune to consider how EA procedures will be

provisions on interim measures10:

treated under the PRC legal framework. “The terms ‘interim measures’ and ‘preliminary orders’ are Are emergency arbitration decisions enforceable in

similar in meaning to ‘preservative measures’ known in

Mainland China?

China’s legal system, which include preservative measures

Almost all major arbitration rules that have adopted

towards property and preservative measures with regard to

[2014] Asian Dispute Review

Arbitration & ADR in asia evidence … The Chinese law has not accorded the arbitral

seek interim measures either directly from the court (before

tribunal the power to order preservative measures, nor

arbitration is commenced) or by submitting the application

the power to order interim measures or issue preliminary

to the court via the relevant arbitration institution (following

orders. In this connection, therefore, the present draft is in

commencement of the arbitration). The amended Civil

conflict with the relevant provisions of the Chinese civil

Procedure Law neither authorises arbitral institutions or

procedure law and the arbitration law. There is no legal

tribunals to grant interim measures,13 nor requires courts to

basis for courts in China to recognize and enforce interim

enforce interlocutory awards or orders made by them.

measures and preliminary orders from foreign arbitral tribunals.”11

Secondly, whilst the law is not entirely clear, it is doubtful that PRC courts would grant interim measures in support of

The “provisions of the Chinese civil procedure law and

offshore arbitration. The Supreme People’s Court of the PRC

arbitration law” referred to above are art 256 of the then PRC

has expressed this view in an extrajudicial commentary on the

Civil Procedure Law (now art 272 following the amendments

amended Civil Procedure Law.14

of 2012) and arts 28, 46 and 68 of the PRC Arbitration Law. Under these provisions, PRC courts retain an exclusive power

Thirdly, the expansion of the courts’ powers to grant interim

to grant so-called “preservative measures” in Mainland China.

measures may further narrow arbitral tribunals’ corresponding

Whilst an arbitral institution may receive applications for

powers. Previously, it might have been argued that PRC

preservative measures, it must submit them to a competent

courts only monopolise powers to grant asset and evidence

court for determination.

preservation measures in all cases and injunctions in intellectual property cases, so that arbitral tribunals could grant other types of interim measures. (This argument is, however,

Contracting States [to the New York Convention] are … under no treaty obligation to enforce interim measures. Rather, it is left to them to decide how to deal with interim measures under their municipal laws. Whilst the 2012 amendments to the PRC Civil Procedure Law enhance the availability of interim measures in support of arbitration,12 these improvements do not apply to the enforceability or availability of interim measures in support of offshore arbitration. Firstly, the amendments do not change the exclusivity of the PRC courts’ powers to grant interim measures. Parties must

controversial and a tribunal-ordered interim measure, even if granted, cannot be enforced if a party does not voluntarily comply with it.) By contrast, under the Civil Procedure Law as amended, PRC courts appear to retain exclusive powers to grant all types of interim measures in all types of cases.

Arbitration & ADR in asia Will the use of emergency arbitration affect the enforceability of final awards in Mainland China? This raises the question of whether and to what extent the use of EA may affect the enforceability of final awards in Mainland China. The most relevant ground for considering refusal of enforcement of an award in this context is public policy.15 PRC courts have been cautious in relying on this ground to refuse recognition and enforcement of foreign arbitral awards

court proceedings and should compensate the Claimants

generally. Nonetheless, the only case in which PRC courts

for damages caused by the asset preservation measure. The

have relied on this ground is one that related to interim

arbitral tribunal held that Yongning had breached the JV

measures.

contract and caused the failure of the JV company by initiating

Whilst the 2012 amendments to the PRC Civil Procedure Law enhance the availability of interim measures in support of arbitration, these improvements do not apply to the enforceability or availability of interim measures in support of offshore arbitration.

the court action and obtaining the measure. The Claimants were awarded damages. The Claimants then sought to enforce the arbitral award in Jinan. Both the Jinan Intermediate People’s Court and the Shandong Higher People’s Court were inclined not to recognise and enforce the award, so the case was referred upwards to the Supreme People’s Court under the PRC pre-reporting mechanism. In support of the views of the lower courts, the Supreme People’s Court commented, most pertinently, that: “the ICC tribunal violated the judicial sovereignty of China and the jurisdiction of Chinese courts by arbitrating the disputes between Yongning and Jinan-Hemofarm concerning the lease contract, as a Chinese court had

In Hemofarm DD, MAG International Trade Holding DD & Suram

already made several civil orders concerning the disputes

Media Ltd v Jinan Yongning Pharmaceutical Co Ltd, the parties

between Yongning and Jinan-Hemofarm and had made

entered into a joint venture contract which was governed

a civil ruling on the interim measures concerning Jinan-

by PRC law and subject to ICC arbitration. A dispute arose

Hemofarm’s property.”17

between the joint venture (JV) company and Yongning, the Chinese JV partner. Yongning sought an asset preservation

The fact pattern of the Hemofarm case appears to be unique

measure from the Jinan local court and was granted that interim

and distinguishable from ordinary cases involving EA

measure despite a jurisdictional challenge by the JV based on

decisions. In that case, the arbitral tribunal in effect directly

the arbitration clause in the JV contract. Foreign JV partners

challenged the interim measures already granted by the PRC

Hemofarm, MAG and Suram (‘Claimants’) commenced

courts. This seems to be more serious than a case in which

arbitration proceedings against Yongning, claiming (inter alia)

an arbitral tribunal grants an interim measure that arguably

that Yongning had breached the JV contract by initiating the

can only be granted by PRC courts, but before any court has

[2014] Asian Dispute Review

Arbitration & ADR in asia dealt with the same issue. Furthermore, the challenge to the Jinan courtâ&#x20AC;&#x2122;s asset preservation measures in the Hemofarm case was reflected in the final award that the Claimants sought to enforce. By contrast, where an interim measure is granted by an emergency arbitrator, even if the EA decision is deemed to have interfered with the exclusive powers of the PRC courts to grant such measures, this will not necessarily render the arbitral tribunalâ&#x20AC;&#x2122;s final award unenforceable. The author has found no records of other cases indicating refusal by PRC courts to recognise and enforce a foreign arbitral award simply on the ground that the arbitral tribunal granted interim measures (though equally, nor has the author found

The risks of non-enforcement may, however, be enhanced if

any clear records of PRC courts having agreed to recognise

some special circumstances exist. For example, by comparison

and enforce an award of a foreign arbitral tribunal granting

with a general interim measure, one that specifically targets

interim measures that are within their exclusive powers18).

assets and evidence in Mainland China is exposed to higher

Similarly, it appears unlikely that a PRC court would refuse to

risks of being deemed to have interfered with the PRC courtsâ&#x20AC;&#x2122;

recognise and enforce a foreign arbitral award simply because

exclusive powers and violated the public policy of Mainland

the emergency arbitrator in that case grants a decision in the

China.

nature of an interim measure. Risks will be even more significant if a party first seeks an interim measure before a PRC court but is refused (for reasons

In [the Hemofarm] case, the arbitral tribunal in effect directly challenged the interim measures already granted by the PRC courts. This seems to be more serious than a case in which an arbitral tribunal grants an interim measure that arguably can only be granted by PRC courts, but before any PRC court has dealt with the same issue.

other than lack of jurisdiction due to the arbitration clause, or the lack of a legal ground for granting interim measures in support of a foreign arbitration), and then that party or an affiliate seeks and is granted a similar interim measure by an emergency arbitrator. Such a scenario may arise where, for example, a joint venture company controlled by a foreign shareholder sues the Chinese shareholder under a contract that is subject to the jurisdiction of a PRC court, seeks interim measures from the PRC court, but fails for substantive reasons. The foreign shareholder then sues the Chinese shareholder under the joint venture contract, which is subject to a foreign arbitration clause, seeks a similar interim measure and succeeds. This hypothetical fact pattern is opposite to that in the Hemofarm case, yet is more common in practice and thus should attract more attention. Finally, risks may extend to the final award if there is a link between the emergency decision and the final award: for

Arbitration & ADR in asia it deems necessary or proper in accordance with the applicable law, and may require the requesting party to provide appropriate security in connection with the measure. The order of an interim measure by the arbitral tribunal may take the form of a procedural order or an interlocutory order.” This power can, however, only be exercised when it is “necessary and proper in accordance with the applicable law.” In fact, this provision was introduced mainly for CIETAC arbitrations with seats in foreign jurisdictions whose laws may allow tribunals to grant interim measures: see interview with Mr Yu Jianlong, Secretary General of CIETAC, at http://finance.chinanews.com/cj/2012/0405/3796028.shtml (last visited on 1 October 2013)).

instance, where the final award directly incorporates parts of the EA decision or grants reliefs in respect of a party’s failure to comply with the EA decision. Conclusion Innovative EA procedures bring both opportunities and challenges to PRC-related disputes. Whereas parties now

Understanding and Application of the Amended Provisions of the Civil Procedure Law of the People’s Republic of China (《<中华人民共和国民事诉讼法>修改条文理解与适用》), edited by the Supreme People’s Court’s Civil Procedure Law Amendment Research Group (最高人民法院民事诉讼法修改研究小组), People’s Court Press (2012), pp 577-578.

Art V.2(b) of the New York Convention and art 7.3 of the MainlandHong Kong Mutual Arrangement.

have a strong weapon with which to deal with urgent circumstances, however, it remains uncertain, in the light of the above discussion, how the PRC legislature, judiciary and parties will react to this new trend. adr

1 This article does not purport to be comprehensive or constitute legal or other advice. 2

HKIAC Administered Arbitration Rules (2013 Edn), art 23 and Schedule 4.

ICC Rules of Arbitration (2012 Edn), art 29 and Appendix V.

4 SIAC Rules (2013 Edn), art 26 and Schedule 1. 5 SCC Rules (2010 Edn), Appendix II. 6

For example, the highest number of filings with the SIAC in 2012 was generated by Mainland China parties (http://www.siac.org.sg/images/ stories/documents/siac_annual_report_2012_new.pdf (last visited on 1 October 2013)). The HKIAC is also well known for handling many cases involving Mainland China parties.

HKIAC Administered Arbitration Rules (note 2 above), Schedule 4, art 16; ICC Rules (note 3 above), art 29; SIAC Rules (note 4 above), art 26.2; SCC Rules (note 5 above), Appendix II, arts 1(2) and 8.

Editorial note: See, for example, Resort Condominiums International Ltd v Bolwell [1995] 1 Qd R 405 (Supreme Court, Queensland) (since superseded by the adoption of the interim measures provisions of the 2006 version of the UNCITRAL Model Law in Australian international and domestic arbitration law).

16 Note 17 below. 17 Supreme People’s Court’s Reply to the Shandong Higher People’s Court’s Request for Instruction regarding the Non-recognition and Nonenforcement of the Arbitral Award Rendered by International Chamber of Commerce (最高人民法院关于不予承认和执行国际商会仲裁院仲裁裁决的请示的复函), 2 June 2008, [2008] Min Si Ta Zi No 11 ([2008] 民四他字第11号). The English translation is taken from http://www. newyorkconvention1958.org/index.php?lvl=notice_display&id=836 (last visited on 1 October 2013): see p 1. 18 The author cannot exclude this possibility because PRC court records that are available to the public are not complete. Whilst most of the enforcement cases that have been referred upwards to the Supreme People’s Court under the pre-reporting mechanism are publicised, some (if not many) of the cases in which lower courts agreed to enforce awards and consequently did not report to the Supreme People’s Court are not available in public domain. Furthermore, most court rulings do not contain detailed descriptions of the procedures in the arbitration proceedings, so it is difficult to ascertain whether and what kind of interim measures may have been granted by arbitral tribunals.

9 See discussions in UNCITRAL, International Commercial Arbitration: Possible future work in the area of international commercial arbitration, Note by the Secretariat (A/CN.9/460), para 121 - http://daccessdds-ny.un.org/doc/UNDOC/GEN/V99/827/50/IMG/V9982750. pdf?OpenElement (last visited on 1 October 2013). 10

Draft declaration regarding the interpretation of article II (2) and VII (1) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (A/CN.9/609/Add.1, 4 May 2006).

11 Whilst these comments are made in the context of the New York Convention, Mainland China is likely to adopt the same approach with respect to the Arrangement concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region 1999. (‘Mainland-Hong Kong Mutual Arrangement’), which in essence mirrors the New York Convention. 12

The two most significant changes are as follows: (1) parties are now allowed to seek interim measures in support of prospective arbitration in a similar way to that of pre-litigation measures (arts 81 and 101); and (2) besides the existing asset and evidence preservation measures, the amended Civil Procedure Law has also introduced new types of interim measure with similar effect to mandatory and prohibitory injunctive relief (arts 100, 101 and 104).

