Publish time: 2022-3-25
Dr. CHEN Fuyong, the Deputy Secretary General of the BAC/BIAC, was invited to join a panel discussion on the latest developments in BRI disputes at the webinar “Challenges and Solutions of Belt and Road Disputes”.
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Published by: Andrew Mizner at 22/03/2022
A multinational panel brought institutions and private practice together to consider the practical and ethical challenges for lawyers handling Belt and Road disputes.
Nearly nine years after Chinese President Xi Jinping unveiled the Belt and Road Initiative (BRI), the vast infrastructure project that links East and West has thrown up a range of interesting legal questions. Some involve the law itself, and others require geopolitical awareness, according to a panel of leading lawyers, speaking at a recent webinar.
Hosted on 2 March in association with CDR publication Essential Intelligence: The Belt and Road Initiative, published in September 2021, the webinar – Challenges and Solutions of Belt and Road Disputes – heard from private practice, the Bar and arbitral institutions in Asia and the West.
VIRTUAL OR PHYSICAL?
On a practical level the pandemic has changed arbitral practices, particularly through use of virtual hearings, but as the crisis eases, the question is whether to return in person.
“It has now become the case over the last two years that virtual hearings and hybrid hearings have gradually overcome any initial resistance and it is now the de facto modus operandi to run oral arguments, and most countries are still in travel lockdown,” said panel chair Colin Ong QC, a barrister and chartered arbitrator with Dr Colin Ong Legal Services in Brunei.
It was the speaker based in London who spoke in favour of returning to the old ways. “It is very trendy to say we have been saved by technology,” said Stephen Jagusch QC, global chair of international arbitration at Quinn Emanuel Urquhart & Sullivan, but “there is nothing nearly as satisfying as holding a hearing in person”.
“Many feel that a lot is lost in terms of being able to read the room”, he said, arguing that “the added cost of travel and accommodation is at the margins of relevance” in a substantial dispute.
Ong took a more measured view but agreed that “hybrid hearings are veering more towards more in-person and less virtual” in recent times.
The institutional speakers were more in favour of continued use of the technology. Fuyong Chen, deputy secretary general of the Beijing Arbitration Commission (BAC) revealed that virtual hearings had been a big success for the BAC, which was able to accept 249 new international case filings and 7,488 new domestic filings during 2021 alone and held virtual hearings for 32 international cases and 366 domestic ones. With more than 70% of the domestic cases involving parties from outside of Beijing, “virtual hearing would be very helpful for domestic cases, let alone international cases”. “In China the court system promotes virtual hearings strongly,” so he was confident that they would continue even after the pandemic.
“A lot of times, [an] arbitrator’s biggest ticket expense is travel and accommodation,” pointed out Hazel Tang, counsel at the ICC International Court of Arbitration, agreeing with Chen that real savings can be made. She acknowledged though that “virtual hearings may not be suitable for every case, especially complex arbitrations such as those involving BRI disputes”. Even after the pandemic she believed physical hearings would not be the default, but that the choice would be “a live discussion going forward”.
A measured perspective came from Sarah Grimmer, secretary general of the Hong Kong International Arbitration Centre, who suggested a case-by-case decision, acknowledging that virtual hearings were useful, but that for major, document-heavy matters that involve lots of experts, such as construction cases, it was useful to be present. Similarly, there were worries about the integrity of remote witness evidence, although “we have found ways around those concerns, in terms of having 360-degree reviews of the room in question or having an invigilator with the witness at hand”.
If a physical hearing is necessary, the next question is where to hold it. For BRI matters the challenge comes when the parties and other personnel are in Asia but the arbitrator is elsewhere.
Tang explained that while traditionally the location fed into the choice of arbitrator, now “what a court takes into consideration is to find someone who has good access to both parties’ time zone”.
QUESTIONS OF DAMAGES
The pandemic has impacted many infrastructure projects and it will be interesting to hear “whether there has been a growing increase in the number of BRI arbitrations involving claims for damages arising out of infrastructure investments which have been affected by the pandemic”, according to Ong.
Chen revealed that the BAC’s international case load over the past three years “kept increasing” from 163 in 2019, to 215 in 2020, to 249 in 2021, with parties from over 54 countries, and “if you look at it broadly, the case[s] that can be categorised as BRI disputes [have] increased”.
