THE prospect of disputes arising in respect of projects under China’s Belt and Road Initiative (BRI) has generated considerable interest, accompanied by positioning on the part of governments, government institutions, lawyers and academics who see potential opportunities.
The BRI is, of course, a very amorphous concept. Although primarily associated with infrastructure construction, which tends to involve large Chinese companies and Chinese funding, projects along the Belt and Road also involve governments other than the Chinese government and don’t necessarily include Chinese parties.
There are already a significant number of competing options available for the resolution of disputes arising from BRI projects — domestic courts, nominated foreign courts, domestic arbitration institutions, international arbitration institutions, ad hoc options, mediation institutions, investor-state arbitration under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID) and so on.
A range of options for the law to govern contracts and related disputes is also available, due to the generally recognised autonomy of the parties to a contract to nominate the law governing the contract.
These include the law of the host state, which may well prefer major infrastructure contracts to be governed by the law where the infrastructure is located, the law favoured by the lenders or contractors, or the law of a neutral third party such as English or Hong Kong law. There may be a mixture of different laws when a project involves a range of contractors and contracts.
Logically, the law selected should also affect the location and method of commercial dispute settlement. However, this is not a requirement, and both arbitration institutions and courts are anxious to show that they are competent to deal with disputes which are subject to foreign law. Further complicating the picture, an investment treaty may specify the governing law for claims by investors against the host state as part of the substantive commitments in the treaty.
There are many methods of arbitrating commercial disputes in the Asia Pacific, including recourse to the major arbitration institutions. The China International Economic and Trade Arbitration Commission (CIETAC), the Hong Kong International Arbitration Centre (HKIAC), the Singapore International Arbitration Centre and the International Chamber of Commerce and others have taken steps to highlight their international experience, and their ability and willingness to handle BRI disputes.
The development of international commercial courts is intended to challenge international commercial arbitration as the preferred dispute resolution method of choice in Asia. Singapore led the way by setting up the Singapore International Commercial Court which offers the services of expert judges from a range of jurisdictions, flexibility in using foreign law and rules of evidence, foreign legal representation and, if desired, appeals on legal grounds.
The so-called Chinese ‘Belt and Road’ court (the Chinese International Commercial Court) offer highly experienced and internationalised Chinese commercial judges, so-called one stop diversified dispute resolution and improved procedures for the proof of foreign law, but in accordance with Chinese law do not involve foreign judges. In Hong Kong, foreign judges serve on the Court of Final Appeal.
Pursuant to a recent arrangement with China, civil commercial judgments of Hong Kong courts will soon be enforceable in China, where enforcement of foreign judgments is otherwise a difficult task.
These and other jurisdictions across Asia, such as Japan, also offer diversified or mixed-mode dispute resolution involving mediation, arbitration and litigation. This is sometimes described as reflecting Asian values by promoting consensus-based dispute resolution.
Most recently in April 2019, the List of Deliverables of the Second Belt and Road Forum for International Cooperation included the establishment of the International Commercial Dispute Prevention and Settlement Organization (ICDPASO) by the ‘China Council for the Promotion of International Trade (CCPIT) and the China Chamber of International Commerce, together with industrial and commercial organisations and legal service agencies from over 30 countries and regional organisations’.
It is not clear from the announcement what the role of the ICDPASO is intended to be, although its cross-border, multi-party and non-governmental character may distinguish it from domestic institutions such as courts and national arbitration institutions.
An International Commercial Prevention and Settlement Centerwas also set up by the CCPIT and foreign business organisations in January 2018, with the stated objective of preventing or resolving international commercial disputes.
Notwithstanding the recent emphasis on mediation in some Asian jurisdictions, it is not clear if and when China and other nations along the BRI will sign up to the Singapore Convention on Mediation which aims to facilitate mediation by providing an effective means of enforcing settlement agreements reached through mediation.
Finally, where a host state is directly or indirectly involved in a dispute with an investor (including a major infrastructure or construction dispute), investor-state dispute settlement (ISDS) is also a possibility — though a controversial one for some Asia Pacific states. In addition to the well-established international ICSID regime, Chinese arbitration institutions such as the CIETAC and the Beijing International Arbitration Center have also issued rules allowing them to facilitate ISDS disputes in China. This is also the case for the HKIAC, which accepted two investor-state arbitrations in 2018.
There is no shortage of established and newly pending types of dispute resolution mechanisms available for the resolution of disputes along the Belt and Road. In these circumstances, it is vital for parties to make a well-informed choice in relation to dispute resolution and governing law at the negotiating stage.
In order to improve dispute settlement along the Belt and Road, rather than more methods or mechanisms directed at BRI dispute resolution, what is needed is better legislative and structural support from China and other countries along the Belt and Road for the recognition and enforcement of judgments and awards, as well as the adoption across the Asia Pacific of international conventions and model laws designed to harmonise and coordinate cross-border dispute settlement through the grant of interim measures and asset protection, smoother procedures for cooperation and prompt and effective recognition and enforcement of judgments.
Vivienne Bath is Professor of Chinese and International Business Law at the University of Sydney.
This article is republished from East Asia Forum under a Creative Commons licence.