13 Some practitioners consider that the China International Economic and Trade Arbitration Commission (CIETAC) Arbitration Rules (2012 Edn) allow tribunals to grant interim measures. Art 21.2 states: "At the request of a party, the arbitral tribunal may order any interim measure

[2014] Asian Dispute Review

Arbitration & ADR in asia

Obtaining Security in Malaysia for Maritime Claims in Arbitration Ahalya Mahendra

This article discusses the mechanisms for obtaining security in Malaysia for maritime claims in arbitration under both the now repealed Arbitration Act 1952 and the Arbitration Act 2005, and the orders that may be made by the courts. Introduction: arbitration legislation in Malaysia

“ … [T]he new Act recognizes that some distinctions

The practice of maritime arbitration in Malaysia is still in its

between these domestic and international regimes are

infancy compared with London, New York and Hong Kong.

required in the local circumstances, but only for limited

The Malaysian government has, however, taken steps in the

purposes, using the Model Law definition for international

last decade to develop and improve this aspect of arbitration

arbitrations as the yardstick for the distinction. It would

practice by enacting modern legislation.

seem that the basic reasoning behind this is that, on the international side, parties would not want any more local

Legislative history

court intervention than is prescribed and allowed under

The Arbitration Act 1952 (the 1952 Act)1 was in force at the

the Model Law; while on the domestic side there is still a

time Malaysia gained independence in 1957. The 1952 Act

need for the courts’ supervisory jurisdiction in the matter

was based on the English Arbitration Act of 1950. On 30

of appeals on points of law, bearing in mind that the

December 2005, Malaysia enacted the Arbitration Act 2005

majority of domestic arbitrations are conducted before lay

(the 2005 Act),2 which adopted the UNCITRAL Model Law on

arbitrators under standard from construction contracts.

International Commercial Arbitration 1985 and took effect on

The primary difference between the two regimes is the

15 March 2006.

extent of judicial supervision, which is significantly greater under the domestic arbitration regime.”

Leading commentators WSW Davidson & Sundra Rajoo3 have described the approach of the 2005 Act as follows:

Court decisions on the 2005 Act began to appear in the

Arbitration & ADR in asia law reports from 2007 onwards. A combination of drafting

These conflicts were resolved by the amendment of s 8 of the

imperfections and judicial interpretations of the 2005 Act

2005 Act by the 2011 Act. Its effect is that the extent of judicial

resulted in its amendment by the Arbitration (Amendment)

intervention in arbitrations is now solely governed by the

Act 2011 (the 2011 Act)4.

provisions of the 2005 Act.

Which of the principal Acts apply?

Security for claims in arbitration

In order to determine which of the principal Acts apply to

It is well settled that that the main purpose of arresting a

a maritime arbitration, reference must be made to the 2005

vessel is to obtain satisfaction of a judgment in a court claim.11

Act and relevant case law. Section 51(2)5 of the 1952 Act

Sometimes, in lieu of arresting or subsequently detaining the

provides, and the Malaysian Court of Appeal decision in

vessel, shipowners will provide alternative security, such as a

Renault SA v Inokom Corporation Sdn Bhd & Anor6 confirmed,

bail bond, a bank or insurance guarantee, or a Protection and

that the date of commencement of arbitration proceedings

Indemnity (P&I) Club Letter of Undertaking.

determines whether the 1952 or 2005 Act applies. Thus, if the proceedings were commenced before 15 March 2006, the 1952

In order to arrest a vessel for security in Malaysia, the arresting

Act is applicable, whereas the 2005 Act applies to proceedings

party must invoke the Admiralty jurisdiction of the Malaysian

commenced on or after that date.

High Court. Admiralty jurisdiction is provided under s 24(b) of the Malaysian Courts of Judicature Act 196412 (‘CJA 1964’),

The ambit of judicial intervention under the 2005 Act

which states that the Malaysian High Court has “the same

The ambit of the Malaysian High Court’s powers of intervention

jurisdiction and authority in relation to matters of admiralty

in arbitrations under the 2005 Act is set out in s 87 of that Act.

as is had by the High Court of Justice in England under the

Two Malaysian High Court decisions and one of the Malaysian

United Kingdom Supreme Court Act 1981.”

Court of Appeal gave rise to different and conflicting judicial interpretations of the phrase “Unless otherwise provided,…”

In brief, the Admiralty jurisdiction is invoked once the vessel

in that provision.

is within the jurisdiction of the Malaysian High Court and the maritime claim falls within the categories set out in the

In summary, the conflicting interpretations proposed that, in

English Supreme Court Act 1981 (the SCA 1981).13 Thereafter,

order to intervene in arbitrations governed by the 2005 Act,

the Court can issue a Warrant of Arrest for the vessel named in

either (i) the jurisdiction and the power of the Malaysian High

the in rem action.14

Court had to be expressly legislated,8 or (ii) the Malaysian High Court had, above and beyond the provisions of the 2005

As to whether a putative claimant may arrest a vessel in

Act, either an inherent jurisdiction9 or, alternatively, residual

Malaysian waters as security for an arbitral award, the

powers10 of intervention.

answer to this question depends on the applicable arbitration legislation.

It is well settled that that the main purpose of arresting a vessel is to obtain satisfaction of a judgment in a court claim.

Claims under the 1952 Act or the pre-amendment 2005 Act The Malaysian High Court held in The Norma Splendour15 that the High Court did not have jurisdiction to arrest a vessel as security for an arbitral award16. The judge, went on, however, to apply the English decision in The Rena K17 in his judgment.

[2014] Asian Dispute Review

Arbitration & ADR in asia As to whether a putative claimant may arrest a vessel in Malaysian waters as security for an arbitral award, the answer to this question depends on the applicable arbitration legislation.

as security for the satisfaction of any arbitral award, or (ii) that alternative security be provided in lieu. By virtue of the addition of s 10(4) to the 2005 Act by the 2011 Act, the Malaysian High Court also has jurisdiction to stay proceedings over international maritime arbitrations held outside Malaysia. As a result, the Court’s power under s 10(2A) extends to international maritime arbitrations with foreign seats.

The effect of The Rena K is that where the High Court’s

In circumstances where a maritime arbitration is under way,

Admiralty jurisdiction has been validly invoked, and the vessel

the claimant may avail itself of an interim measure provided

arrested as security for a judgment in Court, the Court shall

for under s 11(1)(e) as amended of the 2005 Act. The power

stay the Admiralty proceedings for arbitration. Furthermore,

of the Malaysian High Court under this provision to make an

in dealing with the arrested vessel, the Court has discretionary

order “securing the amount in dispute” originates from s 11(1)

power to maintain the arrest, or retain security in lieu as

(e) of the 1952 Act, which was in turn based on s 12(6)(f) of the

security for the arbitration award, where it can be proved that

English Arbitration Act 1950.

any arbitral award in the plaintiff’s favour is unlikely to be satisfied by the defendant.

Mustill and Boyd19 have described the equivalent power under the English 1950 Act as follows:

Claims under the 2005 Act as amended As at 1 July 2011 (the effective date of the 2011 Act), the

“(iv) Securing the sum in dispute. Where the right of a

2005 Act as amended expressly provides for the provision of

party to a specific fund is in dispute in a reference, the

security for the satisfaction of maritime arbitration awards in

Court has power to order the fund to be paid into Court

two situations:

or otherwise secured. The forms of security most likely to be ordered are the provision of a bank guarantee or

(1) in circumstances where Admiralty proceedings are stayed under s 10(1) of the 2005 Act; and (2), where an interim measure of protection is sought pursuant to s 11(1)(e) of that Act.

the payment of the fund into a bank account in the joint names of the parties or their advisers. It is probable that the Court alone, and not the arbitrator, has power to make such an order.

Mechanisms for obtaining security: jurisdiction and

“It will be noted that this power does not enable a party

orders

to recover sums on account of damages in advance of the

Section 10(2A) of the 2005 Act, which has its roots in s

hearing, even if liability is undisputed and it is clear that

11 of the English Arbitration Act 1996, applies where the

some monetary award will be made. The power exists

putative claimant, having successfully invoked the Admiralty

only where an identified fund is in dispute – as where, for

jurisdiction of the Malaysian High Court and obtained

example, it is alleged that the respondent is trustee for the

security for its claim, seeks a stay of the judicial proceedings

claimant in respect of a specific sum of money.”

on the basis of an agreement to arbitrate.18 Under s 10(2A), the putative claimant can apply to the Malaysian High Court to

It is unlikely that the Malaysian High Court, when faced with

order either (i) the retention of the arrested property to stand

an application for this interim measure, would depart from

Arbitration & ADR in asia the original purpose of this power, which is only to secure

or during international maritime arbitrations seated outside

funds and not to enable a party to recover sums on account of

Malaysia. This is in line with the Court’s general jurisdiction

damages in advance of the hearing (ie provisional damages).20

to grant a stay in such cases under s 10(4) of the 2005 Act as amended.

For a putative or actual claimant in a maritime arbitration to avail itself of an interim measure under s 11(1)(e) of the 2005

Conclusion

Act, it must establish that (i) the vessel is within the jurisdiction

The practice of maritime arbitration, both domestic and

of the Malaysian High Court, and (ii) the maritime claim falls

international, received a much needed boost in Malaysia with

within the categories set out in the SCA 1981.21 The Malaysian

the enactment of ss 10(2A), 10(4), 11(1)(e) and 11(3) of the

High Court will then issue a Warrant of Arrest against the

2005 Act as amended. As a result, parties in both domestic and

vessel identified in the suit.

international maritime arbitrations, whether with Malaysian or non-Malaysian seats, can now obtain security in Malaysia

Thereafter, the Admiralty proceedings in Court will have to

for their claims in arbitration. The author wishes to thank Dato’

be stayed in favour of arbitration. It is at this stage of those

E Sreesanthan for assistance received in writing this article.

adr

proceedings that the putative or actual claimant can apply to the Malaysian High Court to exercise its powers to “secure the

Revised Act 93.

Act 646.

continuing the detention of the vessel or ordering security in

The New Malaysian Arbitration Regime 2005 [2006] 4 MLJ cxxx.

lieu.

Act A1395. The 2011 Act received Royal Assent on 23 May 2011 and came into effect on 1 July 2011.

Finally, s 11(3) of the 2005 Act as amended vests jurisdiction

5 The Malay text of s 51(2) was amended by the 2011 Act to state that the date of commencement of the arbitration proceedings determines which statutory regime applies to the proceedings.

in the Malaysian High Court to order interim measures before

amount in dispute” under s 11(1)(e) of the 2005 Act by either

Under s 10(2A) [of the 2005 Act as amended], the putative claimant can apply to the Malaysian High Court to order either (i) the retention of the arrested property to stand as security for the satisfaction of any arbitral award, or (ii) that alternative security be provided in lieu. By virtue of … s 10(4) of the 2005 Act [as amended], the … Court also has jurisdiction to stay proceedings over international maritime arbitrations held outside Malaysia.

[2010] 5 CLJ 32.

7 Section 8, as originally enacted, states: “Unless otherwise provided, no court shall intervene in any of the matters governed by this Act.” 8

Aras Jalinan Sdn Bhd v Tipco Asphalt Public Company Ltd & Ors (2008) 5 CLJ 654 (Malaysian High Court).

Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd (2010) 7 CLJ 785, per Abdul Malik Ishak JCA (Malaysian Court of Appeal).

Innotec Asia Pacific Sdn Bhd v Innotech GMBH (2007) 8 MLJ 304 (Malaysian High Court).

11 An in rem action, as opposed to one that is in personam, is an action against the ship. 12

Act 91.

Editorial note: This refers to s 21(2)-(4) of the SCA 1981. The 1981 Act is an English, not a UK, Act.

14 Malaysia has not acceded to the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships (Brussels, 1952). The issuance of a Warrant of Arrest by the Malaysian High Court is therefore pursuant to s 24(b) of the CJA 1964, referencing the SCA 1981: see note 13 above. 15

(1999) 6 MLJ 652.

For criticism of this decision, see Jeremy M Joseph, Ship Arrest As Security for Arbitration Claims [2001] MLJ xxxvii.

[1978] 1 Lloyd’s Rep 545.

18 Section 10(1) of the 2005 Act. 19

Commercial Arbitration (2nd Edn, 1989, London: Butterworths), p 332.

20 Ibid. 21

Editorial note: See note 13 above.

[2014] Asian Dispute Review

In-house counsel focus

Challenges to Arbitrators for Bias: How Concerned Should We Be? Nerys Jefford QC

This article discusses the reasons underlying the risk of an increase in the incidence of challenges to arbitrators for lack of impartiality and independence, notwithstanding the influence of the IBA Guidelines on Conflicts of Interest in International Arbitration. The principles applicable to determining such challenges, and the uncertainties that may nevertheless arise from them, are discussed by reference to Hong Kong and English case law. Introduction

to stay there for the rest of his working life. Just as unusual

Challenges to arbitral appointments for actual or perceived bias

these days are companies who always use the same law firm

is a vogue topic in international arbitration. Whilst nothing new,

for all their legal work. A global legal market features frequent

recent years have seen a marked increase in the regularity with

moves of personnel between firms, mergers of firms, multi-

which they have been made. The ICC, for example, recorded

disciplinary organisations and significant competition for legal

an increase from an average of 20 per year in the 1990s to an

work. The instances where some relationship can be identified

average of 30 per year by 2009.

that might cause genuine concern, or found the basis for a tactical challenge to an arbitratorâ&#x20AC;&#x2122;s appointment, are therefore

This trend may be the product of the use of challenges for

increasingly prevalent. Further, the global market encourages

strategic reasons or tactical advantage. It may, however, also

relationships between lawyers from diverse jurisdictions who

reflect more complex commercial and professional relationships

work together or (for example) are involved in international

within the international legal market. This means both that

organisations together or speak at conferences together.

arbitrators have been increasingly affected by conflicts of interest and that there may be a growing sense that such challenges will

The IBA Guidelines on Conflicts of Interest

be successful.

