ICC and ICC HK Seminar
Reporter: Suraj Sajnani (King & Wood Mallesons, Hong Kong)
As part of Hong Kong Arbitration Week 2018, the International Chamber of Commerce (ICC) and ICC-Hong Kong held a two-part seminar on 29 October: Part 1 set focus on providing a global, regional and Hong Kong-specific update on ICC arbitration, and Part 2 saw an interactive discussion amongst experts from the legal and financial sectors on the Belt and Road Initiative (BRI).
Part 1: Update on ICC Arbitration
The President of the International Court of Arbitration of the ICC (ICC Court), Alexis Mourre, opened the seminar with a review of recent major updates in ICC Arbitration. These include: a new expedited procedure for smaller claims which requires awards to be granted within six months from the case management conference, generally by a sole arbitrator on documents; reduction of the time limit within which terms of reference must be established, to 30 days; and an imposition of a three-month time limit for three-member tribunals and a two-month time limit for sole arbitrators to submit draft awards to the ICC Court for scrutiny. These, together with other updates, focus on ensuring ICC arbitration is more transparent and more time and cost efficient.
Ronald Shum, the Chairperson of the ICC HK Committee on Arbitration & ADR then provided a brief update on the ICC International Commercial Mediation Competition held in Hong Kong in October 2018. As is the case in real life dispute resolution, Hong Kong and Singapore were up against each other, this time in the grand final of the competition, with City University of Hong Kong ultimately winning, and the National University of Singapore being awarded 1st runner up.
Kim Rooney, a member of the ICC Court then provided a brief update on Hong Kong specific developments in relation to arbitration. Ms. Rooney, also the Chair of the Hong Kong Law Reform Commission Subcommittee on Third Party Funding (TPF) for Arbitration, impressed upon participants that Hong Kong legislation for TPF is already in place and will come into full effect upon the enactment of a code of practice. Since the seminar, the Hong Kong Government has published the code of practice for third party funding of arbitration and has appointed 1 February 2019 as the date upon which the legislation allowing TPF will come into effect.
Mingchao Fan, the Director of ICC Arbitration and ADR (North Asia) then highlighted recent capacity building activities that the ICC has carried out in the Asian region. These include: ICC’s Advanced Arbitration Academy for Asia which is a series of eight workshops organised in six cities across Asia; the 4th ICC Asia Conference on International Arbitration held in Hong Kong in June 2018, a two-day lecture at the Judicial Academy of Vietnam and several collaborations with bar associations in the PRC, including a lecture on cross border dispute management in China.
Chiann Bao, Vice President of the ICC Court and former Secretary-General of the HKIAC, provided participants with a brief reminder of a key ICC transparency mechanism – the ICC Bulletin, through which ICC members can get access to case extracts and information on practice and procedure of ICC Arbitration.
Sun Wei of Zhong Lun introduced participants to a collaboration between the ICC and the Permanent Forum of China Construction Law, which studies and comments on important ICC awards received in anonymised form from the ICC. The aim of the collaboration is to improve efficiency and predictability of dispute resolution in the Chinese construction industry. The group maintains several working groups, including one which focuses on risks for Chinese contractors when operating overseas.
Pui Ki Ta, counsel of the ICC Secretariat in Hong Kong provided additional brief updates on the work of the ICC in Asia. She informed participants of the ICC’s 11th case management team which has recently been established in Singapore and which is responsible for Singaporean, Australian and Indian cases. She also highlighted interesting statistics on arbitrator appointments, including those demonstrating the ICC’s diversity, with arbitrators from 85 nationalities of which 30% were women. She further noted that in Asia, there is an increase of State-owned parties engaging in ICC arbitration.
Part 2: Belt & Road – deals, disputes and the future
The second part of the seminar was an interactive session moderated by Justin D’Agostino, the Chairperson of the ICC Court’s Belt & Road Commission. The diverse panel consisted of arbitration and non-arbitration lawyers – Olga Boltenko of Fangda, Alfred Wu of Norton Rose and Ellen Zhang of Herbert Smith Freehills – as well as non-lawyers – Peter Quayle from the Asian Infrastructure Investment Bank and Peter Burnett from Standard Chartered Bank. John Choong of Freshfields and Dan Gonzalez from Hogan Lovells were commentators in the session.
