24 Jul 2014

Overview of the draft arbitration bill

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On 25 May 2014, the Myanmar Parliament (Pyidaungsu Hluttaw) published a Myanmar-language draft of the highly-anticipated Arbitration Bill.

This follows Myanmar's formal accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention") in April 2013, and the coming into force of the New York Convention in Myanmar on 15 July 2013.

Several of our clients have expressed an interest in the Arbitration Bill as, if brought into force in its current form, it is likely to have a significant effect upon the drafting of dispute resolution provisions in Myanmar-related investment documents.

The New York Convention

The New York Convention provides a regime for the enforcement and recognition of arbitral awards within contracting states, subject to limited exceptions. To date, the New York Convention has been adopted by 150 countries.

Myanmar's formal accession to the New York Convention has been regarded by many as a positive step away from the risks and uncertainties associated with dispute resolution in Myanmar under the current domestic regime. However, until existing arbitration legislation - in particular, the Arbitration (Protocol and Convention) Act of 1937 and the Arbitration Act of 1944 - is reformed to give effect to the New York Convention, the current regime will continue to apply.

The Arbitration Bill is proposed to do exactly that - to reform existing Myanmar arbitration legislation and to give effect to the New York Convention in domestic law.

The Arbitration Bill

Through our team on-the-ground in Yangon, we understand that the Arbitration Bill is divided into two parts - the first part dealing with arbitration in Myanmar, the second part dealing with the enforcement of arbitral awards (both domestic and international).

We understand that for arbitrations seated in Myanmar, the applicable provisions are mostly in line with the UNCITRAL Model Law on International Commercial Arbitration of 1985 (the "Model Law").

Limiting court intervention in the arbitration process

In keeping with the spirit of Article 5 of the Model Law, we understand that the Arbitration Bill proposes that there should be no court intervention in arbitrations seated in Myanmar, save in certain circumstances including matters of public policy.

If accurate, this would indicate a pro-arbitration approach as it ensures a degree of independence for the arbitration regime. Under current legislation, agreements to submit to arbitration are not exclusive, and the Myanmar courts have the discretion to retain a supervisory role over the conduct of an arbitration, and the enforcement of an award.

Under the Arbitration Bill, we understand that the Myanmar court may however be granted powers to support the arbitration process, for example, by granting interim measures in aid of an arbitration.

No restrictions on nationality or language

Indications suggest that the Arbitration Bill does not prescribe, or restrict, the nationality or number of arbitrators appointed to arbitrate, nor does it restrict the language or applicable rules of the arbitration (ie. the arbitration could be governed by the arbitration rules of any international arbitration association, such as the ICC, SIAC, or the LCIA).

Like many other national arbitration laws, however, the Myanmar courts may be granted the power to remove arbitrators where there are justifiable doubts as to their impartiality. This would be in line with Article 12(2) of the Model Law.

Governing law concerns

We understand that an interesting feature of the Arbitration Bill is that while parties to an "international commercial arbitration" are free to select the substantive law of the arbitration, where two Myanmar parties opt for arbitration in Myanmar, the arbitration is required to be governed by Myanmar law. Parties cannot agree to a foreign law as the substantive governing law.

If adopted, this could be significant for parties who invest in Myanmar through locally incorporated entities.

Setting-aside an award

Further, it is our understanding that the Arbitration Bill does not, as currently drafted, follow Article 36 of the Model Law.

So far as we are aware, an award made in Myanmar will only be enforced where the application to set aside that award has expired, or where the court has refused to set aside an award. This would mean that parties objecting to an award must seek to set aside that award, rather than seeking to challenge its enforcement.

Nonetheless, from an initial review, we understand that the grounds to set aside an award or refuse enforcement of an award under the Arbitration Bill mirror those set out in the Model Law and the New York Convention. Examples of such grounds are that:

(i) the arbitration agreement is invalid;
(ii) a party was unable to present its case; and
(iii) the arbitral tribunal exceeded its jurisdiction.

Default

Finally, as drafted the Arbitration Bill deals with the default of the parties to arbitral proceedings. Of particular note, is that the Arbitration Bill suggests that the failure of a respondent to file a defence, or appear or produce documentary evidence will not hinder the continuation of proceedings, although such a default will not be treated as an admission of a claim.

Still a long way to go?

While the publication of the Arbitration Bill appears to be a step in the right direction, it is possible that it may undergo amendment before it is signed into law by President Thein Sein.

The Foreign Investment Law of November 2012 was, for example, sent back from the President's office to the Myanmar Parliament on numerous occasions.

It is to be hoped, however, that given Myanmar's approach to the promotion of foreign investment over the past few years, further amendment away from the Model Code and the spirit of the New York Convention will be minimal.

Perhaps more importantly, should the Arbitration Bill become law, it remains to be seen how easy enforcement of international arbitral awards will be in practice, how the Myanmar courts will approach the new law, and whether the conduct of an arbitration in Myanmar will accord with international standards.

As has been seen in other jurisdictions in the region, the interpretation by local courts of, for example, the public policy exception has not always been consistent with the prevailing pro-arbitration approach adopted in other New York Convention states.

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