The view that this international market gives rise to increasing concerns is supported by the International Bar Associationâ&#x20AC;&#x2122;s

The incidence of arbitral conflicts of interest

Guidelines on Conflicts of Interest in International Arbitration

So far as lawyers are concerned, gone are the days when a

(2004) (the Guidelines), which state that â&#x20AC;&#x201C;

young man fresh from law school joined a firm and expected 24

in-house counsel focus … [M]ore complex commercial and professional relationships within the international legal market … means both that arbitrators have been increasingly affected by conflicts of interest and that there may be a growing sense that such challenges will be successful.

the list is to enumerate situations that should be disclosed, whilst recognising that the proper conclusion may be that there is no basis for justifiable doubt as to independence or impartiality. These include where the arbitrator has himself acted for or against one of the parties or been frequently appointed by one of them, along with the issue that troubles the independent Bar in various jurisdictions, namely where counsel and the arbitrator are members of the same Chambers. (4) The Green List contains examples of situations where no appearance of conflict of interest arises from an objective viewpoint. Applicable principles So what are the principles at play here? Within the UNCITRAL

“The growth of international business and the manner

Model Law and the UNCITRAL Arbitration Rules are the

in which it is conducted, including interlocking corporate

sibling, if not twin, concepts of impartiality and independence.

relationships and larger international law firms ...

The distinction commonly drawn between the two is that

have created more difficult conflict of interest issues to

independence is something to be judged objectively, whereas

determine”.

impartiality is a subjective matter involving consideration of the

mind of the arbitrator. In any circumstances, however, where The Guidelines, which were prepared by a working group

the test of ‘impartiality’ involves consideration of whether there

representing 14 jurisdictions, seek to bring greater clarity and

is objectively an appearance of bias, the distinction is, in practice,

understanding to this issue in the international context. The most

one without much of a difference.

important part of the Guidelines is the section entitled Practical Application of the General Standards, which comprises a list of

The appearance of bias

specific circumstances in which an arbitrator’s independence or

At its simplest, bias or partiality is the actual (and subjective)

impartiality may be compromised:

predisposition to decide a dispute in a particular way, but the objective appearance of bias is generally regarded as equally

(1) The Non-Waivable Red List contains examples of situations

material. As the House of Lords put it in Porter v Magill:2

where an arbitrator should not even act with the consent of all the parties. (2) The Waivable Red List contains examples of potential conflicts that may be waived by agreement, including that

“The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

the arbitrator is a lawyer in the same law firm as counsel and previous involvement of the arbitrator’s firm in the

Such an appearance of bias may arise either from a relationship

case or more generally with one of the parties.

between the arbitrator and one of the parties or their legal

(3) The Orange List sets out situations which, in the eyes

representatives or from a relationship between the arbitrator

of the parties, may give rise to justifiable doubts as the

and the subject matter of the dispute. The argument is most

arbitrator’s impartiality or independence. The purpose of

commonly that this relationship gives rise to the real possibility

[2014] Asian Dispute Review

In-house counsel focus that the arbitrator may favour one party or, occasionally, be predisposed against the party. Challenges on this basis typically arise where the arbitrator has a formal and continuing business relationship with one of the parties or their legal representatives, or even where such a relationship has existed in the past or is contemplated in the future. Justifiable doubts about impartiality or independence (1) Hong Kong In Hong Kong, s 24 of the Arbitration Ordinance (Cap 609) gives effect to art 12 of the UNCITRAL Model Law. A person approached to act as arbitrator must, at that time and thereafter,

In considering the submission that there could be justifiable

disclose any circumstance likely to give rise to justifiable doubts

doubts about Mr Yang’s impartiality, Deputy High Court Judge

as to his impartiality or independence and an arbitrator’s

Lisa Wong SC applied the test of the“objective fair-minded and

appointment may be challenged if circumstances exist that give

informed observer”and asked the question whether there was a

rise to such justifiable doubts.

cogent and rational link between the association of an arbitrator and a party’s legal representative and its capacity to influence

In Jung Science Information Technology Co Ltd v ZTE Corporation,

the arbitrator’s decision. Relying on the English authority of

this provision was considered by the Court of First Instance in

Taylor v Lawrence4 and pointing to like traditions and culture,

the context of a an arbitration between a South Korean claimant

she also concluded that the objective onlooker would be

and a respondent PRC corporation. JSIT challenged the

expected to be aware of the legal traditions and culture that had

continued appointment of Mr Philip Yang as tribunal chairman

played an important role in ensuring high standards of integrity

on the basis of the relationship between this highly experienced

on the part of both the judiciary and the legal professions and

chairman and Mr Michael Moser, who was initially (and,

would be aware of the contact between the two. The learned

until his retirement) the partner handling the matter for the

judge regarded that culture as extending to the wider world of

respondent. The relationship was that both sat on the Council

dispute resolution. Perhaps unsurprisingly the challenge failed,

of the HKIAC; they spoke at seminars and meetings together;

but it highlighted the potential difficulties with close contact

and it was suggested they were friends. Mr Yang clarified that

between those, not by any means exclusively lawyers, involved

they had known each other a long time but their relationship

in the arbitration world.

was professional and social in arbitration-related matters and similar to his relationship with many law firms in Hong Kong.

(2) England & Wales In England & Wales, the Arbitration Act 1996 (the 1996 Act) explicitly requires the impartiality of arbitrators in arbitration

Within the UNCITRAL Model Law and the UNCITRAL Arbitration Rules are the sibling, if not twin, concepts of impartiality and independence. 26

proceedings. Section 33(1)(a) of the Act imposes upon arbitrators the general duty “to act fairly and impartially as between the parties”. Under s 24(1)(a), an arbitrator may be removed by the Court where “circumstances exist that give rise to justifiable doubts as to his impartiality”. Under s 68(2)(a), an award can be set aside on the basis of serious irregularity, including failure to comply with the duty to act fairly and impartially.

in-house counsel focus On its face, however, the 1996 Act does not impose any obligation to be independent or provide for the removal of an arbitrator where there are justifiable doubts as to his independence. This was no oversight and followed a recommendation of the Departmental Advisory Committee on Arbitration Law in 1996. That position was, however, complicated by the UK’s adoption of the European Convention on Human Rights through the Human Rights Act 1998. Article 6 of the Convention provides the right to a “fair and public hearing ... by an independent and impartial tribunal”. The English courts have equated “the common law test of bias and the requirements under Article 6”.5 There is also no obligation of disclosure of circumstances that may give rise to justifiable doubts as to impartiality, but a failure to disclose such circumstances may itself give rise to such

… [D]espite the adoption of the common expression “justifiable doubts”, … what circumstances may give rise to justifiable doubts is a vexed question, particularly for proceedings which involve arbitral tribunals and parties of different nationalities and from different legal backgrounds.

doubts. of fascinating, if often familiar, examples of the complex The LCIA Rules (1998 Edn) similarly provide in art 10.3 for

interrelationships that exist between parties in this international

challenge to the appointment of an arbitrator “if circumstances

legal market. An arbitrator who had briefly and some years

exist that give rise to justifiable doubts as to his impartiality”.

earlier been a partner in a firm now engaged as counsel for the respondent was unobjectionable, but an arbitrator

Approaches to ‘justifiable doubts’

whose partners had worked for companies associated with

So, despite the adoption of the common expression “justifiable

a respondent was successfully challenged. An arbitrator in

doubts”, and as the ZTE case demonstrates, what circumstances

the same Chambers as a barrister appearing before him was

may give rise to justifiable doubts is a vexed question, particularly

unobjectionable, but not an arbitrator who had acted both for

for proceedings which involve arbitral tribunals and parties of

and against the respondent. The fact that an arbitrator was

different nationalities and from different legal backgrounds.

regularly nominated on the recommendation of one of the

While justifiable doubts as to an arbitrator’s independence or

firms acting in the arbitration was not thought to be a ground

impartiality may be readily agreed upon by two people from the

for challenge.

same legal system, an interpretation of this may differ widely if the background and culture of the individual analysing these

A similar approach was also taken by the English Commercial

two points are different. Whilst the IBA Guidelines may assist in

Court (Flaux J) in A & Others v B & X,6 which arose out of an

judging the international view, they remain simply guidelines.

LCIA arbitration. Mr X QC was appointed as arbitrator. He had previously received instructions in unrelated cases from the

In 2011, the LCIA added considerably and informatively to

firms representing both of the parties to the arbitration. One

the body of understanding of how it approached challenges

such case appeared to have been settled, but the settlement

on the grounds of alleged justifiable doubts as to impartiality

unravelled and Mr X was instructed again to act. Through

and independence by publishing a special edition of Arbitration

inadvertence, he failed to disclose the fact immediately.

International which contained digests of over 30 reasoned decisions on challenges. All the decisions related to arbitration

As well as a challenge to his continued appointment made

with their seat in England. These digests provide a series

to the LCIA (which was rejected), an application to remove

[2014] Asian Dispute Review

In-house counsel focus The last point, in particular, alludes to a common international perception of and concern about the way in which the English legal profession operates in terms of the relationships between barristers and between barristers and solicitors. Barristers in Chambers together share resources and premises – and some international observers find it inconceivable that an arbitrator can be seen to decide a case impartially where a party is represented by a member of his own Chambers. At least in English law, both the second and third of Flaux J’s principles go some way to addressing this issue by making the relevant observer someone familiar with how the relevant legal system works in practice. The irony of the position is that English judges him was made to the Court. Flaux J adopted the test that “the question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”.

are internationally regarded as independent and impartial, even though (and particularly in specialist areas of practice) they routinely come from the same Chambers as those appearing before them – an observation that does not require much more than a casual observer.

In addressing this issue, Flaux J gave detailed consideration to the IBA Guidelines, whilst making clear that they could not override national law. He rejected arguments that the arbitrator would unconsciously not want to disappoint the firm instructing him and that the arbitrator would unconsciously place particular confidence in that firm. He did not consider that any financial relationship was relevant since it had not affected the arbitrator’s fee in the litigation.

Conclusion The approach taken by Flaux J in A & Others v B & X is clearly in line with that taken in Hong Kong, or perhaps vice versa. Whether there are justifiable doubts as to an arbitrator’s impartiality or independence will always be a question of fact and degree, but it may be hoped that the information that the respected LCIA has provided as to its approach, in tune with that of the courts in England and Hong Kong, might point a

What, however, is most interesting about this case is the Court’s

way towards a workable test on the international stage. adr

exposition of three aspects of the overarching test. Firstly, the test is an objective one and is not dependent upon the characteristics of the parties, such as their nationality. Instead, “the issue is whether the impartial objective observer, irrespective of nationality, would conclude from those facts that there was a real possibility that the arbitrator was biased”. Secondly, Flaux J emphasised that the test assumes that the impartial observer is “fair-minded” and “informed”, in possession of all the facts and not unduly sensitive or suspicious. Thirdly, although this observer is not to be regarded as a lawyer, he is expected to be aware of the way in which the legal profession in this country operates in practice. Each of these tests echoes and elucidates the approach in the ZTE case.

Introduction, para 1.

[2002] 2 AC 357, per Lord Hope at [103].

[2008] 4 HKLRD 726.

[2003] QB 528 (Court of Appeal).

Lawal v Northern Spirit Ltd [2003] UKHL 35 at [14].

[2011] EWHC 2345.

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nuts & bolts lecture

Factual and Expert Evidence in Arbitration John Cock

This article is a primer on the fundamental principles and concepts of the law and practice of evidence generally and of expert evidence in arbitration. It focuses on the common law system as applied in domestic arbitration in Hong Kong. The article is an edited version of the Nuts & Bolts Lecture delivered to the Chartered Institute of Arbitrators (East Asia Branch) at the HKIAC on 19 March 2013. Introduction

of relevance therefore refers to the relationship between the

Put simply, evidence is material or information presented to the

material the party wishes to present and the facts it wishes

tribunal to support or refute the parties’ respective contentions

to prove or disprove thereby. That test requires not only the

of the facts of the matter being tried. Evidence relates to facts

evidence to be relevant to the alleged facts, but also those

and must therefore be distinguished from points of law, which

alleged facts to be relevant to the issues in contention.

must be decided based on the parties’ submissions following relevant authority.

