Arbitration

Aman Kumar Yadav and Arjun Chakladar on Arbitration’s Shift to the East

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Arbitration in recent times has seen immense growth globally and has been recognized almost unilaterally by majority of legal frameworks as the premier alternative dispute resolution procedure. Arbitration as a process has gained traction due to its methodology gaining prevalence outside the walls of litigation, and a process where both disputing parties come to terms amicably and the arbitration award rendered by the arbitrator/ arbitral tribunal is enforceable and legally binding without the formality and myopic scope of the litigant courts.

Arbitration, as a procedure has its roots and stronghold in the United States of America, with the ‘New York Convention’ and UNCITRAL Arbitration rules,[i]both landmarks for ad hoc arbitration procedure being devised in America, and the other stronghold for arbitration is Western Europe, namely the United Kingdom. There were two main courts located in the Western Hemisphere namely the International Chamber of Commerce court for Arbitration, situated in Paris and the London Court of International Arbitration.

However in recent times, there has been a monumental shift for commercial arbitration, which has migrated to arbitration hubs situated in the east, and in many instances gaining preference when compared to erstwhile arbitration hubs in the West. Specifically, it has encapsulated regions such as the Middle East, the Afro-Asian demographic but has mainly centered itself in South East Asia, especially in the arbitration hubs of Singapore and Hong Kong. However, the niche which has grown into a revolution is majorly based upon matters international in nature. The arbitral centres in Dubai, Singapore, Japan and China, cater more to matters brought by foreign actors from different countries who have amicably decided that they will conduct their commercial dispute in an Arbitral centre situated in the East.

The most prominent international arbitral centre being, the SIAC or the Singapore International Arbitration Centre, which since its establishment in 1991 gained a dominance for arbitration in the East, with a flurry of cases coming in since the year 2014, and in 2016 SIAC had more than 300 cases submitted for arbitral proceedings and more than 80%,[ii]of all of these matters have been considered as international cases. The main clientele that the SIAC tends to are not domestic in nature but come from various nations who agree to arbitrate majorly on Singaporean law, British law and Indian law, commonly not choosing the law governing their nations. The main slew of clients for the SIAC are Indians, who flock to Singapore owing to a multiplicity of reasons, be it the common demographics, the shared linguistic similarities or the similar legal framework. Apart from India, clients from the USA, United Kingdom, China, Japan and Middle East all flock to Singapore for its established reign in the Eastern Arbitration market.

Moving on, the next major hub for arbitral proceedings in the East is Hong Kong, with its arbitral centre “HKIAC” or the Hong Kong International Arbitration Centre. In Hong Kong almost all of the cases were classified as ‘international’, wherein almost half of the arbitral parties did not belong to Hong Kong and flocked from various regions in the East, such as Japan, China and other South Eastern nations. Hong Kong has gained popularity majorly by gaining reliability regarding arbitrations concerning Chinese parties. In recent time, majority of arbitral parties have engaged in arbitrations governed majorly by Hong Kong Law, followed subsequently by Chinese and English Law to dictate proceedings.

Owing to the fact that the HKIAC was founded in 1985,[iii]it outnumbers the SIAC in terms of number of arbitral seats but the main character of comparison being that the SIAC, tends to Indian and American arbitral parties with the HKIAC tending to Chinese and South- East Asia based parties. The HKIAC is seen more of a regional arbitration centre and has established a hegemony when it comes to regional disputes but SIAC is the preferred choice for international commercial disputes. However, both of the Eastern situated arbitration centres deal with majorly corporate and commercial disputes,[iv]along with any disputes regarding maritime trade or shipping as well as construction or investment disputes.

Apart from the SIAC or the HKIAC, there are some other new players who have begun to make a name in the international arbitration scenery. One such is the People’s Republic of China. The China International Economic and Trade Arbitration Commission (“CIETAC”) had been established in 1956, but only after did it begin enforcing the “New York Convention’ from the year 1987 onwards, has it begun to get a flurry of international arbitration cases. In present day the Chinese Arbitral scenario has grown leaps and bounds, however only one third of their total arbitral proceedings conducted are international, with majority being domestic disputes with international players and China has furthered the growth of Chinese Arbitration by setting up centres in Shanghai, Shenzhen and Beijing and further diversifying the CIETAC by implementing a ‘South China Sub-Commission of the CIETAC’ for any arbitral disputes in Southern China concerning issues relating to the British Virgin Islands, which have an insurgence of  Chinese Investment companies flocking there.

