Arbitration on the rise in Asian trade

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Global Trade Review | 14 June 2016

Arbitration on the rise in Asian trade

by Finbarr Bermingham

New research has shown that Singapore is the leading arbitration hub in Asia, and is now the fourth seat in the world.

The city state is the most preferred destination for arbitrations conducted by the International Chamber of Commerce (ICC) in Asia, with 6% of all new ICC cases being held in Singapore.

The number of domestic arbitrations remained constant in 2015, but there are a rising number of foreign parties bringing cases to the ICC in Singapore. In over 71% of all cases, there was a non-Singaporean party involved. In half the cases, a non-Singapore arbitrator was appointed.

The ICC’s recently-appointed director in South Asia Abhinav Bhushan tells GTR that Singapore’s growing role in arbitration is down to its excellent infrastructure.

He says: “There is great infrastructure, such as a hearing centre with hearing rooms, translators, transcribers, etc. Also, the Singapore courts have a great record in respecting the arbitral process and there is a vibrant arbitration community in Singapore.”

The growing culture of arbitration in Singapore is interesting in the current climate of multilateral trade negotiations, many of which have been hamstrung by disagreements over investor protection clauses.

The Trans-Pacific Partnership (TPP) is facing difficulties in concluding partly due to strong opposition to the controversial investor-state dispute settlement (ISDS) clause, which opponents say grants foreign investors capability to sue local governments if policy changes affect their investments.

“There has been a rise in investment arbitrations arising out of investment agreements and Asia,” Abhinav Bhushan, ICC

Recently in Australia, the government won an ISDS case brought by tobacco giant Philip Morris International (PMI) over its decision to introduce plain packaging legislation for tobacco products. The dispute was possible because of a trade agreement between Australia and Hong Kong, where PMI has its Asian headquarters.

It’s understood that in the TPP, Australia managed to negotiate a carve-out for tobacco products to prevent this happening again, much to the chagrin of the US tobacco lobby.

Data from the United Nations Conference on Trade and Development (UNCTAD) shows that the number of ISDS cases has been growing exponentially in recent years. In 1996, there were fewer than 10, while in 2014 there were more than 60.

Bhushan says that ISDS cases are becoming more common in Singapore, but that these are not a huge amount of the cases the ICC sees.

He says: “ISDS cases form a small percentage of our case load so this is not something we can provide insight on. However, that said there has been a rise in investment arbitrations arising out of investment agreements and Asia, in general has a great potential to cater to the investment arbitration regime.”

The ICC’s report on arbitration found that of the 791 arbitration filings over the course of 2014, there were 140 countries and independent territories involved. The countries involved in the most trade arbitrations were the US (10.04%), France (5.31%), Brazil (5.04%), Germany (4.64%) and Italy (3.56%).

In 2015, the ICC’s dispute settlement court recorded the second-highest number of new cases in its 93-year history, with 801 new cases being filed.