Admissibility, on the other hand, is a question of law rather than fact and depends on the application of the relevant rules under

Rules of evidence have been developed down the centuries to

the applicable law of evidence. As such, admissibility “has

govern the scope and nature of evidence that may be presented

nothing to do with the probative or logical relationship between

(or adduced) to courts and tribunals. The rules of evidence

the evidence tendered and the fact to be proved”.2

(particularly in courts) tend to be restrictive, in that they generally operate to exclude or limit the presentation of certain

Relevance is therefore a prerequisite for, but does not guarantee,

types of material as evidence. Essentially, evidence is required to

admissibility.

be both relevant and admissible in order to be presented. Nature and form of evidence Relevance and admissibility of evidence

To begin with, evidence may be classified in terms both of its

Evidence is relevant “if it is logically probative or disprobative

form and its nature.

of some matter which requires proof” and “makes the matter which requires proof more or less probable”.1 The question

Evidence to be presented to the tribunal may take three forms.

nuts & bolts lecture Oral evidence Evidence given by a witness is referred to as oral evidence, as it was traditionally delivered in the proceedings by a person speaking from the witness box.3 More recently, and particularly in arbitrations, witness evidence is also often taken by way of written witness statements or affidavits, and sometimes by means such as video or telephone link. Such evidence is, however, still referred to as oral evidence. This is because,

Put simply, evidence is material or information presented to the tribunal to support or refute the parties’ respective contentions of the facts of the matter being tried.

whatever the medium and means of communication employed, it is evidence ‘spoken’ by the witness.

Direct or circumstantial evidence? Direct evidence is evidence which, if accepted as true, proves the

Documentary evidence

fact in contention itself without anything further. Circumstantial

Documentary evidence takes the form of the contents of

evidence, on the other hand, first requires the tribunal to accept

documents presented to the tribunal. These may be letters,

the evidence as true, and then to draw inferences from that

emails, contracts, reports and other written communications.

evidence to draw conclusions about the alleged fact.

Documentary evidence also includes evidence conveyed by the contents of other forms of communication, such as

Percipient or hearsay evidence?

photographs, films, audio and video tapes, drawings and so

Percipient evidence is first-hand, in that it is something which

on. Similarly, the term ‘document’ refers not only to physical

the witness perceived or experienced personally with his/her

media but also to an ever expanding range of electronic media.

own senses.4 Hearsay evidence, by contrast, is evidence which

These include digital files of all types, such as emails, text

the giver of the evidence did not personally perceive, but learned

messages, spreadsheets, word processing documents, digital

from another party. Hearsay is therefore second-hand evidence.

images, electronic models and so on. Primary or secondary evidence? Real or physical evidence

This classification relates to documentary evidence. An original

‘Real’ or physical evidence is anything from which the tribunal

document would be primary evidence for the purpose of proving

must use its own senses to draw conclusions or inferences in

its contents. If only a copy is presented (in whatever form), that

relation to the alleged facts. Common examples are samples

would be secondary evidence. An admission of the document’s

of materials or objects alleged to be damaged or defective and

contents would also be primary evidence, whereas oral evidence

inspections (or ‘views’) by the tribunal of sites or premises.

of the document’s contents presented by a witness would be

Documents may also be presented as real evidence if their

secondary evidence.

existence, physical form or condition somehow conveys evidence beyond that of their contents. Thus, for example, an

Presumptive or conclusive evidence?

original report by a testing laboratory may be presented as real

This classification generally arises out of statute, or as a creature

evidence that testing was performed, while the report’s contents

of the parties’ contract. Presumptive evidence (also referred to

may be documentary evidence of the test results.

as prima facie evidence), is evidence which is declared to be sufficient proof of a fact, unless the opposing party adduces

The nature of evidence refers to its substantive character with

contradictory evidence sufficient to rebut the presumption.

respect to the facts to which the evidence relates.

Conclusive evidence is deemed to be sufficient proof of a fact and may not be rebutted. Although relatively rare, conclusive

[2014] Asian Dispute Review

nuts & bolts lecture evidence may be found, for example, in the Final Certificate under some building contracts.5 By way of simple illustration of these concepts, the table below presents examples of evidence that might be presented in a case of alleged armed robbery.

Scenario

Nature

Form Oral

Witness says he saw a man running from the bank with wads of cash

Percipient Circumstantial

Another witness says he heard at the pub that the man had a gun

Hearsay Circumstantial

A customer at the bank says he saw the man draw the gun and demand cash

Percipient Direct

CCTV video from the bank shows the man with a gun robbing the bank

Direct

A gun is found in the next street soon after the incident with the man’s fingerprints on it

Direct (that the man had held the gun) Circumstantial (about the robbery)

Procedural matters relating to evidence in arbitration

Doc

Real

(1) s 47(1) gives effect to art 19(1) of the UNCITRAL Model

As already stated, the admissibility of evidence is a question of

Law, by which the parties are free to agree as to procedure;

law and depends on the applicable rules of evidence in each

(2) failing such agreement, the tribunal may conduct the

case. The law of evidence forms part of the applicable arbitral

arbitration in the manner that it considers appropriate (s

law, though modern laws usually relax the strict rules of evidence

47(2)); and

in their application to arbitrations. Thus, s 47 of the Hong Kong

(3) the tribunal “is not bound by the rules of evidence and

Arbitration Ordinance (Cap 609) governs determination of the

may receive any evidence that it considers relevant”,

rules of procedure as follows:

but must give the evidence adduced the weight that it considers appropriate (s 47(3)).

The law of evidence forms part of the applicable arbitral law, though modern laws usually relax the strict rules of evidence in their application to arbitrations. 32

Absent any agreement by the parties to the contrary, therefore, the admissibility of evidence in arbitration is a matter for the tribunal’s discretion rather than of the application of any strict or prescribed rules. As with many other aspects of arbitration, however, the parties may ‘agree’ by adopting rules, either as part of the arbitration agreement itself or following commencement of the arbitration. The HKIAC Domestic Arbitration Rules (2012 Edn), for example, include a number of provisions relating to

nuts & bolts lecture the presentation and taking of evidence.6

to be recited in full to the tribunal. The witnesses may then be cross-examined on their evidence by opposing counsel and may

The arbitral law, together with any particular agreements of

also be re-examined by their own party’s counsel. This process is

the parties and any applicable rules, thus create a framework

commonly referred to as ‘testing’ the witnesses’ evidence.

within which the tribunal must deal with evidence. Orders for Directions are the normal means by which tribunals exercise

Expert evidence

their powers and communicate procedural matters, including

Expert evidence refers to opinion evidence as opposed to

those relating to evidence. While such orders may and indeed

evidence of fact. It may include both written reports and

often should make reference to the applicable law and rules,

evidence presented orally at hearings. Expert opinion evidence

their purpose is not to restate those provisions but to issue

may be called to assist the tribunal to interpret or understand the

specific directions in accordance with them. Examples of these

factual evidence presented and/or to offer opinion of what the

may include orders:

facts may have been in the absence of sufficient other evidence.

(1) limiting oral evidence;

Generally speaking, expert evidence may only be called from

(2) specifying timeframe and procedures for production and

witnesses who possess both specialist knowledge and relevant

service of witness statements; (3) for disclosure and production of documents (sometimes referred to as ‘discovery’7);

experience. Traditionally, experts were required to be members of a recognised profession, such as doctors, architects, engineers etc. While that is still generally the case, the scope of activities

(4) for preparation and delivery of expert evidence;

and expertise now accepted for the purposes of giving expert

(5) for conduct of hearings.

evidence has become much broader (though by no means unlimited) and continues to develop. Examples of more recently

Witness statements and oral evidence of fact

accepted professions include programming/delay and forensic

As mentioned above, written witness statements may be ordered

IT experts.

and in current practice such orders are almost universal. Their primary purpose is to save time at the hearing by avoiding the

The other key difference with expert evidence is that, whereas

need to have the witness recite the entirety of his/her evidence

evidence of fact may essentially be presented as of right (subject

into the record. Instead, written statements are exchanged prior

to certain limitations), expert evidence always requires leave of

to the hearing, which can be read in advance by the parties and

the tribunal to be presented.

the tribunal. Briefly stated, and with some variations, the process for No particular form is required for such statements, save as may

presentation and testing of expert evidence in arbitration is

be prescribed by rules or the orders of the tribunal. The tribunal

typically as follows.

may also order that such statements be signed or made by way of affidavit.

(1) Exchange of expert reports, which may be either ‘open’ (ie disclosed to the tribunal and presented in evidence)

At the hearing, each witness will be asked to confirm and, if

or ‘without prejudice’ (ie disclosed only to the parties and

evidence is to be taken on oath or affirmation, to swear to or affirm

the experts and not to the tribunal).

the truthfulness of the contents of his/her witness statement.

(2) ‘Without prejudice’ meetings of experts of like discipline

The witness statements are thereby adopted as the evidence-

will then normally be conducted, to agree points and

in-chief of each witness, without the necessity for that evidence

narrow the scope of any differences of opinion. All the

[2014] Asian Dispute Review

nuts & bolts lecture communications at and arising from such meetings are

claimant is required to prove its claims and is therefore said to

without prejudice to the parties’ positions, and must be

have the burden (or onus) of proof. The respondent, by contrast,

treated confidentially and not disclosed to the tribunal.8

is fundamentally not required to prove anything, or to disprove

(3) Joint reports will then be prepared. These typically set out

the claimant’s claims. To the extent that the respondent relies on

the points on which the experts are agreed, the points on

positive points of defence (as opposed to bare denials or non-

which they disagree and the reasons for disagreement.

admissions) or if it raises a counterclaim, however, it will have

From the without prejudice meetings, only the joint report

the burden of proving the alleged facts on which its defence

will be presented to the tribunal.

and/or counterclaim rests.

(4) In the event that the experts continue to disagree on

some or all points, supplemental individual reports may

‘Standard of proof’, on the other hand, refers to the extent or

also be ordered. The form of these may differ, depending

degree to which the tribunal must be satisfied that a fact has

upon whether the experts’ original individual reports were

been proved. In arbitration, as in all civil cases, the standard of

exchanged openly or without prejudice. If the former,

proof is ‘the balance of probabilities’. This simply means that,

supplemental reports may be brief, dealing only with

based on the evidence, the tribunal is satisfied that the alleged

points of disagreement in the joint report that have not

fact is more likely to be true than not. This contrasts with the

previously been addressed. If the latter, the individual

much higher standard of ‘beyond reasonable doubt’ required in

reports will have to deal with all points of disagreement

criminal cases. Proof is therefore more difficult to demonstrate

and will therefore be longer and more detailed.

in criminal than in civil proceedings.

(5) As with witnesses of fact, opinion evidence presented

in the experts’ joint and individual reports is generally

In order to reach conclusions and findings on the facts, the

adopted at an oral hearing, and tested by cross- and re-

tribunal will need to weigh the evidence. This means deciding

examination. This may not, however, be necessary in cases

which version of the facts each piece of evidence tends to

where the experts agree on all or most points. It may also

support, and to what extent.

not be necessary in cases where the differences between the experts and the reasons for them are clear from the

Using the common analogy of the scales of justice, each piece of

reports. In such cases, cross-examination may be of little

evidence is treated like a weight which is placed on one side of

value in testing the evidence and the tribunal may instead

the scale or the other. When all the evidence has been weighed,

proceed to a decision on the basis of the reports alone.

the scales tip in one party’s favour – even if the ratio is only 51:49 – indicating which facts have been proven. If the scales balance

Weighing evidence and decision-making Having been presented with the evidence, the tribunal is required to pull it all together to reach conclusions about the facts in contention in order to decide what happened. In so doing, the tribunal must have regard to the concepts of burden and standard of proof. ‘Burden of proof’ simply refers to the question of which party is responsible for proving any particular fact in contention. The simple answer is contained within the maxim that ‘he who alleges must prove’. In practice, this generally means that the

nuts & bolts lecture Conclusion

When all the evidence has been weighed, the scales tip in one party’s favour – even if the ratio is only 51:49 – indicating which facts have been proven.If the scales balance evenly – 50:50 – the alleging party has failed to prove the alleged fact and the benefit of the doubt goes to the other party.

evenly – 50:50 – the alleging party has failed to prove the alleged fact and the benefit of the doubt goes to the other party. Generally speaking, direct evidence will be given greater weight than circumstantial evidence. Conflicting percipient evidence

Evidence is a huge field, about which entire textbooks have been written, and this article can only hope to skim the surface of the subject. It is hoped that it may be helpful as a general introduction, particularly for non-lawyers and those who are new to the subject. adr 1

DPP v Kilbourne [1973] AC 729 at 756, per Lord Simon of Glaisdale.

Peter Murphy, Murphy on Evidence (1997, 6th Edn, London: Blackstone Press) p 18.

