The Role of Arbitration in Free Trade Area

Introduction

Arbitration plays important role in the international trade today. Most of contracts affecting international trade, and if contracts provide dispute arise under two country, dispute would be settled by arbitration. Using an arbitration should be based on an agreement between the dispute parties. The parties’ agreement could be given after the dispute happened and that agreement only limited by that dispute.

The reason why arbitration become popular in the way to settle disputes is by using this way disputes can be settled quicker and more satisfying, better than if we are using judicial settlement.

The Association of South East Asian nations (ASEAN) comprises ten countries, namely, Brunei Darussalam, Burma [Myanmar], Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Philippines, Singapore, Thailand, and Vietnam. ASEAN Free Trade Association (AFTA) is a body which acts in trade in South East Asia. This region had been abundant in trading activities including the famous spice trade. Disputes must have been regularly resolved.

At the present legal system of each country has developed from a past where the boundaries were not clearly drawn and with each phase of development a layer of influence that helped shaped the present legal system was added on. This essay is trying to examine the recent development in arbitration. This essay also examine dispute resolution framework is examined as regards the applicable law for contractual disputes, the enforcement of foreign judgments in general, and the framework for arbitration including the enforcement of foreign arbitral awards.

Recent Development in Arbitration[1]

Indonesia use Law No. 30 of 1999 as its Law on Arbitration and Alternative Dispute Resolution. Many of the superseded laws found its way back to the new law although there are a number of innovations, for example, the parties may apply to an arbitral institution for a binding opinion as to a point of law or the interpretation of a provision in their underlying agreement, even where no dispute has arisen. This service has long been offered by Badan Arbitrase Nasional Indonesia (BANI). Although New York Convention was ratified on 5^th January 1982 by Indonesia, it was not implemented until 1990 by the Supreme Court Regulation No 1 of 1990. Indonesia became a contracting state of the ICSID Convention on 28^th October 1968. The arbitral bodies include BANI, Indonesian Board of Arbitration, Indonesian Muamalah Board of Arbitration, and Indonesian Alternative Dispute Resolution Centre

In Brunei Darussalam, the applicable arbitration legislation is the Arbitration Act Chapter 173 1999 edition. It is a party to the New York Convention which came into operation on 23^rd October 1996 and it became a contracting state of the ICSID Convention on 16^th October 2002. There is no arbitral body in Brunei.

Burma/Myanmar’s arbitration legislation are the Arbitration Act 1944 (Burma Act IV, 1944) which came into force on 1^st March 1946 and the Arbitration (Protocol and Convention) Act (India Act VI, 1937) which came into force on 19 January 1939. However, Burma/Myanmar is not a party to both New York Convention and ICSID Convention. The Union of Myanmar Chamber of Commerce and Industries do provide arbitrators to the parties seeking help in appointment. However, the Chamber is not independent of the government.

Cambodian legal system traditionally encourages mediation over adversarial conflict and adjudication. Although there are plans to create a commercial tribunal and an arbitration and mediation body, the courts are now the only judicial forum to settle commercial disputes. There are no laws to require the courts to enforce a foreign arbitral award. Although Cambodia had signed the New York Convention in 1960, it has yet to implement the Convention. Cambodia is also not a Contracting State of the ICSID Convention. However, there is a bilateral agreement with Thailand on the promotion and protection of investment which provides for reference to international arbitration as well as to ICSID. The main arbitral body is Cambodia Centre for Conflict Resolution.

Lao People’s Democratic Republic have no arbitration legislation. However Article 21 of the Law on the Promotion and Management of Foreign Investment in the Lao People’s Democratic Republic provides for the submission of disputes to the economic arbitration authority of the Lao PDR or to any other mechanism for dispute resolution of the Lao PDR, a foreign country or an appropriate international organization which the disputants can agree upon. Laos is a party to the New York Convention. This came into operation on 15^th September 1998. However, it is not a party to ICSID Convention. The main arbitral bodies in Laos are the Lao Chamber of Commerce Arbitration Commission and a similar organization established by the Ministry of Finance.

Malaysian Arbitration Act 1952 is modeled on the UK Arbitration Act 1950. This was amended by the Arbitration (Amendment) Act 1979 (Act A 478) which excluded from the ambit of the Act, arbitrations held under the ICSID Convention, UNCITRAL Arbitration Rules and the Rules of the Regional Centre for Arbitration at Kuala Lumpur. A new Arbitration Act is being contemplated. Two models are being considered, namely the UK Arbitration Act 1996, and the NZ Arbitration Act 1996. Malaysia has ratified the New York Convention by the Convention on the Recognition and enforcement of Foreign Arbitral Awards Act 1985 (Act 320) which came into force on 3^rd February 1986 and the ICSID Convention by the Convention on the Settlement of Investment Disputes Act (Act No 14 of 1966). Malaysia became a contracting state of the ICSID Convention on 14^th October 1966. The main arbitral body is the Kuala Lumpur Regional Centre for Arbitration.

Philippines’ legislation is the Arbitration Law (Republic Act No 876) enacted in 1953 with special laws set out in Executive Order No 1008 known as the Construction Industry Arbitration Law. Although the Philippines ratified the New York Convention on 10^th June 1967, there is no law prescribing the procedure for the enforcement of foreign arbitral awards. There are two other arbitral bodies, namely, the International Chamber of Commerce (Philippines) and the Philippines Dispute Resolution Center Inc.

