ONE BELT ONE ROAD (一帶一路) AND ARBITRATION

One Belt One Road (一帶一路) is without a doubt one of the hottest topic at the moment.  This is primarily a resurrection of the ancient "Silk Road" concept into the modern "Maritime Silk Road" and the "Silk Road Economic Belt". The initiative is conceived by China. The aim is to build and improve the infrastructure as well as the trading network of land, sea and air of the trading partners of China in South East Asia, Central Asia, West Asia, Russia, Europe as well as South America.  The scale and magnitude of this initiative brings about huge commercial potential and it acts as a stimulus for economic growth for the region.

The cross border element is a major feature of this initiative.  It is anticipated that over 70 countries will participate in the initiative.  When considering the best model to resolve any contractual dispute arising out of this initiative, I am sure arbitration will come out on top of the list. 

In terms of international trading disputes, arbitration has a number of advantages as compared to litigation.  I shall highlight some of these below:-

Neutrality

A party to an international contractual dispute involving multiple parties, regions and interests, may find the courts of a country which it is domiciled or is otherwise connected with the oppositions are unsuitable to hear the dispute.  In arbitration, the parties can certainly select a neutral venue for deciding any dispute.  This may certainly give the parties a high degree of comfort and confident in the process.

Expertise

Similarly, in arbitration the parties can choose the arbitrator or arbitrators with the relevant expertise in the subject matters of the dispute as the umpire.  On the contrary, the court may not necessary have the expertise in the subject matters of the dispute.

Confidentiality

All arbitrations are confidential and conducted in private.  Therefore, adverse publicity can be avoided.  For the same reason, arbitration is often preferred in cases involving governments, trade secrets, intellectual property rights, confidential commercial transactions and so on.

Flexibility

In court proceedings certain procedural matters must be followed.  In arbitration, the normal protocols of a national court can be avoided by agreement of the parties.  The parties can agree on procedural matters and the rules to be adopted in arbitration.

Enforceability

Enforcement of foreign court judgments often poses difficulties in different countries.  As a result, a fresh legal action may have to be commenced in the court of the country where the judgment is sought to be enforced.

On the contrary, under the New York Conventions on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention"), arbitral awards made in one convention country can be easily enforced in another convention country and thus to save costs.

Finality

Arbitral awards are usually final and not subject to further review on the merits.  As a result, lengthy and costly appeal procedures in the national courts can be avoided.

Third Party Funding

It is highly likely that third party funding for arbitration will soon be permitted in Hong Kong. This will enable parties who have genuine claims but may not have sufficient financial means to pursue legal proceedings in the national courts to have access to justice by way of arbitration.

If you are interested to use for arbitration as the model for dispute resolution, please ensure that an appropriate arbitration clause is being incorporated in the contract.

Albert Lam
Partner
HAMPTON, WINTER AND GLYNN
December 2015