3 Such evidence is also often referred to as ’testimony’, particularly in American practice. 4 Somewhat confusingly, percipient evidence is also sometimes referred to as ‘direct evidence’, as it refers to evidence directly perceived by the witness. 5

6 These include arts 6.3 (widest discretion allowed by law to conduct proceedings), 7 (written statements and documents), 9 (hearings), 11 (witnesses), 12 (tribunal-appointed experts and assessors) and 15 (general and additional powers of arbitrators, including powers relating to evidence). 7

Editorial note: This nomenclature is still used in the Arbitration Ordinance: see s 56(1)(b). The terminology distinguishes discovery from the duty of disclosure that is required of parties in support of ex parte applications or applications for interim measures, as to which see ibid, s 41.

How materials are dealt with that are alleged to be inadmissible, because they are without prejudice or otherwise privileged, is beyond the scope of this article.

of two opposing witnesses considered in isolation may be of equal weight. One witness’s version of the facts may, however, be supported by contemporaneous documents, such as emails or site reports. In that case, the documentary evidence may add weight to the witness evidence on one side of the scale, so that it tips one way or the other.9

For example, cl 32.9 of the Hong Kong Standard Form of Building Contract (2005 Edn) provides that the “Final Certificate shall be conclusive evidence in any proceedings arising out of the Contract whether by arbitration or otherwise” of certain facts, including in respect of materials and workmanship, adjustments to the Contract Sum, extensions of time and additional payments for loss and expense, subject to certain defined exceptions. The exceptions include proceedings commenced under the dispute resolution provisions under cl 41 within 28 days of the issue of the Final Certificate, but only in respect of the matters to which those proceedings relate.

9 This does not mean that the witness whose evidence was not accepted has been lying, and arbitrators will usually take pains to avoid such a statement. Instead, witnesses whose evidence is not accepted are usually found to have mis-recollected events or to have been mistaken in their perception at the time.

The tribunal uses the evidence thus weighed to find which of the alleged facts are proven. The relevant legal principles are then applied to the facts as found to decide the issues in contention and are expressed as holdings in the award. In so doing, the tribunal will also take into consideration the parties’ closing submissions in the case. These are simply the parties’ (or their respective counsels’ or advisors’) oral or written contentions of how the evidence adduced should be considered to have proved or disproved the alleged facts, and of the relevant legal principles.

[2014] Asian Dispute Review

mediation

The Impact of a Mediator’s Conduct on Disputing Parties Dr Lim Lan Yuan

This article puts a case for mediators obtaining feedback from parties as a matter of course in order that they may accurately gauge and improve their performance. A list of mediator ‘do’s’ and ‘don’ts’ is offered, particularly emphasising the need to avoid forcing or appearing to force settlement. Introduction

satisfaction for the party but rather grievance or frustration. If

Mediations are conducted in a private setting and the

the ‘unhappiness’ is strong, and a party feels greatly aggrieved

proceedings are not reported as they are confidential.

because of the mediator’s conduct and behaviour, that party may

Therefore, how a mediator has performed in the mediation will

complain about the mediation or seek other forms of redress.

not be known unless the disputing parties provide feedback on

Conversely, parties may not complain, leave the matter as it is

the entire process. Of course, mediators themselves will have

and suffer in silence, and the mediator will be none the wiser.

a sense of how the mediation has proceeded. Unfortunately, mediators often go away with a lot of satisfaction when a

Feedback from parties on how they believe the mediation

dispute is settled, believing that everything is in order.

has proceeded therefore provides a valuable source for understanding how mediators have performed and suggests

The conduct of a mediator can, however, have an important

how they can improve their mediation performance in order

impact on the disputing parties. A party may unwillingly settle

to generate satisfaction for the parties.

the dispute because he feels helpless, or does not wish to continue with the dispute. Such a settlement does not generate

This article attempts to discuss some of the do’s and don’ts

mediation in mediation, based on feedback obtained by the author from parties in the context of commercial mediations. The purpose is to remind mediators of their basic role and functions, so that they may better understand the proper conduct of mediation. At the same time, such feedback will provide an opportunity for mediators to appreciate their different approaches and styles of mediation. The evaluation of the parties’ feedback will eventually help to raise the level of professionalism and competency of practising mediators. Objectives in mediation Mediators have different objectives and goals when mediating. This can influence how they conduct mediations. Some of the objectives are not necessarily compatible. Is mediation about helping parties to resolve their problems only? Do mediators

The conduct of a mediator can … have an important impact on the disputing parties. A party may unwillingly settle the dispute because he feels helpless, or does not wish to continue with the dispute. Such a settlement does not generate satisfaction for the party but rather grievance or frustration.

also help parties to rebuild goodwill? Are they satisfied with

she has no particular interest in which disputing party ‘wins’ or

getting parties to clarify issues but not having the problem

‘loses’. The conduct of mediators should be seen as fair to the

settled? A mediator with the sole objective of achieving a

parties through words, speech and actions. In other words,

settlement will likely work towards helping parties to do so.

mediators should (i) attempt to use neutral words, (ii) not

On the other hand, a mediator with other objectives, such as

show bias, and (iii) not side with one party. Other actions that

helping parties to communicate better and understand each

might demonstrate neutrality include the following.

other, may not be so forceful in achieving settlement. (1) showing sincerity to assist both parties; There are undesirable effects in achieving settlement at all costs. Mediators therefore need to avoid taking this approach. Disputing parties are likely to feel coerced to settle. It is necessary for the mediator to remove both the misperception

(2) guarding

against

imposing

the

mediator’s

value

judgements and deciding for the parties; (3) being concerned about the way and manner of putting across the mediator’s own ideas;

held and the apparent lack of trust.1 Even if the matter is settled, parties may feel that it was resolved on an unfair basis. Parties may also feel that the mediators were biased against them. All of these can result in giving the impression that mediators are lacking in professionalism. Whatever the objectives in mediation, one suggestion is to ensure that the mediator has tried his or her best: whether the problem is settled or not is not crucial. It should, however, be the best effort made by the mediator. The mediator’s role as a neutral third party The conduct of a mediator should be neutral: that is, he or

[2014] Asian Dispute Review

mediation (4) being aware of any approach, action or conduct that will show bias against the parties; (5) being aware of prejudging based on limited information and incomplete data from the parties. Adverse comments on mediators’ conduct Although

many

mediators

conduct

their

mediations

appropriately, with integrity and skill, adverse feedback from disputing parties is inevitable in view of misperceptions or misunderstandings that can occur during the session. The following are the more serious adverse comments that have been received in the author’s study on mediators’ conduct.

Developing good mediation practice Based on the feedback received, it is necessary for mediators to re-examine their conduct and improve their level of

Mediators might be perceived as biased or partial because of their choice of words used, their tone of voice or the way the message or statement is conveyed.

competency. The following good practice can be developed for mediation. Proper opening of sessions Mediators should conduct a proper opening for every mediation session. This is important to ensure that the parties are educated about the mediation process and what is expected from it. In particular, mediators should emphasise their impartiality. The importance of the mediator’s opening statement and its impact

(1) Some mediators were perceived to be rude and

on the mediation should not be underestimated.2

domineering during the mediation session. (2) Parties felt pressurised to settle as mediators did not

Show neutrality as well as impartiality

appear to want to listen to them, so there was no point in

Mediators should show neutrality as well as impartiality, and

going further.

not side with either party. It is necessary not only to speak in

(3) Mediators were perceived to be telling a party that they would encourage the other party to sue if the dispute

a neutral manner but also to show in action and conduct that the mediator is unbiased and fair.

were not settled. (4) Mediators prejudged the dispute based on the documents

Show respect

they had reviewed, eg the contract between the parties,

Mediators should show respect and be polite to parties,

and concluded that one party’s case had no merit.

although they may need to be firm at times. The mediator

(5) Mediators were clearly biased, arguing on behalf of one

needs to create a positive atmosphere. The parties also need

party. They did not give sufficient opportunity for the other

reassurance about their having selected mediation as an

party to explain the situation from its own perspective.

appropriate forum for their dispute.3

(6) Mediators,

when

acting

co-mediators,

showed

disagreement with each other openly and in front of the

Professional conduct in co-mediation

parties.

In situations where co-mediation is adopted, it is important

mediation that mediators do not quarrel with their co-mediators, and

(3) Remind parties that it is difficult to satisfy the needs of

certainly not in front of the parties. Mediators need to conduct themselves professionally.

both of them fully, even when there is a settlement. (4) Learn how to capture the essence of the dispute. (5) Learn to identify opportunities for settlement and ways to

Encourage but not force settlement

settle.

Mediators should attempt to encourage parties to settle but

(6) Remember that there are always at least two sides to a

should not force the issue. This is an important voluntary role

story, and at least one way of resolving the problem.

and purpose of mediation. Mediators should prevent coercion.4 Conclusion Value judgments

This discussion has emphasised the importance of mediator

Mediators should keep their value judgements to themselves,

conduct and how it can influence eventual settlement of a

that is, remain impartial, an objective that reflects an essential

conflict between disputing parties. Unless a concerted effort is

role of a mediator.

made to obtain feedback from the parties, however, mediators often go away without knowing how they have performed

Re-focusing on mediation fundamentals

in helping parties arrive at a settlement (or not). Mediators

To perform well, mediators need to remind themselves of the

may be perceived as biased or partial because of their choice

fundamentals in mediation. These are as follows.

of words used, their tone of voice or the way the message or statement is conveyed. They need to be aware that their

(1) To communicate well, learn to rephrase, reframe,

conduct and behaviour can adversely affect disputing parties.

summarise and use neutral language. (2) Remember that the purpose of mediation is not about

Based on complaints received from parties, valuable lessons

finding out which party is right or wrong. The one who is

can be learnt. These have been highlighted in this article and

‘right’ can also offer to settle.

it is hoped that they will provide useful inputs for improving mediation practice and conduct. adr

There are undesirable effects in achieving settlement at all costs. Mediators therefore need to avoid taking this approach. Disputing parties are likely to feel coerced to settle. … Even if the matter is settled, parties will feel that it was resolved on an unfair basis.

CW Moore, The Mediation Process – Practical Strategies for Resolving Conflicts (1986, Jossey-Bass Publishers, San Francisco).

LY Lim, The Theory and Practice of Mediation (1997, FT Law and Tax Asia Pacific).

R Charlton & M Dewdney, The Mediator’s Handbook: Skills and Strategies for Practitioners (1995, LBC Information Services, Sydney).

J Folberg & A Taylor, Mediation: A Comprehensive Guide to Resolving Conflicts without Litigation (1984, Jossey-Bass Publishers, San Francisco).

[2014] Asian Dispute Review

case notes

Defining the Scope of an Arbitral Tribunal’s Authority and Setting Aside of Awards in Cases Involving a State Party Suraj Sajnani Introduction

In 1994, a Project Development Agreement (the ‘PD

In Government of Lao People’s Democratic Republic v Thai-Lao

Agreement’) was entered into between GoL and TLL only,

Lignite Co Ltd & Honsa Lignite Co Ltd, the High Court in Malaya

granting TLL a concession to build a power plant at Hongsa

set aside an arbitral award on account of the arbitral tribunal

(the ‘Project’). The PD Agreement contained an arbitration

having exceeded and wrongly exercised its jurisdiction. The

clause (the ‘Arbitration Agreement’), directing disputes to be

judgment makes clear that even in an arbitration-friendly

settled at the Kuala Lumpur Regional Centre for Arbitration

jurisdiction such as Malaysia, the supervisory court will

under the UNCITRAL Arbitration Rules (1976 Edn).

ensure that an award handed down is within the tribunal’s jurisdiction, even if this means granting an extension of time

In 2006, the GoL purported to terminate the PD Agreement

to make a legitimate challenge to the award. The case has

and the two mining contracts on the grounds that “after

implications for:

a decade: not a watt of electricity was produced and not an ounce in weight of lignite was mined”.2

(1) participation in arbitrations by sovereigns; (2) the proper scope of an arbitral tribunal’s jurisdiction; and

Challenging the termination, TLL and HLL invoked the

(3) time limits for making applications to set aside award.

Arbitration Agreement in 2007. In 2009, a tribunal of three arbitrators (the ‘Tribunal’) held that the GoL had improperly

Background and facts

and invalidly terminated both the PD Agreement and mining

In 1992, the Government of Laos (‘GoL’) entered into two

contracts. Consequently, TLL and HLL were awarded US$56

mining contracts with Thai-Lao Lignite Co Ltd (‘TLL’) and

million and costs (the ‘Award’).

