2024 London International Disputes Week
THE AUTHOR:
Erica Li, Associate at Wilmer Cutler Pickering Hale and Dorr
London International Disputes Week 2024 commenced with an International Arbitration Day featuring panels on jurisdictions spanning the world from Europe to Latin America. One notable panel, “ASEAN’s Arbitration Landscape in the Year of the Dragon: Power and Progress”, focused on the arbitration landscape in the ASEAN region. The panellists included Dzung Manh Nguyen (Dzungsrt & Associates), Mark Mangan (Lindsay Francis & Mangan), Debby Sulaiman (Hiswara Bunjamin & Tandjung) and Mike McClure KC (Herbert Smith Freehills) as speakers, and Nelson Goh (Pallas Partners) as moderator.
Vietnam
Mr. Dzung opened with an overview of the Vietnamese economy, highlighting its increasing economic integration with the rest of the world. Vietnam has become an important trading partner for the EU, UK, US, and neighbouring countries like Korea, China, and Japan.
Mr. Dzung explained that arbitration in Vietnam has seen significant growth, with 43 local arbitral institutions, 2 foreign arbitral institutions and over 1,000 arbitrators. In 2023, the Vietnam International Arbitration Center (“VIAC”) registered 425 new cases, with the largest case valued at USD 270 million. The top foreign users of VIAC are China, Japan, Korea, and Singapore, with 22% of cases involving foreign parties. There is also a rising number of investor-state dispute settlement (“ISDS”) cases involving Vietnam.
Despite this growth, Mr. Dzung noted that enforcement of arbitral awards remains challenging in Vietnam due to protectionism in the Vietnamese courts. According to statistics from the Vietnamese Ministry of Justice, from 2012 to 2019, only 39 out of 83 foreign arbitral awards were recognised and enforced. Mr. Dzung explained that the common reasons for refusal included due process violations, lack of authority in signing arbitration agreements, and violation of fundamental principles of Vietnamese law, with the last reason being invoked most often.
However, Mr. Dzung notes that the arbitration landscape in Vietnam is changing, and there have been increased efforts by the VIAC and other institutions to improve awareness and the enforcement of arbitral awards in Vietnam.
Singapore
Mr. Mangan explained that Singapore is Asia’s most preferred arbitration seat. Ranked alongside London as one of the top two seats for international arbitration in the White & Case and the University Queen Mary London Survey conducted in 2021, Mr. Mangan observed that Singapore’s rise as an arbitration seat is remarkable, given that Singapore did not adopt the New York Convention until the 1960s, and the Singapore International Arbitration Centre (“SIAC”) was only established in 1991, a century after the London Court of International Arbitration (“LCIA”) was established in 1892.
Mr. Mangan explained that Singapore’s success as an arbitration hub might be attributed to the government’s support for arbitration, which recognised the benefits of arbitration for businesses and Singapore’s economic development. Key government policies included :
- internationalising the legislative framework for arbitration with reference to the English Arbitration Act,
- adopting the Model Law, supporting third party funding, and
- providing tax incentives for law firms and arbitrators in Singapore.
Moreover, Mr. Mangan explained that to appeal to a wider range of users, there have been significant efforts by the government to internationalise the SIAC. Such efforts are evident – by 2012, three-quarters of the SIAC Board of Directors came from abroad, and the SIAC has had a non-Singaporean Chairman since 2009. The SIAC Rules are available in 15 different languages; by contrast, the LCIA Rules are only available in English and Spanish. Additionally, the government set up Maxwell Chambers as a leading dispute resolution hub to further the growth of arbitration in Singapore.
Lastly, Mr. Mangan noted that Singapore’s favourable conditions, such as its strategic location in a rapidly growing region and adept navigation of the geopolitical landscape, have contributed to its success as an arbitration hub.
Indonesia
Ms. Sulaiman highlighted growing foreign direct investment in Indonesia and the Indonesian courts’ increasing acceptance of arbitration as an alternative to litigation, although Ms. Sulaiman noted that arbitration remains in the early development stages in Indonesia. In particular, Ms. Sulaiman commented that enforcement of arbitral awards in Indonesia remains challenging, which necessitates precautions by foreign investors in Indonesia.
Ms. Sulaiman explained that, at the pre-investment stage, foreign investors should ensure that their investment structure offers sufficient protection. Common pitfalls included copying dispute resolution clauses from previous transactions wholesale without considering their relevance, and neglecting to include consolidation and joinder clauses in the context of multiple contracts and loan agreements.
Ms. Sulaiman explained that if disputes arose during the investment stage, foreign investors must take note of the practicalities of the Indonesian legal system. Ms. Sulaiman observed that there was a tendency for foreign investors to incorporate English law governing clauses in their agreements, notwithstanding that the Indonesian courts were not allowed to apply foreign law.
Ms. Sulaiman observed that the court litigation process in Indonesia was slow and could take up to 10 years, as there was a shortage of judges. Moreover, the concept of legal professional privilege does not exist in Indonesia. Thus, foreign investors should be mindful that advice provided by legal advisers would be disclosable in any Indonesian court proceedings.
Finally, Ms. Sulaiman noted that at the post-investment stage, foreign investors should be mindful of the difficulties of enforcing an award in Indonesia, although improvements are being made.
South Korea
Mr. McClure noted that, while Korea is not an ASEAN country, it is a major investor in ASEAN economies, particularly Vietnam and Indonesia, due to free trade agreements between Korea and ASEAN countries.
Mr. McClure observed that Korean foreign direct investment covers the whole spectrum of commercial activity. While Samsung and LG are major Korean investors, there is also significant Korean investment in the construction, food, retail, textiles, audio and entertainment, and automobile industries. However, these investments are not one-way. For example, one of Korea’s largest foreign investments in Indonesia was the development of a shrimp farm; in return, Indonesia exported the shrimp produced by the farm to Korea.
Mr. McClure noted that most contracts which govern Korean foreign investment provide for arbitration, with Singapore as the preferred venue of choice. On that note, Mr. McClure observed that Korean parties are generally confident about arbitration in local jurisdictions and are optimistic about enforcement risks.
Further, Mr. McClure observed that most arbitrations involving Korean parties have been commercial in nature, with few investor-state arbitrations involving Korean parties, although this may change as existing free trade agreements provide for ISDS arbitration.
Conclusion
Despite the unique challenges and varying stages of development across ASEAN jurisdictions, the overall sentiment on the panel is that the trajectory of arbitration in the ASEAN region is one of remarkable progress and promise. The panellists’ insights highlight a dynamic and evolving landscape in a fast-growing part of the world – Vietnam and Indonesia have made great strides towards improving the enforcement of awards and finessing their arbitration infrastructure. Singapore has solidified its position as the most preferred arbitration seat in Asia, and Korean investment continues to grow in the ASEAN region, which underscores the importance of arbitration infrastructure in the region.
The Year of the Dragon symbolises power and progress. With continued efforts to improve arbitration infrastructure and the proliferation of foreign direct investment and trade, the future looks bright for arbitration in the ASEAN region.
ABOUT THE AUTHOR:
Erica Li is an Associate and Solicitor Advocate (England and Wales) at the London office of Wilmer Cutler Pickering Hale and Dorr LLP, where she specialises in international arbitration.
