"Battle of the Seats: Developing Nations and International Arbitration Centers"
Wilder Alejandro Sanchez and Lucia Scripcari
Geopolitical Monitor
Opinion
March 6, 2019
Originally published:
https://www.geopoliticalmonitor.com/battle-of-the-seats-developing-nations-and-international-arbitration-centers/
In recent months, several governments have announced their intention
to establish international arbitration centers. This is a noteworthy
trend as these states are predominantly developing nations.
The fact that many developing nations are turning to international
arbitration as a way to attract financial investment and increase their
country’s pedigree abroad is a significant development that will have
repercussions in the arbitration industry.
The New Arbitration Centers…
As for upcoming centers, there are several initiatives worth
mentioning. For example, in mid-January a delegation from the Oman
Centre for Commercial Arbitration traveled to Qatar to
discuss co-operative ties
between Qatar and the Oman Chamber of Commerce and Industry (OCCI),
“especially in the areas of commercial arbitration.” Reports detailing
Oman’s intention to create an arbitration center
appeared around 2015, but it was only established in 2018 via
Royal Decree No 26/2018. Oman is now looking to Qatar, which has its own
Qatar International Center for Conciliation and Arbitration, for assistance to get its arbitration center started.
Also in November 2018, Uzbekistan announced the creation of the
Tashkent International Arbitration Center (TIAC),
which will operate under the country’s Chamber of Commerce and
Industry. Meanwhile, in late January 2019, during an international
conference on arbitration, the minister of financial services, trade
& industry and immigration in The Bahamas, Brent Symonette,
reiterated
the commitment of this Caribbean nation to become an international
arbitration hub. Even more, the governments of Singapore and the
People’s Republic of China agreed in late January “
to set up an international panel of mediators, to better handle disputes that may arise from projects under the multi-billion dollar Belt and Road Initiative.”
The African continent is building itself into a hub for
international commercial arbitration, with South Africa, as well as
Rwanda and Mauritius leading the charge. Not only is the continent
garnering expertise in international arbitrations; but, from a cost
perspective, counsel costs and the general expense of arbitrating are
also far more reasonable when compared to other seats in countries such
as London or Paris.
We may soon add even more nations to the growing list of
international arbitration centers, many of which may be based in Africa.
… Will Have to Struggle Against other Centers
In other words, any new player will have to compete for clients with more established and reputable arbitration entities.
Potential New Seats Are Confident
The aforementioned list demonstrates that commercial arbitration
centers are en vogue right now. A successful arbitration center can help
a country’s image grow in the international arena, not to mention help
protect the country’s business interests. Moreover, arbitration centers
are ideal for local economies, as they imply greater usage of airports,
hotels, and other facilities as arbitrators and clients travel to said
centers for their cases.
Part of the challenge for any new arbitration center to be successful
is that it has to appear attractive to potential clients, hence local
governments have to “sell” the image of their nation. For example, the
aforementioned Bahamian Minister Symonette,
argued why The Bahamas would be a great location for an arbitration center:
Our accessibility by air transport to several major continents;
our infrastructure by way of hotels and convention centers; our advanced
technology; a long standing commitment to the rule of law; stable
government; our trained judiciary and let us not forget an experienced
and skilled cadre of professional lawyers, accountants, trust officers
and insurance specialists to name a few. These attributes should not be
taken lightly as they give The Bahamas a competitive advantage over many
competitors.
There are reasons for these governments to be confident about their
possible success as some arbitration centers in developing regions are
doing quite well. For example, the Kigali International Arbitration
Centre is an African success story, and
according to the Rwandan daily
The New Times, in early 2019 the center registered its 100th case.
Similarly, Kazakhstan has high hopes for the AIFC, which is a
conglomerate of different financial entities, aimed at attracting global
investors to the Central Asian state. Apart from the previously
mentioned Arbitration Centre, the AIFC includes the Astana International
Exchange; the AIFC Court, which “
provides a common law court system for the first time in Eurasia;” and other administrative agencies.
Analysis
While Kigali can be regarded as a success story, we would be
neglectful if we did not mention some of the challenges that new
international arbitration centers will face as they try to make a name
for themselves.
One obvious challenge is convincing legal professionals that they
should, in turn, convince their clients to utilize a new arbitration
center rather than a more well-known institution, like the ICC. After
all, nobody wants to be the “guinea pig” of a new arbitration center.
