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The Fine Print, Legal & tax insight:Working with partner
disputes through the Arbitration Bill By Sebastian Pawlita and
Thitsar Khine | Sunday, 15 June 2014
A common concern for investors is dispute resolution: If the
relationship with a business partner turns sour, will I be at a
disadvantage because the other party can influence the judge?
In Myanmar, as in other developing countries, foreign investors
tend to distrust local courts. They fear that the judge may be
inherently biased towards the local party or even corrupt. They
worry about the length of time that it may take until the case is
finally decided. If it is a high-profile case, there is the
possibility from the standpoint of the investor, an unwelcome
possibility that the court proceedings will get press coverage.
Usually, investors prefer arbitration over dispute resolution by
the courts as they consider arbitration to be faster, more
professional, less prone to local bias and less likely to result in
dirty laundry getting washed in public. However, arbitration in
Myanmar has its shortcomings. There is no arbitration institute. An
arbitral award has to be enforced by a court, and courts in Myanmar
in practice assume wide discretion in setting aside arbitral
awards. This means that, after having gone through all the hassle
with arbitration, a party may still find it necessary to sue the
other party in court. Local businesspeople are therefore wary to
about agreeing on an arbitration clause when they have business
dealings amongst themselves.
Foreign investors prefer arbitration abroad preferably, of
course, in their home jurisdiction. However, they also know that
their local partner is not likely to agree to this, so they suggest
arbitration in a third country. Usually, this is Singapore a
country with a developed, stable and highly professional justice
system and an internationally renowned arbitration centre.
Regrettably, however, there have been no reported cases of any
foreign arbitral award being enforced in Myanmar for the last few
decades, and investors are wise to act on the assumption that in
practice, their award (if they win arbitration abroad) will be
worthless here.
This may change soon, though. Myanmar acceded to the New York
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards with effect as of June 15, 2013. So far, there has been no
legislation implementing the Convention, but on May 25, the draft
of an arbitration law (Arbitration Bill) was published. If enacted,
there will be a system to enforce foreign arbitral awards in
Myanmar.
Of course, it remains to be seen how easy enforcement will be in
practice. However, the enactment of the law will be a major step
for Myanmar toward recognition as a place where investors can
safely do business, and investors are eagerly awaiting this
step.
The bill, which to a large extent is based on a model text
provided by UNCITRAL (United Nations Commission on International
Trade Law), is divided into two parts, the first part dealing with
arbitration in Myanmar and the second part with the enforcement of
foreign arbitral awards. The bill does not specify which court is
competent for enforcement. It is to be hoped that enforcement will
be centralised at one court so as to quickly create a centre of
expertise within the justice system and ensure that enforcement
cases are handled by judges with experience in the matter.
The court may refuse to enforce a foreign arbitral award only on
the grounds set forth in the bill. This part of the bill is a
literal translation of the UNCITRAL model text. Hopefully, courts
will exercise restraint when invoking these grounds.
Sebastian and Thitsar are consultants with Polastri Wint &
Partners Legal & Tax Advisors.
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