Centres for arbitration gravitating towards Asia

By Vincent Wee from Hong Kong

 

 

The atmosphere for international arbitration is ripe for a movement towards Asia and away from the more developed West. This was one of the themes that was discussed at the recent International Congress of Maritime Arbitrators in Hong Kong.

Chief among the factors driving this is the gravitation of shipping activity towards the region as China and the other Asian economies outpace those of the West. However, with the growth of trade, also inevitably comes an increase in the incidents of dispute, which then raises questions of the best dispute resolution mechanisms for the current conditions.

This is where issues such as cultural and linguistic sensitivity come in. According to Simon Croall QC of London’s Quadrant Chambers, “the goal of the linguistic and cultural sensitivity deployed by those in the arbitral process must be to eliminate any legitimate cause for a losing party to feel that it has lost because has been misunderstood or, which is even worse, discriminated against”.

But this goal is not a simple one. Underscoring the core challenge, Croall said: “It is essential to the process that parties and witnesses participating in arbitration are not only heard but understood. Without that understanding, there is a real risk of failing to ensure that the parties are given a fair hearing.”

Among the factors that can affect it are different attitudes towards record keeping and internal corporate governance for example. As such, acknowledging cultural differences as part of the agenda is important, Croall said.

Although a suggested solution would be to ensure that arbitrators are from the same culture as the parties. However this brings about another issue of language ability. While international arbitrators are required to have a wide range of skills such as legal skills as well as an understanding of commercial markets, they may not have knowledge and language skills of a particular culture such as in China for example.

This is where Hong Kong provides a good option as an international arbitration centre, noted the territory’s solicitor-general Frank Poon. Not only does the territory have a well-recognised legal system and good infrastructure, but also good arbitrators that are fluent in Chinese languages.

However moving beyond this to more remote jurisdictions poses different questions. Christopher Hasche of Fleet Hamburg raised the issue of protecting contractual rights in countries with varying degrees of effectiveness in their judicial systems.

“Only if contractual rights can be pursued and – where necessary – enforced, is there sufficient safety for the conclusion of the business,” said Hasche. Although he spoke from his experience in Ghana, Hasche noted that “there are many regions in the world where foreign enterprises cannot be sure that their claims for damages will be supported by courts if the local business partner does not fulfil its contractual obligations”.

He also highlighted the problem of rampant and blatant corruption in some developing countries. Hasche pointed out that while many shipping businesses rely on the practically worldwide enforceability of arbitration awards under the 1958 New York Convention, this may prove to be misguided as in order to enforce an award in a developing country, one needs to approach the local courts, which brings back the problem of corruption.

“A favourable arbitration award might turn out not to be worth more than the piece of paper on which it is written if a corrupt judicial system ignores the New York Convention and acts contrary to the local law. Reality often differs from the law where judges are happy to accept bribes,” said Hasche.

As a result, he suggested mediation as a viable alternative that will have a better chance of success. Since the mediator does not decide the dispute, a fair and open discussion can be held between the parties to find a mutual solution with the mediator only providing the structure of the discussion.

Another plus point is that the process has a high chance of being corruption-free, Hasche said. “The mediator does not have an impact on the substance of the result because his impact is limited to facilitating the discussion. Accordingly, it would be of no use to bribe a mediator,” he concluded.



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