Hongsa Lignite Co Ltd (‘HLL’) for the mining of lignite in Hongsa, a region of Laos near the Thai border.

case notes The High Court judgment – Round One: the Court’s unfettered discretion The GoL applied to the High Court in Malaya at Kuala Lumpur,3 the supervisory court in this matter, to set aside the Award (the ‘Application’). Under the Malaysian Arbitration Act 2005 (the ‘Act’), “an application for setting aside may not be made after the expiry of ninety days from the date” of receipt of the arbitral award by the Applicant.4 The Application was made nine months after the expiry of this timeframe. As such, the Application included a prayer that the Court exercise its discretion under the Act to enlarge the time for making it, or alternatively exercise its inherent power to extend time,5 on the following grounds: (1) the GoL was a foreign sovereign; (2) the Award was made in excess of the Tribunal’s jurisdiction; (3) the Tribunal wrongly exercised jurisdiction over third parties; (4) the GoL was not conversant with local law requirements and did not receive competent advice from its legal advisors; (5) TLL and HLL would not be prejudiced if an extension were granted, whereas GoL would be prejudiced if it were not granted; and (6) the GoL was being compelled to expend efforts and resources on resisting enforcement applications in England & Wales, France, Singapore and the USA. At least half of these grounds are often found as a matter of course in investor-State arbitrations. It was therefore likely that the grounds which held particular weight in this matter were those relating to jurisdiction ((2) and (3)) and that relating to the inadequacy of legal advice given to the GoL ((4)). The High Court held that the wording in the Act was ‘directory’ (on account of the use of the word “may”) rather than ‘mandatory’ (on account of the absence of the word “shall”). Together with the Court’s inherent powers, the Act indicated that the Court did have power to grant a party an extension of

The case has implications for: (1) participation in arbitration by sovereigns; (2) the proper scope of an arbitral tribunal’s jurisdiction; and (3) time limits for making applications to set aside awards. did not, however, justify such an exercise of discretion because: (1) the Court found that the GoL did in fact have adequate legal representation; (2) the delay was not merely nominal.

Rather, it was

inordinate; (3) the substantive merits of the Application were not an essential consideration in determining an application that sought to condone delay; (4) Malaysian jurisprudence was inclined to adopt a ‘minimum court intervention’ approach. The Application was therefore dismissed. The ‘form over substance’ and ‘hands-off’ approaches taken by the High Court in this decision arguably negate the benefit that parties aim to achieve when choosing a seat with a strong legal framework. The Court of Appeal judgment: the benefits of bureaucracy The GoL appealed against the High Court’s decision to the Court of Appeal of Malaysia in Putrajaya.6 While echoing the High Court’s view that the Court had“an unfettered discretion to grant an extension of time”, the Court of Appeal held that the overriding principle was that “justice must be done.” In determining an application for an extension of time, the Court reiterated, citing The Government of India v Cairn Energy India Pty Ltd & Ors,7 that it must consider:

time for applying to set aside an award. The merits of this case

[2014] Asian Dispute Review

case notes (1) the length of the delay; (2) the reason for delay; (3) the prospects of success of the underlying application (judged on the standard of a ‘good arguable case’); and (4) the degree of prejudice to the side opposing the extension if one were to be granted. The Court of Appeal held that it ought to exercise its discretion in favour of granting an extension of time for, inter alia, the following reasons:

The Court also took into account the facts that (i) the GoL had never intended to flout the provisions of the Act and (ii) had

(1) dismissal of the application was “tantamount to requiring the GOL to pay out sums in respect of an award which is

expeditiously made the Application after it had been advised of the need to do so.

in excess of jurisdiction” and “shutting out the GOL from challenging [the Award] … in the only country competent

With regard to the seat’s approach to arbitration, the Court of

to hear the Application”; and

Appeal stated that although Malaysia had prima facie accepted

(2) the GoL’s delay was attributable to the fact that “implicit

the Model Law, this“does not in any way take away the powers

in the nature of governmental functioning is procedural

of the court in dealing with any application for extension of

delay incidental to the decision making process.”

time” – a matter that is not dealt with in the Model Law at all.

The Court of Appeal thus added a further consideration, in

While finality and a lack of court intervention are propellers

cases where the applicant is a sovereign, over and above

of the speedy rise of arbitration, it is also “equally desirable to

those laid down in Cairn Energy, namely the functioning of

ensure that arbitration is trusted and respected as a means of

government.

resolving commercial disputes.”

The judgment makes clear that even in an arbitrationfriendly jurisdiction such as Malaysia, the supervisory court will ensure that an award handed down is within the tribunal’s jurisdiction, even if this means granting an extension of time to make a legitimate challenge to the award.

The Court held that the cogency of GoL’s substantive arguments for setting aside (elaborated further in the next section) was good reason for extending time to make the Application. The matter was thus remitted to the High Court to reconsider the substantive application to set aside the Award. High Court judgment – Round Two: determining the substantive application Back in the High Court,8 Lee Swee Seng JC heard the Application on the grounds that the Tribunal – (1) had exceeded its scope by determining matters in relation to the mining contracts;

case notes (2) had wrongly exercised its authority over a third party; and (3) had breached the rules of natural justice by not granting the GoL an opportunity to be heard, other than by way of objection, on an issue in dispute. Lee JC quickly disposed of the third ground by noting that not every breach of the rules of natural justice offends public policy, and thus does not always stand as a ground for setting aside. On the two jurisdictional grounds, Lee JC noted that the Model Law “does recognise and respect [the] court’s

… [T]he Court of Appeal stated that although Malaysia had prima facie accepted the Model Law, this “does not in any way take away the powers of the court in dealing with any application for extension of time” – a matter that is not dealt with in the Model Law at all.

interference where arbitrators have acted outside the scope … and exceeded their jurisdiction.” He also pointed out the

(1) having gone beyond the confines of the PD Agreement,

clear distinction between the role of the supervisory court and

the Tribunal had exceeded its jurisdiction (which may be

the enforcement court and that, ultimately, whether or not

contrasted with the situation where a tribunal correctly

the Award was valid was a matter for determination by the

exercises jurisdiction but makes an error of law, in which

former. This approach was echoed in enforcement proceedings

case a supervisory court cannot not set aside an award on

in this case brought in England and the US, where a decision

jurisdictional grounds); and

on the jurisdictional challenge was deferred to the Malaysian

(2) the Tribunal had wrongly exercised jurisdiction by

court.9 It contrasts, however, with the approach of the Paris

determining matters relating to third parties in an

Court of Appeal which, on jurisdictional grounds, overturned

arbitration that, on the face of the Arbitration Agreement,

the decision of the Paris Court of First Instance allowing

was intended to apply to the parties to the PD Agreement

enforcement of the award.10

alone.

Resisting the Application, TLL and HLL contended that GoL

Conclusion

had participated in the Arbitration and was thus precluded

This judgment confirms that arbitrators need to tread carefully

from raising a jurisdictional objection. The Court held, however,

when determining whether they have jurisdiction to hear

that to raise an objection and then proceed to participate in

matters related to connected contracts or parties. Nevertheless,

the proceedings in a ‘passive’ manner and challenge the award

the judgment ought not to stand generally as an authority

after it had been made was “a perfectly legitimate course.”The

for parties to have a second shot at challenging a tribunal’s

Court noted that whether or not a party was precluded from

jurisdiction.

raising an objection was a question of the degree and extent of its participation and that, in the present case, the GoL

The decision lends support to the increasing practice of arbitral

had not gone past the “point of no-return where estoppel,

tribunals to:

acquiescence and waiver is concerned.” (1) bifurcate proceedings into jurisdictional and merits stages; Upholding the first two grounds of challenge and setting aside the Award, therefore, Lee JC held that:

and (2) express the determination on jurisdiction not in the form of a preliminary question, but instead in that of a

[2014] Asian Dispute Review

case notes partial award, which may be efficiently challenged in a

Press Release dated 29 January 2013, Ministry of Planning and Investment on behalf of the Government of the Lao People’s Democratic Republic.

Government of the Lao People’s Democratic Republic v Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd (2012) 10 CLJ 399.

supervisory court if need be, before expending time and resources on having a tribunal hear the merits, which would possibly be outwith the scope of its jurisdiction. Postscript TLL and HLL have appealed to the Court of Appeal of Malaysia against Lee JC’s decision, so the saga continues. At the time of writing, the judgment of the Court of Appeal remains pending. adr 1

4 Section 37(4). 5

Courts of Judicature Act 1964, Schedule, Item 8.

Government of the Lao People’s Democratic Republic v ThaiLao Lignite Co Ltd & Hongsa Lignite Co Ltd, Civil Appeal No W-02(NCC)-1287-2011.

[2003] 1 MLJ 348.

Government of the Lao People’s Democratic Republic v Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd [2013] 3 MLJ 409.

Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the Lao People’s Democratic Republic, 10 Civ 5256, 2011 WL 3516154 (SDNY, 3 August 2011) (Opinion and Order); Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the Lao People’s Democratic Republic, 11-3536-cv, 2012 WL 2866275 (2d Circuit, 13 July 2012); Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the Lao People’s Democratic Republic [2012] EWHC 3381.

RG No 12/09983, Paris Court of Appeal (19 February 2013).

Editorial note: The High Court in Malaya, seated in Kuala Lumpur, is one of two High Courts of Malaysia, the other being the High Court in Sabah and Sarawak.

Invitation to Submit Articles for Publication in the Asian Dispute Review The Asian Dispute Review journal seeks articles with an Asian focus on arbitration, mediation and ADR. We are also pleased to receive commentaries, case studies, book reviews, and regional updates from around Asia. If you are interested in contributing, please note the following guidelines: • • • • •

Contributions should be written in a style that is easily understood by lay readers Contributions should not focus on substantive law, although brief comment on substantive law may be included to the extent that it adds to the understanding of arbitration and ADR Contributions should not have been previously published in or submitted to another journal or news letter for consideration, and should not be available online Contributions should not be on a subject covered in depth by any paper in the previous two issues of Asian Dispute Review Contributions should be no longer than 2,000 words.

Before writing or submitting an article, we recommend that you read a complete version of our Editorial Guidelines, and contact the Editors first. Please contact the Editors at adr-editor@ninehillsmedia.com to receive a copy of our Editorial Guidelines or if you have any submission enquiries.

case notes

Treatment of Arbitration Provisions in Illegal PRC Contracts Margaret Tsau Introduction

The Claimant, which was incorporated in China, challenged

It is a trite statement of English law that a contract is

the awards pursuant to s 67 of the English Arbitration Act

unenforceable if its object is illegal under the law of a friendly

1996 (‘the Act’) on the ground that the arbitral tribunal lacked

foreign country. It is equally well-established that an arbitration

substantive jurisdiction. On such an application, the English

agreement is separate from its underlying contract.

court may confirm, vary or set aside the award in whole or in part.

If, however, a contract involves the performance of an unlawful act in a foreign country, can the parties enforce

During the hearing of the applications, the Claimant

its arbitration provisions when a dispute arises? In Beijing

submitted that (i) it was illegal under PRC laws for a Chinese

Jianlong Heavy Industry Group v Golden Ocean Group Ltd, the

legal person to make a foreign guarantee in favour of a foreign

Commercial Court of the Queen’s Bench Division held that

legal entity without having obtained prior authorisation of

arbitration provisions embedded in unlawful guarantees were

the State Administration for Foreign Exchange, and (ii) it also

enforceable.

contravened PRC foreign exchange regulations to transfer

funds from China to meet any demand on the guarantees. Background

Furthermore, argued the Claimant, the parties were fully aware

In Beijing Jianlong, the Claimant was liable as guarantor for its

of the illegality but still they conspired to evade PRC laws. On

subsidiary’s repudiation under charterparties. The guarantees

this basis, the Claimant contended that the guarantees were

were, however, unenforceable because their performance

unenforceable, which the Defendants conceded.

would inevitably have broken certain PRC laws. The Defendants therefore commenced arbitration proceedings in

Key issue

London pursuant to the arbitration provisions. Various awards

While it was common ground in the applications that the

were handed down against the Claimant.

unlawful guarantees were unenforceable, the key issue for the Court was whether the principle in Foster v Driscoll2 applied

[2014] Asian Dispute Review

case notes … It is a trite statement of English law that a contract is unenforceable if its object is illegal under the law of a friendly foreign country. It is equally well-established that an arbitration agreement is separate from its underlying contract. to the arbitration provisions embedded in the guarantees. In that case, the English Court of Appeal held that a bill of

which related to the arbitration agreement itself. Therefore, in

exchange (which by itself was not illegal as it merely provided

order to challenge successfully the validity of the arbitration

for payment of a specified sum) was unenforceable because

provisions and thereby set aside the awards, the Claimant

it was entered into as part of a bundle of agreements giving

had to establish that the arbitration provisions were directly

effect to an unlawful scheme. Applying similar reasoning,

impeached. This is, as Lord Hope said in Fiona Trust,“an exacting

the Claimant argued in the present case that the arbitration

test.” Furthermore, the Court pointed out that in order to hold

provisions should not be enforced as they were part of an

the arbitration agreement unenforceable, that agreement must

unlawful scheme.

involve an “intended commission of prohibited acts within the territory of a friendly foreign country (whose laws prohibit

Decision

those acts)”, which was “an essential and necessary ingredient

The court rejected the Claimant’s approach to the principle in

of the principle in Foster v Driscoll”. Looking at the facts of

Foster v Driscoll. First of all, the Court pointed out that it is

the present case, however, the arbitration provisions stipulated

provided in s 7 of the Act that an arbitration agreement which

that the arbitration was to be held in London, not in the PRC.

