The Malaysian Bar - CAFTA 2011: “Arbitral Institutions in CAFTA Region – Opportunities and Challenges” (Session Two)

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CAFTA 2011: “Arbitral Institutions in CAFTA Region – Opportunities and Challenges” (Session Two)

Wednesday, 19 October 2011 12:48pm

Contributed by Michelle Fung, Pupil in Chambers

Session two of the 5th China-ASEAN¹ Forum on Legal Cooperation and Development ("CAFTA 2011"), entitled “Arbitral Institutions in CAFTA Region – Opportunities and Challenges”, started at 12:15 pm on 26 Sept 2011. The session began with the moderator, Yang Ing Loong, Partner and Global Coordinator of International Arbitration, Sidley Austin LLP, Hong Kong, introducing the three panelist speakers. They were Sundra Rajoo, Director of the Kuala Lumpur Regional Centre for Arbitration (“KLRCA”), Malaysia; Professor Liu Xiangshu, Vice-President of Southwest University of Political Science and Law, People’s Republic of China; and Tony Budidjaja, Principal and Managing Partner of Budidjaja & Associates, Indonesia.

Sundra Rajoo commenced his speech by reviewing arbitral institutions in the countries of the China-ASEAN Free Trade Area (“CAFTA”). He was of the opinion that the integration of ASEAN countries with China would create a larger market that would benefit all CAFTA members. He explained that this particular trade pact had reduced a large portion of treaty uncertainties in the region, and elaborated that it was only natural for trade to prosper under such stable market conditions, which meant the entry of more businesses.

Sundra Rajoo further suggested a merger between CAFTA and China-ASEAN countries in the following three aspects:

(1) Participation in global commerce and market integration;
(2) Prevention of cross-border disputes, which would attract foreign investors; and
(3) Availability of neutral dispute resolution forums and facilities that were international in nature, yet responsive to diverse users and cultures.

Sundra Rajoo pointed out that many ASEAN countries were gradually moving away from United States of America (“USA”) to China or Japan. He added that there were enormous resources within ASEAN countries, and amongst them were arbitral institutions within the China-ASEAN region such as KLRCA in Malaysia, China International Economic and Trade Commission in China, Hong Kong International Arbitration Centre (“HKIAC”) in Hong Kong, and Korean Commercial Arbitration Board in South Korea. He highlighted that nowadays, most countries preferred to settle disputes through locally-based arbitral institutions, such has HKIAC and Singapore International Arbitration Centre, rather than overseas institutions, especially those that were situated in European countries or USA.

Sundra Rajoo stressed the need for collaboration and integration of services as the main ingredients of making this arbitral channel successful. KLRCA has reached out to achieve collaborations with China, Korea and Singapore, and was also in the process of identifying potential institutions in India to promote and share services. He shared his belief that such collaborations would promote awareness, which, in turn, would instil confidence in the use of arbitration. In addition, arbitral institutions or directions should be transparent and universal so that members from any countries could have the same confidence in, and reliance on, the process, regardless of which institution they wished to depend on.

Sundra Rajoo proceeded to analyse and identify the three important types of “support” required to promote arbitration: support from the Government; support from the Judiciary to promote, and not oppose, any arbitration cases; and legal framework from public and private sectors. He wrapped up his talk by reminding delegates that having transparency, good governance and infrastructure was the key to attracting international investors.

The second speaker, Professor Liu Xiangshu, delivered his speech on “Opportunities and Construction for the Arbitration Centre of China". He provided a brief outline of the commencement of China’s CAFTA on 1 Jan 2010, and described it as one of the largest free trade areas in the world. He explained that notwithstanding the economic turmoil, the free trade area had remained very active as a result of collective effort from regional countries. He commented that conflicts were expected to arise; thus, there was a need for arbitral centres to settle disputes effectively. Professor Liu Xiangshu proposed a solution to this problem by establishing China as an arbitral centre.

Professor Liu Xiangshu shared his view that having a single arbitral centre did not mean that CAFTA members would be compelled to seek information or help through that one centre. He pointed out that instead, all parties would be free to choose any agent for arbitration as there were so many strong arbitral institutions available all over Asia.

Professor Liu Xiangshu emphasised that a strong foundation for arbitration required great arbitrators – only those who were truly qualified to hold the position of arbitrators would be chosen. He elaborated that such individuals should be well-qualified, with the requisite industrial knowledge and high standards of professionalism, be experts in their area of practice, in addition to being independent and impartial. Finally, he suggested that CAFTA should come up with a new method of settling disputes by combining both arbitration and mediation.

The last speech for the session was delivered by Tony Budidjaja, who began his talk by describing the commencement of arbitration and the challenges faced in Indonesia. He informed the audience that the first arbitration law in Indonesia was legislated in 1957, but there had been no specific law governing arbitration until 12 Aug 1999, when Indonesia finally introduced its first comprehensive law on arbitration and alternative dispute resolution under Law No 30 of 1999. With the enactment of the new law, it was no longer possible to appeal against arbitration awards. Based on his personal observation, arbitration cases were infrequent even though there were voluminous court proceedings. Although the number arbitration cases had increased after arbitration laws were introduced in Indonesia, statistics showed that the number of arbitration cases was still relatively low when compared to other members of CAFTA.

Tony Budidjaja named the three main arbitral institutions in Indonesia: Badan Arbitrase Nasional Indonesia, Badan Arbitrase Pasar Modal Indonesia and Badan Arbitrase Syariah Nasional. He noted that each institution handled different areas of arbitration.

Tony Budidjaja ended his speech by listing down the seven main challenges faced by Indonesian arbitrators, namely:

(1) The Indonesian legal system was not too supportive;
(2) No court was designated to handle parties’ request for support from the court;
(3) Indonesian judges were not familiar with arbitration and lacked experience in handling arbitration cases;
(4) There was no uniformity in the court’s practice and its attitude towards judicial review or control;
(5) Enforcement of arbitral awards was still inconsistent due to legal uncertainty in the interpretation and application of “public policy” and annulment standards;
(6) The losing party often used the commencement of an annulment action as a tempting dilatory avenue of an adverse arbitral award even though application for annulment of awards could only be granted on very narrow grounds and strict procedures; and
(7) Judges involved may not be experts in the commercial field.