One positive aspect of the AIFC’s IAC is that it is its own entity,
independent from the Kazakhstani judicial system and other government
agencies. This, combined with its army of arbitrators, will hopefully
encourage clients to turn to it due to its impartiality. On the other
hand, the TIAC, for example, will operate under the Chamber of Commerce
and Industry of Uzbekistan, meaning that potential clients may perceive
it to be inherently biased in favor of the Uzbek government. The
perception of impartiality of arbitrators and the system as a whole is a
critical pillar necessary for any arbitration center to flourish.
An additional issue to keep in mind is the effect that these new
entities will have on international arbitration as a whole. How will
these new centers affect commercial arbitration as we know it? How will
the increase of “supply” affect the “demand”? Future analyses about
commercial arbitration should pay attention to this issue.
The Future of Arbitration: Technology and Cryptocurrencies
The Shenzhen Court of International Arbitration in China has ruled
that “bitcoin is not a legal currency” but that “does not prevent it
from being protected by law as a property.” In fact, several hotels in
major Chinese now accept cryptocurrencies, case in point the
Ethereum Hotel, which offers discounts to those that pay their bills using the Ether cryptocurrency.
This ruling clearly demonstrates that state regulation should be a
priority and, thankfully several governments have drafted bills to
regulate cryptocurrencies. For instance, the government of
India has announced that a draft legislation on crypto regulation is in its the final stages. Meanwhile, the
government in Kiev
announced its intention to legalize cryptocurrencies and draft relevant
regulations, an initiative led by the ministry of economy. As for the
Russian Federation, it has already enacted bills on this matter, and,
according to reports, at least 51 cryptocurrency ATMs operate in
compliance with the current regulations in Russia.
However, bills and regulations are not enough to fully guarantee the
protection of property rights. A relevant dispute settlement mechanism
is necessary for that. This is the reason why the Russian Industrialist
Union has launched an
Arbitration Body for Crypto Disputes.
Similarly, Uzbekistan’s aforementioned TIAC will be a platform to
settle disagreements over investments, intellectual property and,
interestingly, crypto-related technologies.
Resolving the disputes arising from cryptocurrencies not only require
arbitrators and laws, but also a technical knowledge regarding how a
virtual currency, like Bitcoin, exists, how much it is worth, and how
can it be tracked.
Contrary to litigation, where parties cannot select a judge of their
preference, arbitration is an alternative dispute settlement mechanism
that allows parties to appoint an arbitrator that is a specialist in
subject of the dispute. As Redfern and Hunter correctly suggested “it
is, above all, the quality of the arbitral tribunal that makes or breaks
the process” (Law and Practice of International Commercial Arbitration,
4th Ed, 2004). Appointing authorities is a critical component of the
arbitration process, in order to be represented in the most professional
and efficient way possible, parties must be sure that their case is
heard by highly specialized arbitrators. Moreover, as it is not
necessary to be represented by lawyers, parties may be represented by
themselves or by financial technology specialists.
While this analysis has focused on new arbitration centers in
developing nations, the rise of cryptocurrencies will also have an
effect on how arbitration is conducted. Hence governments, parties, as
well as current and future arbitration centers must think of how
cryptocurrencies will affect future contracts.
Final Thoughts
Nations like Kazakhstan, The Bahamas, Qatar and Uzbekistan are in the
process of setting up their own international arbitration centers, or
have recently created them. This is an interesting strategy as these
countries seek greater international recognition, and other benefits
that come from having a respected arbitration center within their
territory; the center in Kigali stands as an example of a successful
arbitration center in a developing nation. Nevertheless, the arbitration
industry is fairly well-established by now, and these new entities will
have to complete against the ICC or ICSID.
Commercial arbitration is an evolving industry, it will be important
to monitor how new centers and the rise of cryptocurrencies affect it in
the near and long term.
About the authors: Wilder Alejandro Sanchez is an analyst based
in Washington DC who focuses on geopolitical, military and cyber
security issues. Lucia Scripcari is a Moldovan student finishing her
degree in law at Istanbul Sehir University (Turkey).
The views expressed in this article are those of the authors
alone and do not necessarily reflect those of Geopoliticalmonitor.com or
any institutions with which the authors are associated.
