13 March, 2013
Legal News & Analysis – Asia Pacific – Myanmar
Introduction
On 6 March 2013 the Parliament of the Republic of the Union of Myanmar (also known as Burma) (“Burma”) approved the country’s planned accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”). Orrick partner, Robert San Pe, was in Burma’s administrative capital, Naypyitaw, at the time and ran a series of training seminars for Burmese Parliamentarians on the New York Convention and on international arbitration more generally.
The context: encouraging foreign investment
On 2 November 2012 President Thein Sein signed into law a much awaited new Foreign Investment Law (the “FIL”) (click here to read Orrick’s Commentary on that law). This was clearly aimed at encouraging foreign investment but it was high level and broad brush in its approach.
There is great interest among potential foreign investors in developments in the country and there have been numerous investment conferences, visits by business delegations and the like. Indeed, many companies have established representative offices in the country. However, the anticipated flood of foreign investment has yet to materialize. There are multiple reasons for this but they include concerns among potential foreign investors about having to resolve any disputes in the country’s domestic courts.
Section 44(2) of the FIL sought to provide more party autonomy when it came to dispute resolution. It provided that disputes arising from investment matters “…shall be settled according to the provisions of the contract if the said contract mentioned how to settle such dispute [unofficial English translation of the Burmese text].” However, this provision was somewhat meaningless in circumstances where there was no effective means to enforce foreign arbitral awards in the country. Major multinationals lobbied hard for the country to accede to the New York Convention.
The history: Burma is a party to the Geneva Convention
Burma is a party to the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (the “Geneva Convention”). This is of limited benefit. Far fewer countries are parties to the Geneva Convention than to the New York Convention and it is rarely used in practice.
Parties relying on the Geneva Convention have to discharge the onerous burden of proving in Court that the arbitral award in question is final. This can entail having to re-litigate the case in the Courts of the jurisdiction where the arbitration took place, before even starting to seek to enforce the award in an overseas jurisdiction.
As a matter of reality, foreign arbitral awards have rarely, if ever, been enforced in Burma under the Geneva Convention.
The New York Convention: why it is so important
As at 6 March 2013, 148 countries had acceded to the New York Convention. It is widely viewed as one of the most successful international treaties ever. There is no treaty for the mutual recognition and enforcement of Court judgments that comes anywhere close in terms of number of signatories.
The New York Convention is a key reason why international arbitration has become the default choice for resolving international commercial disputes (when it proves impossible to achieve an amicable settlement through direct negotiations or mediation).
Reasons for the New York Convention’s success include simplicity and clarity. The grounds upon which an enforcing Court may decline to enforce a foreign arbitral award are extremely narrow. In practice, the ground relied on most commonly is that it would be contrary to the “public policy” of the enforcement jurisdiction for the Court to enforce the award. “Public policy” is a vague and ethereal concept. However, countries which rely heavily on the public policy ground to decline enforcement become known for doing so. That, in turn, causes foreign investors to treat such countries with caution.
The next steps: implementation is crucial
Now that the Burmese Parliament has approved the country’s accession to the New York Convention, the country still needs to do the following:
1. complete the mechanical steps of the accession process;
2. enact domestic implementing legislation; and
3. ensure that a group of judges receive training on dealing with New York Convention awards.
Action items 1 and 2 above are relatively straightforward. Action item 3 is more complicated and will take time. However, it also presents an excellent opportunity to give a select group of local judges exposure to some leading international practitioners and a basic understanding of key international legal norms. Potentially it can therefore make a meaningful contribution to the mammoth task of rebuilding the rule of law in Burma.
Conclusion
Burma’s planned accession to the New York Convention is likely to be as important, if not more important, than the FIL in terms of attracting foreign investment. It is a significant step in the right direction and sends a signal that the country’s leaders are prepared to listen to and address the needs of foreign investors.