The focus for this session was the new trends for dispute resolution as a result of the BRI. Mr. D’Agostino pointed out one clear trend that he has seen: Chinese State-Owned Entities and other Chinese clients want to change the conversation around dispute resolution, as traditional arbitration does not always work for them. Rather, these clients are now looking for mixed mode dispute resolution which allows them to shuttle in and out of different forms of dispute resolution, and in particular, mediation.
Mr. Quayle then commented on the framework of AIIB, its policy and recent projects; these include, a transmission system strengthening project in India, an air quality improvement project in Beijing, a project in Bangladesh, and a gas storage expansion project in Turkey. With regards to investment target countries, he noted that India is currently the largest recipient of investment from the AIIB, whereas there is a tacit understanding that funds will typically be directed to projects outside of China. In the 3 years since its formation, AIIB has approved financing of US$6.4 billion.
Mr. Burnett then provided the perspective of a commercial bank. He spoke about (1) the bankability of projects, (2) the need for encouragement of external capital into projects, and (3) the availability of projects. On bankability, Mr. Burnett noted that there is a major developmental need for power investments to shift away from being reliant on coal-fired power, on account of climate change. He pointed out that what is currently missing in BRI investments are feasibility studies which allow banks to understand whether a project is bankable. He highlighted that much more needs to be done on understanding and allocating risk in BRI projects.
To the joy of many in the room, both bankers said that arbitration is very important for financiers, however Mr. Quayle did caveat that as AIIB is a multinational development bank, it is naturally conservative and it would need to find the right project before utilising novel innovations in dispute resolution. While both said that they are watching developments in the arbitration and ADR space, they are not prepared to incorporate innovations until they have been tried and tested.
Ms. Zhang, a projects lawyer, reminded the room of the importance at contract drafting stage to structure deals around treaty protection. She said that even her Chinese private sector clients are looking quite closely and in a sophisticated manner at bilateral investment treaties, not only to determine the location of the holding company, but how to structure shareholdings to ensure that project companies can be looked at as an “investor” for the purpose of investor-state dispute settlement. Her view is that going forward, Chinese claimants will more frequently be looking to enforce their rights.
Mr. Wu addressed hurdles to the success of the BRI. These include: a perception that the BRI is an attempt by China to enhance their economic influence over developing countries, corruption and human rights issues. Two examples where these hurdles have materialised are (1) cancellation of the Malaysian east coast rail link project because of allegations that funds were linked to the notorious 1MDB scandal, and (2) Australia’s statements that it does not want to be too closely involved in the BRI as it does not consider it wise to deepen its reliance on China. Mr. Wu further noted that while new institutions and fora are coming online for the BRI, it remains to be seen how these fora will operate. Limitations on who can sit on international courts in China, as well as limitations on legal representation will give people serious thought as to whether or not to opt for these fora.
Ms. Boltenko then commented on the attitudes of Chinese parties in investor-state treaty arbitration. Previously, it had not been the practice of Chinese parties to launch claims against host states. However, that culture is changing and it is no longer a complete “no go”. Even if Chinese parties are not commencing investor-state arbitration very frequently, they are resorting to commercial arbitration. Often, geo-political issues and interests play a key role in deciding whether or not to launch a claim, all while bearing in mind future investment potential and the impact of claims on monies already in-country for other projects.
Mr. Chong and Mr. Gonzalez then posed several questions to the panelists. Two interesting pieces of information that arose from that discussion are:
Contrary to rumours, AIIB is not currently looking to set up an ICSID type dispute settlement body, even though such a body could be one of the ways that AIIB could make a contribution to the region.
There is a trend moving away from short dispute resolution clauses, to longer and more complex ones that cater for the cultural backgrounds of disputing parties, such as clauses allowing for mixed mode dispute resolution.
Despite the various different approaches, the disputes and non-disputes lawyers, and the bankers, all agreed that the backstop in BRI disputes should remain arbitration.