12 November, 2012
To boldly go…Burma and Mongolia are potential new frontiers for international arbitration, but there are still challenges facing both countries.
Arbitration is an increasingly popular method of international dispute resolution for businesses. It has many advantages over litigation, such as quick resolution to the conflict, party autonomy and greater flexibility.
International arbitration can prove particularly useful in developing economies such as Burma and Mongolia, as was discussed recently at the ADR in Asia conference by panellists Robert Pé of Orrick, Herrington & Sutcliffe and David Bauxbaum of Anderson & Anderson.
Earlier this year, Pé visited Burma with an international delegation of senior figures from major arbitral institutions. The purpose of their visit was to run a training seminar on international arbitration for local lawyers and business people. They also met with the attorney-general and other senior Myanmese government officials.
Aung San Suu Kyi recently said: “Would-be investors, please be warned: Even the best investment law would be of no use if there were no courts independent and clean enough to administer those laws justly.”
Having been a closed economy and military controlled government for the past five decades, Burma does not have the legal framework that other leading global economies have. Until it does, some investors may be reluctant to enter the market.
“The reality is the courts in Burma have been eroded dramatically over the last 50 years. If you speak to any local lawyer there they have little faith in the judiciary,” Pé told delegates.
Burma is a common law jurisdiction closely based on the English and Welsh legal system. Its most recent company law is dated 1914, its arbitration law is from 1944 and due to former military rule, Burma does not have modern case law.
The common choice for dispute resolution in commercial disputes in Burma today is mediation but, as Pé explained, “you’re encouraged heavily to settle and if you don’t you’re going to be in trouble with somebody.”
Despite this lack of legal redress in Burma, investors need not be altogether put off investing there since there is recourse to international arbitration. But Burma is not a party to the New York convention on the recognition and enforcement of foreign arbitral awards. If a multinational corporation were to be awarded relief through international arbitration proceedings, the award would not necessarily be recognised by the Burmese government.
This matter was raised by the delegation with the attorney-general who said he was well aware of the issue and confirmed that Burma will sign up to the New York convention, although he could not confirm when. That was several months ago.
The situation in Mongolia is very different. Mongolia declared its independence in 1911 but remained under the influence of Russia or the Soviet Union until 1992. A new constitution in that year saw Mongolia entering the market economy for the first time. But the courts in Mongolia “lag behind”, Buxbaum said, due to the legacy of “old Soviet systems”.
Unlike Burma, however, Mongolia is a party to the New York convention and since 1995 arbitral awards made within Mongolia are enforceable in the countries who are signatories to the convention, and vice versa.
“There is no data to say how many awards have not been enforced but I suspect it is a very small number,” Buxbaum added.
Mongolia also has an arbitration law dated 2003. The law adopted the Mongolian national arbitration court and expanded its jurisdiction to include resolution of domestic and foreign business disputes through arbitration and mediation.
As with Burma, though, there are also problems in Mongolia. As Buxbaum explained, arbitrators are paid very badly so the profession is not attracting the best lawyers. There are a limited number of arbitrators in Mongolia and they were trained under the former Soviet system. Many of them are unfamiliar with contemporary law and not best equipped to deal with some of the issues that may arise in international arbitrations.
Mongolia does appear to be a few steps ahead of Burma in terms of modernisation and reform but bribery and corruption are still rife in both legal systems. Both countries seem to be intent on the modernisation and reformation of their respective legal systems.
When asked what lessons Mongolia can learn from the Hong Kong International Arbitration Centre, Buxbaum said: “They can emulate the Centre; that would be very helpful! There are many lessons they could learn if they are willing to learn them. And I think they will over time.”
He later added, “Mongolia would benefit from permitting applicants and respondent to select qualified persons from all over the world as arbitrators, using UNCITRAL Rules or other rules that the parties may select themselves, allowing all arbitrators in international arbitration to receive international standard fees for their work and requiring arbitrators to be trained in law or in a specialty directly related to the arbitration issues.”
The idea of lessons to be learned is also applicable to Burma who has made it clear it is hungry to rejoin the global economy. Although investors should proceed with caution, heeding Suu Kyi’s advice, there is no doubt that Burma, like Mongolia, is the new frontier for business and investment.