Following in the footsteps of their counterparts in the Eastern region, the Japan Commercial Arbitration Association or the ‘JCAA’ is one of the oldest bodies being established in 1950 and subsequently adopting the ‘New York Convention’ in 1967. Despite having restricting regulations placed on the practice of Japanese law by foreign lawyers in the mid-1990’s, in contemporary times Tokyo,[v]has been chosen as a ‘preferred’ seat for arbitration over other prominent centres in the West such as Paris, London, New York and Geneva and many international parties are coming to Tokyo as a new established hub for arbitration rather than arbitration centres which have been in terms of arbitration, almost a monopoly in the West. Furthermore, the Korean Commercial Arbitration Board or the ‘KCAB’ which dealt majorly with Korean domiciled arbitrations as well as Chinese, American and Vietnamese parties.

Now moving towards a new arbitral hub competing with the likes of SIAC and HKIAC is the Middle East. Since the 1970’s the Middle East has seen proliferating growth in International Investments and subsequent to this growth the area has witnesseda large number of international investors and parties flocking to the region. Since the advent of the 1990’s majority of the region’s states have begun adopting the UNCITRAL law along with French and English law for purposes for alternative dispute resolution in the form of Arbitral Proceedings. Since the turn of the 21stcentury, many nations in the region have sponsored arbitration by adopting the UNCITRAL model law, such as Bahrain, Egypt, Oman, Qatar, Saudi Arabia and Dubai leading the forefront, despite being emerging newcomers to the world of international commercial arbitration, has shown prominence and immense growth. The Middle East incorporates the legal framework of three forms, namely Sharia law, Shia law and Arbitration model law into its disputes. The Qatar International Court and Dispute Resolution Centre alongside with Dubai International Arbitration Centre are the major players, where almost all matters regarding any dispute in the Middle Eastern region are resolved amicably between international investors or parties and Middle Eastern based parties

In the Indian Subcontinent, arbitration had been present since 1965 with the Indian Council of Arbitration, but arbitration achieved prevalence with the codification of the Arbitration and Conciliation act in 1996, and currently New Delhi had been a major centre and the recently established Mumbai Centre for International Arbitration or ‘MCIA’ is predicted to take on arbitral proceedings which earlier were being referred to SIAC. Most recently, in 2018 the Central Government introduced the New Delhi International Arbitration Bill, 2018 in accordance to the requisite need to establish India as an investor- friendly nation. The bill also looked towards the fortification of the Indian Council of Arbitration (ICA), the MCIA and International Centre for Alternative Dispute Resolution or the ‘ICADR’, situated in New Delhi. The need of the hour is to establish on a global scale that India is fertile for investors and has the groundwork laid out for the facilitation of diverse alternative dispute resolutions.  The Indian subcontinent and surrounding nations have preferred India for international arbitration proceedings and many domestic and international issues are being given prevalence vis-à-vis India’s development as an arbitration centre.

In conclusion, arbitration has been seen as the premier choice for alternative dispute resolution and in the past few decades the meteoric rise of the East as the preferred hub of arbitration shows that many governments across the enormously diverse region are finding common ground, with the progressive and forward thinking approach of promoting growth and development through arbitration.

[i]UNGA Resolution 2205 (XXI) of 17 December 1966 (United Nations Commission on International Trade Law)

[ii]Statistics, SINGAPORE INTERNATIONAL ARBITRATION CENTRE, http://www.siac.org.sg/2014-11-03-13-33-43/facts-figures/statistics [http://perma.cc/EW9W-AEL7].

[iii]Hong Kong International Arbitration Centre, Annual Report 2016, 10.

[iv]Singapore International Arbitration Centre, Annual Report 2016, 15.

[v]Queen Mary University of London, 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration, 12.

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