Conference Report: UNCITRAL Emergence Conference at the University of Macau (International Commercial Courts)

On 30 November 2015 the University of Macau (UM) hosted the UNCITRAL Emergence Conference on Harmonising Trade Law to Enable Private Sector Regional Development. The conference was as a continuation of the 2014 UNCITRAL-UM Asia-Pacific Fall Conference on Trade Development through the Harmonisation of Commercial Law, and is part of a series of conferences planned to be hosted by UM on an annual basis. This year’s program covered a range of topic of a particular interest to UNCITRAL, including international contract law, e-commerce, MSMEs (micro, small and medium-sized enterprises), cross-border insolvency, and dispute resolution.

Dispute resolution being one of the most extensively covered topics at the 2015 conference, the two sessions designated to this area encompassed presentations from 12 academics and professionals. The session on the future of international commercial dispute resolution covered the expansion of arbitral subject matter[2], concurrent claims in investor-state arbitration[3], confidentiality[4] as well as transparency[5] in arbitration. Efficiency of arbitration was addressed from the perspectives of cost-effectiveness[6], document production[7], and the virtual domain[8]. The session also expanded over the developments of mediation regulation[9], and of the current works around the international recognition of mediation outcomes[10]. One of the most debated sessions, however, was on the emergence of international commercial courts, their place in the field of international dispute resolution in general and their advantages and disadvantages.

Prof. Akira Saito from Kobe University japan argued that the emerging Dubai International Financial Centre Courts (DIFC Courts) and the Singapore International Commercial Court (SICC) are welcome players in the field, given that ‘international arbitration is invading even into the dispute settlement of public law areas’[11]. His advice was that these courts could/should learn from the experience of the English Commercial Court within the Queen’s Bench Division, in order to become as successful as that court is in settling commercial disputes. The context in which these courts operate was addressed by Assist. Prof. Avnita Lakhani from City University Hong Kong, emphasising that ‘having a harmonised, predictable, consistent and efficient framework to resolve commercial disputes is critical’ for the private sector and SMEs to serve as an engine of economic growth and job creation in developing countries[12].  Both speakers seemed to agree that the emerging commercial courts are a necessary and welcome response to the increasingly apparent deficiencies of international arbitration; even though the private sector is apparently experiencing a shift in favour of mediation as the preferred method to resolve international commercial matters.

The author of this report acknowledges the increasing importance mediation is playing in the field of cross-border commercial dispute resolution in general, and welcomes any variations that providers may create for the benefit of enabling more efficient dispute resolution procedures to suit the relevant stakeholders’ interest globally[13]. I am, however, sceptical with regard to the new commercial courts allegedly solving arbitration’s weaknesses while offering the same unique benefits as arbitration currently provides. Both the DIFC and the SICC advertise to be complementing, not competing with arbitral institutions with their services, but also appear to offer something of a hybrid: not quite arbitration, but not quite litigation either. While they do allow to some extent for party autonomy and confidentiality, they do fall short compared to arbitration, when it comes to enforcement.

In satisfying the expectation of party autonomy being a major factor in choosing any alternative to classical state court litigation, the two commercial courts allow for the substantive law to be chosen by the parties, and SICC also allows for the rules of evidence to be shaped by the parties. Otherwise, the procedural law is limited to that of the forum. Party autonomy is also restricted with regard to appointment of the decision-maker, as judges are appointed by the court for both forums, but unlike in the regular state courts, they are selected from a group of international experts. Singapore also allows for foreign counsel to appear in the cases filed to SICC, but this freedom and flexibility is less than that characteristic of arbitration. Confidentiality being another typically preferred characteristic of arbitration is severely limited by the commercial courts. The DIFC Courts have, as a rule, public hearings, while at SICC confidentiality is only granted upon a successful application.

Enforcement of arbitral awards is one of the main advantages over litigation, due to arbitration’s relative ease and predictability of enforcement in all 156 member states to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards – compared to the country-specific procedures to be followed for the cross-jurisdictional enforcement of court judgments. The decisions issued by the DIFC Court and SICC are legally recognised as court judgments, and as such, cannot be directly enforced via the New York Convention. To counterbalance this disadvantage, Singapore relies on a range of bilateral agreements for reciprocal enforcement of court judgments; it has also signed, but not yet ratified, the Hague Choice of Court Convention that would make SICC judgments enforceable in the European Union (excluding Denmark), Mexico and, once it ratifies the convention, the United States of America. In Dubai, the Gulf Co-operation Council Convention ensures reciprocal enforcement of judgments throughout Jordan, Bahrain, Qatar, Kuwait, Oman and the UAE. DIFC also provides for a non-binding Memoranda of Guidance between courts that provide general guidelines for when and how the DIFC Courts’ decisions will be enforced.

Arguably, one of the most ‘creative’ and controversial solutions is that of converting the DIFC Court judgments into orders of the DIFC Arbitral Tribunals[14] by reference to a hybrid litigation-arbitration clause as suggested by the DIFC Courts to be incorporated in the parties’ contracts. The DIFC Courts suggest this approach through the use of ‘Judgment Payment Disputes’, which would also include an explicit exclusion of the tribunal’s authority to rule on the merits of the case or even the formal validity of the judgment. Through this process, one would ostensibly be able to enforce such DIFC Court judgments turn arbitral awards via the New York Convention.

The issue of contention is that conversion of a judgment into an arbitral award would become in fact a rubber stamping exercise that may not meet the criteria of a ‘genuine dispute’ required under the New York Convention. Such a converted judgment also challenges the concept of an ‘arbitral award’, raising the question of a proper definition, given that neither the Model Law, nor the New York convention contains one as such. The reason why this may become an issue is also the potential devils’ circle that the Dubai construction could create:  The new DIFC Arbitration Centre is theoretically independent from the DIFC Courts, but the DIFC Courts will exercise the ‘curial’, or supervisory, role which in all systems of law is exercised by the relevant national Court. This means that if the DIFC court renders a judgment that is then ‘converted’ by the DIFC arbitration centre into an award, that award could only be challenged in the same DIFC court that issued the judgment in the first place.

Issues for the broader arbitration community to consider from this are the need for a set definition for arbitral awards, and also to interpret the concept of ‘difference’ under Art.II.1 NY Conv required for a valid arbitral agreement to either include or explicitly exclude the mechanical conversion of court judgments into arbitral awards. Disregarding the subtle irony of the need for court judgments to become arbitral awards rather than the other way around, the development of these hybrid litigation/arbitration providers pose a new challenge to the development of legal harmonisation.  Should the host countries of international commercial courts find any other way to provide legal recognition to these judgments that equals to that of arbitral awards – to attract more disputes and grow their jurisdiction as a dispute resolution hub – such recognition will pose a challenge to the international recognition of the same judgments, and will trigger the need for further legislative harmonisation.

This article may be cited as follows: Dalma R Demeter, “Conference Report: UNCITRAL Emergence Conference at the University of Macao (International Commercial Courts) International Arbitration Asia (18 December 2015) <http://www.internationalarbitrationasia.com/UNCITRAL-Emergence-Conference-at-the-University-of-Macau>.