forms part of another agreement “shall not be regarded as

As such, no illegal acts whatsoever would be committed in a

invalid, non-existent or ineffective” per se because such other

foreign country by enforcing the provisions.

agreement is so vitiated, and shall be “treated as a distinct Thirdly, the Court noted that it was common ground that if

agreement.”

the public policy ground on which the underlying contract Secondly, the Court applied the principle in Fiona Trust &

was unenforceable also tainted the arbitration agreement, the

Holding Corporation v Privalov, in which the House of Lords

latter would similarly be unenforceable. On this public policy

held that an arbitration agreement was to be treated as a

point, the following two-step approach was adopted by the

distinct and separable agreement from the contract of which it

Court.

formed part, and mere unenforceability of the contract would not of itself result in the unenforceability of the arbitration

(1) Would the policy of the illegality rule that invalidates the

agreement. Nonetheless, the Court recognised in the present

underlying contract be defeated if the Court were to allow

case that it might be possible for an arbitration agreement to

a dispute to be determined by an arbitral tribunal chosen

be unenforceable if it were directly impeached on grounds

by the parties?

case notes (2) If it would, this would have to be balanced against

upholding arbitration provisions. By refusing the Claimant’s

powerful commercial reasons for upholding arbitration

applications to set aside the awards, this decision practically

provisions “unless it is clear” that to do so would offend

says that international businesses may get away with by-

the policy of the rule. In this case, it was held that the

passing exchange controls by taking disputes to be arbitrated

public policy ground did not tip in favour of the Claimant.

elsewhere. To the English court, is the real risk of capital flight faced by the PRC (as well as other developing countries with

Effects of the decision on arbitration provisions in PRC

foreign exchange regulations) a ‘commercial reason’ that is

commercial contracts

not powerful enough? Or are the interests of international

The significance of this English High Court decision is as

businesses more powerful commercially? adr

follows. Even if the Claimant could show that the policy of the illegality rule would be defeated by enforcing an arbitration agreement (which in effect would enable the parties to circumvent applicable PRC laws), it still faced the hurdle of

[2013] 2 Lloydʼs Rep 61.

[1929] 1 KB 470.

[2007] Bus LR 1719.

rebutting the so-called “powerful commercial reasons” for

About the Book Hong Kong has been institutionally separated from the United Kingdom for less than two decades. As recently as 25 years ago, it would have been difficult to perceive any appreciable emergence of a distinctly local Hong Kong common law. There were, however, some relatively early signs that the Crown Colony’s common law was adapting to Hong Kong conditions to better serve the local community. Professor Betty M Ho skilfully identified many of these earlier developments. Last published in 1994, Betty Ho’s immensely popular contract law title has been extensively revised and expanded, with a focus on Hong Kong developments which has been updated by Professor Stephen Hall of The Chinese University of Hong Kong. Authors: ISBN: Price: Format: Pages:

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[2014] Asian Dispute Review

Book review essay Mediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal Systems1 Mediation Ordinance: Commentary and Annotations2 Reviews by Robert Morgan

little or no foreign influence (such as Cambodia).

HONG KONG PRACTICE SERIES

Mediation ordinance

he reader to quickly gain an in-depth understanding gal context for mediation by commenting on the e, the way it has emerged from its traditional Chinese ation practice [should now] be conducted…”

Mediation

Mediation Ordinance

HONG KONG PRACTICE SERIES

new mediation regime in Hong Kong, which is ublication, is extremely important for commercial ers and all those working in the dispute resolution he new developments important for Hong Kong losely watched in other Asian countries and

ordinance Claire Wilson

Danny McFadden LLM, FCIArb Mediator, Arbitrator Managing Director CEDER (Centre for Effective Dispute Resolution) Asia Pacific

he Mediation Ordinance in Hong Kong now cements international and regional dispute resolution centre. rposes of the newly enacted Ordinance are: (i) to rage mediation for the resolution of disputes in Hong the confidentiality of mediation communications on

vides both a historical background and practical plication of the mediation process here in Hong rts and Government strongly advise that parties he mediation process before a matter is set down for certainly given its stamp of approval for mediation preferred alternate dispute resolution process. e of iRiver Hong Kong Ltd v Thakral Corp (HK) Ltd 00, the Court stated that the legal profession ‘must ation’s value and should routinely consider whether es can be resolved through mediation.’ A skilled nd provide solutions beyond the scope of what is and the court. This rebuke was prompted by the fact e damages were just over $1 million BUT the legal cost million.

prove an invaluable e interested and ew form of alternate whole-heartedly he courts and

n ways many and various, and to both greater and lesser degrees, mediation has substantially become part of the worldwide dispute resolution order. Whilst its development is often associated in Western minds with the ‘access to justice’ movement in the US from the mid-1960s onwards, mediation (in a number of guises) is of ancient heritage, not least in Asia. Furthermore, whereas in the West, ADR in general (and mediation in particular) has been seen primarily as a way of reducing clogged court dockets, and promoting efficiency in and saving public expenditure on civil justice (apparently in the cause of ‘consumer choice’), Confucian ideas in some Asian jurisdictions have co-opted it more as a traditional means of maintaining social harmony and therefore public order. In the People’s Republic of China, for example, socialist law and public administration practice have, in the guise of conciliation, embellished the Confucian approach to dispute resolution so as to macro- and micro-manage the populace. Two other broad – albeit general and perhaps even misleading – contrasts are apparent in approaches to ADR as between East and West ... Firstly, whereas Europe and North America have a more homogeneous approach to ADR (as illustrated by, respectively, the EU Mediation Directive and the US Uniform Mediation Act, which is in turn influenced by the UNCITRAL Model Law on International Commercial Conciliation 20023), approaches in Asia have been more varied and divide between (i) jurisdictions that have been heavily influenced by Western practice, whether common law or civil law influenced (such as Hong Kong, Singapore, Malaysia and Japan), (ii) those governed by socialist law (such as the PRC and Vietnam) and (iii) those that have (at least in the past) subscribed to more ‘traditional’ and community-based ways of resolving disputes that is subject to

Secondly (and partly as a result of the first contrast), whereas Europe and the US now emphasise the importance of co-opting mediation into the civil justice system through court-annexed or court-adjunct mediation under rules of court, Asian jurisdictions have generally been slower in following suit, presumably because of the underlying principle that dispute resolution should be based upon settlement and not compulsion. It is a common feature of court-adjunct mediation, in both West and East, that few jurisdictions have made it compulsory, preferring instead to give strong encouragement to parties to litigation to mediate whilst reserving the right to impose adverse costs orders on those who do not treat the mediation process seriously. On the Asian side of the Pacific Rim, Hong Kong has come closest to mandatory court-adjunct mediation, while two Australian jurisdictions (New South Wales and Queensland) have gone all the way. On the other side of the Rim, the US has for many years been the leading proponent of courtannexed ADR. Nevertheless, other Asian jurisdictions, notably Indonesia, Singapore and South Korea, have over the past 25 years adopted laws that, to greater or lesser degrees, co-opt mediation into the litigation system, particularly for commercial disputes.4 The overall picture is, therefore, one of regions in which developments and experiences have been mixed and the contrasts in fact far from stark. With this lesson in mind, Professor Wang Guiguo and Dr Yang Fan have launched their survey of mediation trends on both sides in the Asia-Pacific, Mediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal Systems. This title focuses on what is understood by ‘mediation’ in each of the jurisdictions surveyed, its history and features, how exactly their civil litigation systems have been affected by the mediation process and, particularly in relation to Asia, the influence of culture on dispute resolution. The book is, in the main, admirably uniform in its approach as to breadth, depth and subject-matter, helped no doubt by Dr Yang’s comprehensive and thematic List of Questions to Contributors (Appendix 1), which the vast majority of contributors appear to have followed reasonably faithfully. There are, however, some criticisms. A somewhat glaring exception to Dr Yang's injunction

Book review essay is the chapter on Australia which, whilst addressing the principal theme of impacts, limits discussion to family dispute resolution instead of surveying the far wider scope of mediation in that country. The author of this chapter has regrettably wasted an opportunity to depict mediation in Australia in a wider Asia-Pacific context. At the other end of the scale, China is accorded a far greater proportion of the book than any other jurisdiction. A lesser criticism concerns the omission of any mention of the Hong Kong Mediation Ordinance (Cap 620), which may have been the result of a long lead in period to publication, though the Hong Kong Civil Justice Reform and Practice Direction 31–Mediation are discussed in some detail. The General Editors have cast their net far and wide in defining ‘Asia Pacific’ by including India, though curiously there is a suggestion in their Preface that Canada and the US are not part of the Asia-Pacific (if by this we mean the Pacific Rim rather than Pacific Asia). Austria, whilst not a part of Asia, is included for general comparison. Its inclusion appears odd, however, and there are other European jurisdictions that might have made better comparators. It should also be noted that Cambodia, Laos, Vietnam and Malaysia are not included in the book. Treatment of the first three of these jurisdictions would have made for some very interesting comparisons, not least with regard to the traditional approaches to non-commercial mediation and the impact of socialist law and administrative practice on mediation/conciliation. These are, however, relatively minor criticisms of what is otherwise a laudable work that will contribute immeasurably to comparative knowledge of mediation and its impacts on legal systems and scholarship throughout a vast swathe of the globe. Of an altogether different order is Mediation Ordinance: Commentary and Annotations, by Claire Wilson, the latest title in Sweet & Maxwell Asia’s Hong Kong Practice Series. The subject-matter is the Mediation Ordinance (Cap 620), which represents Hong Kong’s minimalist or ‘thus far and no further’ approach to legislating for mediation. The first objective of the Ordinance, expressed in s 3(a), is “to promote, encourage and facilitate the resolution of disputes by mediation”, an objective which is based in broad principle on s 3(1) of the Arbitration Ordinance (Cap 609). Whereas the objective of the latter Ordinance is underpinned by a near comprehensive set of provisions, however, that of the former is underpinned by provisions that are few in number and limited in nature and subject-matter, being concerned primarily with rules as to confidentiality, admissibility and disclosure of mediation communications, pursuant to the second objective of the

Ordinance set out in s 3(b). The Mediation Ordinance therefore stands in great contrast to more comprehensive mediation legislation overseas, such as Malaysia’s Arbitration Act 2012. Claire Wilson’s book is a detailed and carefully written section-by-section commentary on the Mediation Ordinance, discussing each provision by reference to its legislative origins and history, its aim(s), the words and phrases employed and their interpretation, the duties of lawyers and cross-references to related provisions. These are supported by extensive references to case law (primarily Hong Kong and English) and to opinions expressed on the Mediation Bill by the Administration in papers to the Legislative Council. As one might expect, the book does not discuss the Ordinance in isolation from the system of which it forms part but discusses the history of mediation in China and Hong Kong and development of the mediation process and procedure in the context of Hong Kong, thus enabling the reader to see precisely how the Ordinance fits in. The author also provides illustrations of the mediation services and structures that have been provided in Hong Kong by dispute resolution and other institutions and by trade bodies, through court-adjunct mediation under the CJR and Practice Direction 31–Mediation and through court- and tribunal- related mediation under other Practice Directions. Well over half of the book comprises appendices which set out the texts of the Ordinance, together with other instruments and materials, including all Practice Directions relevant to mediation, the Hong Kong Mediation Code, prescribed forms and the recommendations of the Secretary for Justice’s Working Group on Mediation (February 2010). In the context of this book, what this reviewer would normally regard as ‘filler’ in fact provides the reader with a single, accessible and comprehensive information resource on the Ordinance and its place in the spectrum of mediation post-CJR. This book is an essential resource for all Hong Kong mediators, litigators and mediation practitioners. adr 1

Wang Guiguo & Yang Fan (2013, CCH Hong Kong/Wolters Kluwer), ISBN 978-988-12216-0-5, xlv + 559 pp, casebound.

Claire Wilson (2013, Sweet & Maxwell Asia/Thomson Reuters). ISBN 978-, xxv + 444 pp, soft cover.

3 Only 11 US States, together with Washington DC, are listed as Model Law jurisdictions by virtue of having adopted the Uniform Mediation Act, while only two Canadian Provinces – Nova Scotia and Ontario – are so listed. No Asian jurisdiction has adopted the Model Law: see http:// www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model_ conciliation_status.html. 4 Exceptionally in Asia, Thailand and Japan were (in 1935 and 1951 respectively) early converts to court-annexed conciliation.

[2014] Asian Dispute Review

NEWS

Effective date of amendments to Hong Kong's Arbitration Ordinance and subsidiary legislation

Arbitrators and Umpires) Rules (Cap 609B).

mendments made to the Arbitration Ordinance (Cap 609) pursuant to the Arbitration (Amendment) Ordinance (No 7 of 2013) were reported in the July and October 2013 issues of Asian DR.1 Many, but not all, of the amendments came into force on 2 December 2013. The amendments that have been given effect are those relating to enforcement of emergency relief2 and various provisions relating to domestic and non-Convention foreign awards,3 Convention awards4 and Mainland

awards.5 The provisions of a new Part 10, Division 4 of the Ordinance as to the enforcement of Macau awards in Hong Kong6 have not yet been given effect, however. For the time being, therefore, Macanese awards remain enforceable under Part 10, Division 1 of the Ordinance. The Arbitration (Appointment of Arbitrators and Mediators and Decision on Number of Arbitrators) Rules (Cap 609C) also took effect on 2 December 2013 and replace the Arbitration (Appointment of

Quality advice and deliverables that will make a real difference.