In Singapore the International Arbitration Act (Cap 143A 1995 Rev Ed) as amended by Act 38 of 2001 adopts the UNCITRAL Model Law. It also re-adopted the New York Convention which came into operation on 19^th November 1986. The legislation governing domestic arbitration is the Arbitration Act 2001 which is also based on UNCITRAL Model Law as well as the UK Arbitration Act 1996. Singapore has also enacted the Arbitration (International Investment Disputes) Act (Cap 11 1985 Rev Ed) as amended by Act 34 of 1992. The main arbitral bodies are the Singapore International Arbitration Centre, the Singapore Institute of Arbitrators and the International Chamber of Commerce.

In Thailand the Arbitration Act 2002, which replaced the 1987 Arbitration Act, adopted the UNCITRAL Model Law. The Act also re-adopted the New York Convention which came into operation on 20^th March 1960. Thailand, however, has yet to ratify the ICSID Convention although it has enacted the Convention Establishing the Multilateral Investment Guarantee Agency. The main arbitral bodies are the Thai Arbitration Institute and the Thai Chamber of Commerce.

There is no arbitration law in Vietnam. Vietnam is a party to the Bilateral Trade Agreement with the USA which provides that disputes between companies or persons of each country against the other, Vietnam, the USA or the company concerned may submit the dispute to ICSID or arbitration elsewhere as agreed.

Dispute Resolution Framework affecting ASEAN Countries

At the Bangkok Declaration, 8 August 1967, when ASEAN was born, the founding countries were Indonesia, Malaysia, the Philippines, Singapore and Thailand. Brunei Darussalam joined in 7^th January 1984 while Vietnam became a member in July 1995. Then, the Lao People’s Democratic Republic and Myanmar were made members on 23 July 1997.The last member was admitted into the association by the Declaration on The Admission of The Kingdom of Cambodia Into The Association of Southeast Asian Nations, 30^th April 1999.

Although there was a provision in the Agreement for the Promotion and Protection of Investment, 15 December 1987, disputes were settled in the ASEAN spirit. Essentially, the countries used the musyawarah and mufakat consensus to settle disputes before 1992.

In particular, Article X, paragraph 1 of the Agreement for the Promotion and Protection of Investment, 15 December 1987 provides that any legal dispute arising directly out of any investment between any Contracting Party and a national or company of any of the other Contracting Parties, it shall as far as possible be settled amicably between the parties to the dispute. If such a dispute cannot be settled within six months of its being raised, then either party can elect to submit the dispute for conciliation or arbitration and such election shall be binding on the other party. The dispute may be brought before the International Centre for the Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), the Regional Centre for Arbitration at Kuala Lumpur or any other regional centre for arbitration in ASEAN, whichever body the parties to the dispute mutually agree to appoint for the purpose of conducting the arbitration.

Besides ASEAN, the countries in ASEAN may also be members of the Asia-Pacific Economic Cooperation (APEC) and/or the World Trade Organization (WTO).

APEC “is the only inter governmental grouping in the world operating on the basis of non-binding commitments, open dialogue and equal respect for the views of all participants.”[2]. It has no treaty obligations. Decisions are made by consensus and commitments are undertaken on a voluntary basis. APEC regards the WTO Dispute Settlement process as the primary channel for resolving disputes and supports this channel by helping to avoid disputes through non-adversarial and voluntary approaches. Seven out of ten members of ASEAN are members of APEC.

WTO is the only global international organization dealing with the rules of trade between nations[3]. Seven of the ASEAN countries are members of the WTO while three have the observer government status. Disputes are settled by the Dispute Settlement Body according to the Dispute Settlement Understanding, the main WTO agreement on settling disputes. There are also Rules of Conduct on the rules and procedures for settling disputes that were adopted in December 1996 and the Working Procedures for Appellate Review[4].

Conclution

The dispute resolution framework of each country may be found in its legal system including the applicable law relating to commercial activities, for example, the law of contract applied by the courts as well as the recognition and enforcement of judgments given by foreign courts. In addition, the existence of an arbitration regime that is alternative to dispute resolution by the courts including the applicable arbitration legislation and the recognition and enforcement of foreign arbitral awards under the New York Convention of 1958.

The state of each country in ASEAN as regards their dispute resolution framework as a state and a member of international conventions and groupings. It is found that in the last decade, a strong dispute resolution framework has been shaped and it continues to improve.

ASEAN countries have seen many changes taking place in the development of its dispute resolution framework based on the progress made in their respective legal systems and through ASEAN, APEC and WTO. Now as compared to a decade ago, the ten ASEAN countries are in a far better position to assure each other and ASEAN’s trading partners that an effective dispute resolution framework is put in place to cope with much greater economic activities.

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[1] www.soc.nii.ac.jp/jaie/2003Chan%20Paper.doc Dr. Phillip Chan, a Paper, Development of Disputes Resolution Framework in ASEAN Countries.

[2] http://www.apecsec.org.sg/apec/about_apec.htnl

[3] http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm

[4] http://www.wto.org/English/tratop_e/dispu_e/dispu_e.htm

#an essay from my university era