Both the updated Ordinance and the new appointment rules may now be viewed and downloaded in PDF format at the BLIS website.7 adr 1

Hong Kong Arbitration (Amendment) Bill [2013] Asian DR 107; Changes to Hong Kong arbitration legislation [2013] Asian DR 154.

Part 3A (ss 22A and 22B) of the principal Ordinance, together with a consequential amendment to s 5(2) regarding the application of the Ordinance.

Ibid, s 86(1)(a), (3) & (4).

Ibid, ss 87(1) & (2), and 89(1), (2)(a), (4) & (5).

Ibid, ss 92(2), 93(2) and 95(1), (2)(a) & (4).

6 See Hong Kong Arbitration (Amendment) Bill (note 1 above) and Reciprocal enforcement of awards between Hong Kong and Macau [2013] Asian DR 107. 7 http://www.legislation.gov.hk/eng/home. htm.

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n 18 November 2013, the ICC Secretary-General and the President and Secretary-General of the ICC International Court of Arbitration joined Israeli and Palestinian business leaders in Jerusalem to inaugurate the Jerusalem Arbitration Centre (JAC) and sign a memorandum of engagement. JAC is a joint venture between ICC Israel and ICC Palestine and is the first measure since the Oslo I Accord of 1993 to implement an internationally agreed mechanism for resolving commercial disputes between Israeli and Palestinian parties. The JAC will apply arbitration rules based upon the ICC Rules of Arbitration (2012 Edn).

NEWS

International institutional anniversaries 90th anniversary of the ICC International

Court of Arbitration 2013 marks the 90th anniversary of the establishment by the ICC of its arbitral arm, the International Court of Arbitration (the Court), four years after the foundation of the ICC in 1919.1 Instrumental in the Court’s foundation was the inaugural President of the ICC, Etienne Clémentel, a former French Minister of Commerce. Known originally as the Court of Arbitration (the appellation ‘International’ having been added to the Court’s name in 1989 by a decision of Council of the ICC), the Court was established in 1923 to “pioneer … international commercial arbitration as it is known today, initiating and leading the movement that culminated

in the adoption of the New York Convention, the most important multilateral treaty on international arbitration. The Court has also developed resolution mechanisms specifically conceived for business disputes in an international context.”2 These mechanisms have, over the years been expanded beyond arbitration to include such processes as expertise, mediation and dispute boards. Permanent Court of Arbitration celebrates

centenary of the Peace Palace A seminar organised by the Permanent Court of Arbitration (PCA) and themed From Gunboat Diplomacy to InvestorState Arbitration was held on 11 October 2013 to celebrate the centenary of the

opening of the Peace Palace in The Hague. The Peace Palace was built to house the PCA, which had been established in 1899 under the Hague Convention on the Pacific Settlement of International Disputes of that year. Moderated by Judge Peter Tomka, President of the International Court of Justice (to which PCA members elect ICJ judges), the keynote address was delivered by the President of ICCA, Mr Jan Paulsson. adr 1 ICC, The merchants of peace – http:// www.iccwbo.org/about-icc/history. 2 ICC, Arbitration – http://www.iccwbo.org/ products-and-services/arbitration-andadr/arbitration.

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[2014] Asian Dispute Review

NEWS

International institutional appointments ICC Ms Sylvia Tee, formerly of Singapore law firm Allen & Gledhill, was appointed by the ICC with effect from 12 November 2013 as Regional Director for Arbitration and ADR for Asia. Based in Singapore, Ms Tee will be responsible for promoting ICC arbitration and other dispute resolution services throughout Asia, as well as co-ordinating the activities of the ICC Young Arbitrators Forum across the region.

New ICC Mediation Rules

he ICC unveiled its new Mediation Rules (the Rules) at a global launch conference held in Paris on 4 December 2013.1 The Rules, which took effect on 1 January 2014, replace the ICC’s ADR Rules (2001), reflecting the reality that mediation was the process chosen in 90% of cases under those rules. The Rules,2 and accompanying Mediation Guidance Notes,3 a practical guide for users, were drafted by a Task Force for the Revision of the ICC ADR Rules (which comprised 90 ADR specialists – mediators, commercial mediation users, counsel and other dispute resolution experts – from 29 countries), and approved by the ICC Commission on

Arbitration and ADR. Unless the parties otherwise agree, cases filed for mediation with the ICC will be administered by the ICC International Centre for ADR, but with enhanced responsibilities. The Rules and Guidance notes are currently available in eight languages, including English, French and Chinese. adr 1

ICC press release, New ICC Mediation Rules unveiled at global launch event – http://www.iccwbo.org/News/Articles/2013/ New-ICC-Mediation-Rules-unveiled-atglobal-launch-event.

2 http://www.iccwbo.org/products-andservices/arbitration-and-adr/mediation/ rules. 3 http://www.iccwbo.org/Products-andServices/Arbitration-and-ADR/Mediation/ Rules/Mediation-Guidance-Notes.

ICCA Mr Albert Jan van den Berg, founding partner of Belgian law firm Hanotiau & van den Berg of Brussels and a Professor of Law at Erasmus University, Rotterdam, was on 1 November 2013 elected as the next President of the International Council for Commercial Arbitration (ICCA). Mr van den Berg is a renowned member of the international arbitration community, principally as author of his seminal text, The New York Convention of 1958, and as General Editor of the Yearbook Commercial Arbitration. His term of office will commence at the ICCA Congress in Miami (6-9 April 2014), on the retirement from office of Mr Jan Paulsson, who has held office since 2010. adr

NEWS

Hong Kong Arbitration Week 2013

he second Hong Kong Arbitration Week, held on 21-24 October 2013, was again an unequivocal success. The legal and commercial communities generously sponsored this event, which gathered over 350 arbitration practitioners, officials and scholars to engage in a lively and vibrant series of events on the development of arbitration across Asia. Arbitrating in the BRICS: Developments & Challenges; What Role for the PCA; and ICC-HK/HK45 Evening Seminar &

Cocktail Events on Monday, the first day, situated Asian arbitration in the larger global context. Meaningful dialogue took place on arbitration developments in Brazil, Russia, India, China and South Africa (BRICS), organised by the ICCYAF (Young Arbitrators Forum) in the morning. Attention then turned to the role of the Permanent Court of Arbitration (PCA) in today’s world, with Deputy Secretary-General Brooks Daly surveying the background, recent cases and future trajectory of the world’s oldest dispute resolution centre. The first day concluded with the opening seminar and cocktail organised by ICC-HK and HK-45. Secretary for Justice Rimsky Yuen SC JP offered a policy perspective on the future of international arbitration culture in Asia and vowed that the Hong Kong Government would spare no effort to keep Hong Kong’s arbitral infrastructure up to date.1 Arbitration in Mainland China; HK Arbitration Charity Ball On Tuesday, the sold out seminar organised

by the China International Economic and Trade Arbitration Commission (CIETAC) brought together eminent China experts to give practical recommendations on how to manage and conduct arbitration proceedings in China and to provide an overview of the Chinese judiciary’s approach towards arbitration and maritime arbitration. In the evening, over 300 delegates gathered together for the 2nd annual HK Arbitration Charity Ball and raised a total of HK$850,000. This year’s main beneficiary was the Society for Community Organization (SoCO), a local charity which provides care for up to 200,000 people who live in subsidised housing in Hong Kong. The other beneficiary was the Vis East Moot, which will receive approximately 25% of this year’s proceeds for work with developing countries to improve arbitral programmes. ADR in Asia Conference The annual ADR in Asia Conference brought over 240 esteemed local and international practitioners together to witness HKIAC’s new Administered Arbitration Rules in practice. In a mock arbitration, Hong Kong’s first Emergency Arbitrator was appointed, and a tribunal considered whether to join an additional party to the arbitration and whether or not to consolidate multiple arbitrations – all powers enabled by the new HKIAC Rules, which took effect on 1 November 2013. The conference also discussed two particularly timely issues facing the arbitration community today: the regulation of ethics and third party funding.

3rd Annual GAR Live, Asia The Global Arbitration Review held its third annual GAR Live Asia to tie together the events of the week with a review of regional developments in China, Hong Kong, South Korea, Japan, India, and Southeast Asia as well as its first “yum cha” interview with two celebrated international arbitrators. The GAR event concluded with an Oxford Union-style debate between eminent practitioners. 2014 HK Arbitration Week The Hong Kong International Arbitration Centre (HKIAC) has established the Hong Kong Arbitration Week to celebrate the triumphs of and challenges to international arbitration while actively promoting the development of the practice in Asia. Through conferences, seminars and evening receptions, Hong Kong Arbitration Week seeks to provide a multitude of fora in which users and practitioners can come together to exchange ideas on how best to manage this increased demand for arbitration services. Save the dates for the 2014 HK Arbitration Week: 14–17 October 2014. adr 1

Editorial note: See The Future Development of Arbitration in Asia: The Policy Perspective – http://www.doj.gov. hk/eng/public/pdf/2013/sj20131021e1. pdf.

Contributors to this month’s News section: Robert Morgan Karen Tan [2014] Asian Dispute Review

Events 15 January 2014

The Future of Financial Transactions in Asia – Opportunities and Challenges Venue: Hong Kong Organiser: HKIAC Website: http://hkiac.org/index.php/en/2014

15 – 17 January

ICC Institute Masterclass for Arbitrators, Singapore Venue: Singapore Organiser: ICC Institute Website: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/ICC-Institute-Masterclass-for-Arbitrators,Singapore

17 – 18 January

2014 ADNDRC Conference - Rethinking Domain Name Dispute Resolution in the Era of New gTLDs Venue: Kuala Lumpur, Malaysia Organiser: KLRCA Website: http://klrca.org.my/scripts/list-posting.asp?recordid=458

13 February

The Allocation of Costs in International Arbitration Venue: Paris, France Organisers: ICC Website: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/The-Allocation-of-Costs-in-InternationalArbitration/?tab=programme

13 – 14 February

17th Annual IBA International Arbitration Day Venue: Paris, France Organiser: IBA Website: globalarbitrationreview.com/events/1652/17th-annual-iba-international-arbitration-day

28 February – 1 March

Vienna Arbitration Days 2014 Venue: Vienna, Austria Organiser: Austrian Yearbook on International Arbitration/ICC – Austria/Vienna International Arbitration Centre/YAAP/ Austrian Arbitration Association Website: http://www.viennaarbitrationdays.at

10 – 12 March

International Arbitration in the Middle East and North Africa (MENA) Venue: Dubai, UAE Organiser: ICC Website: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/International-Arbitration-in-the-Middle-Eastand-North-Africa-%28MENA%29/?tab=programme

26 – 28 March

10th Anniversary APRAG Conference Venue: Melbourne, Australia Organiser: Australian Centre for International Commercial Arbitration (ACICA) Website: http://apragmelbourne2014.org

31 March – 6 April 2014

11th Annual Willem C Vis (East) International Commercial Arbitration Moot Venue: Hong Kong Website: http://www.cisgmoot.org/index.html

6–9 April

ICCA Miami 2014: ‘Legitimacy: Myths, Realities, Challenges’ Venue: Miami, USA Organiser: ICCA Website: http://www.iccamiami2014.com/index.php

12 – 17 April 2014

21st Annual Willem C Vis International Commercial Arbitration Moot Venue: Vienna Website: http://cisgw3.law.pace.edu/cisg/moot/mootlist.html#top

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Entry Requirements Bachelorâ&#x20AC;&#x2122;s degree in a construction-related discipline or equivalent (including recognized professional qualifications) plus relevant work experience (preferably at least 2 years) ; or Qualified lawyer. Professional recognition The PgD/MSc programme has full accreditation for membership (AHKIArb) from the Hong Kong Institute of Arbitrators Those students who opt to complete the mediation workshop of the programme will be exempted by various professional institutions in Hong Kong and overseas as achievement of approved mediation course leading to membership (subject to assessment) The MSc programme is accredited by the Royal Institution of Chartered Surveyors [RICS] as meeting their academic requirements Programme Structure Information related to the programme structure is available from the website (http://www.bre.polyu.edu.hk/frameset/frameset_co urse.html) or from the Programme Leader, Prof. Edwin H. W. CHAN (tel: 27665800, email: bsedchan@polyu.edu.hk). Enquiries and Application Online application website : http://www.polyu.edu.hk/study Enquiry Tel.: 3400 3819 Connie Yap (Dept. of BRE) or 2333 0600 (Academic Secretariat) Application deadline : 28 February 2014

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