He reported that one Chinese corporation had 687 ongoing projects in 118 countries, involving contracts worth USD 100 billion, of which by Oct 2020, 202 projects had temporary suspensions and 56 claims for damages, with most claims going before arbitration.
The key, said Chen, was identifying disputes which involved one Chinese and one international party, a definition endorsed by Tang, and the number of cases that can be defined as BRI has increased, he added.
HKIAC had done some research on the matter, reported Grimmer, finding 95 cases on its books between 2016 and 2020 that involved one Chinese and one foreign party. This was not clear-cut however, as many HKIAC cases involve parties which are registered offshore but are Chinese owned or have significant Chinese interest.
The scope of potential BRI cases is also incredibly broad, with HKIAC identifying cases that related to the maritime, trade, corporate, professional services, finance, construction and intellectual property (IP) markets, involving parties from as far afield as the Middle East, Africa and South East Asia.
Hong Kong was most common choice of governing law for these cases, followed by English law, while the English language dominated around 70% of cases and 19 different nationalities were represented.
Unsurprisingly for an infrastructure initiative, construction was the top BRI matter at the ICC, while BAC had seen the emergence of IP matters, the difference being that whereas past IP claims involved foreign companies claiming fees from Chinese users, now the trend was reversing.
Good, up-to-date rules were an important factor in attracting users to an arbitral centre, explained Grimmer. HKIAC had introduced provisions for multi-contract and multi-party disputes, among others, and had emphasised making the process predictable.
HKIAC had also taken proactive steps to broaden its reach, seeking out arbitrators not yet on its panel. Although the primary objective remained appointing properly qualified people, Grimmer said that the centre believed it could also consider diversity of race and gender, by appointing first-time arbitrators.
BAC, Chen said, had made moves to be more attractive to BRI disputes, aligning its rules with those of other institutions and involving more international arbitrators in the process.
A DELICATE MATTER
The international nature of arbitration means sanctions can have an impact on proceedings. Ong recalled the difficulties he had faced when finding arbitrators to sit in arbitrations relating to Crimea, due to Western sanctions.
“BRI disputes will always have at least the participation of one Chinese party, and they would also have to be cognisant of the sanctions imposed by the Chinese government” on individuals and organisations in the UK in March 2021, Ong said.
This is not least because the institution that was sanctioned is one of the leading Western outlets for arbitration counsel and arbitrators – Essex Court Chambers.
BAC is inclined to confirm any challenge to the appointment of a sanctioned arbitrator, explained Chen, as providing arbitral services was considered a business dealing and therefore subject to the sanctions.
Hong Kong finds itself in a slim middle ground when it comes to this issue, and HKIAC had investigated the issue during 2021, reported Grimmer, finding that the sanctions legislation only applies to Mainland China People’s Republic of China, and not the Hong Kong Special Administrative Region. However, in an instance when a client had rejected an arbitrator who had left Essex Court, HKIAC had complied with the request. “Institutions are conservative and are never going to introduce problems to the constitution of the arbitral tribunal”, she explained.
It is less clear whether sanctions apply to those who have left chambers since the sanctions came into force, but Grimmer knew of an ex-Essex Court lawyer who had been appointed as arbitrator and counsel by Chinese entities and was allowed to enter China, so “it is not black and white”.
Considering the parties’ views was key, argued Tang, but more information is needed about how to handle this issue in future.
“The [ICC] court takes all objections to nominees and all challenges to appointed arbitrators very seriously,” she said. She noted that the Shanghai Financial Court had rejected a request not to recognise an award by a member of Essex Court as “a good sign that the judiciary is making an active effort to maintain the arbitration practice”.
Chen offered the qualifier that the award in that instance had been written before the sanctions were introduced, and pointed out that the outcome may have been different otherwise, but he went on: “Chinese court system is very pro-arbitration. If a local court would like to enforce an arbitral award, they just enforce it. If they would like to refuse the recognition and enforcement, they have to [apply] to the Supreme People’s Court before getting the approval. They cannot deny the enforcement”.
Sanctions occupy a tricky position in the legal firmament explained Jagusch, who dismissed any perception of them as “soft law”, as they are a serious public policy matter, which can result in fines or even imprisonment. As such “it is only right that institutions are conservative” around them – “why would they take any risks?”
When an opponent appoints a problematic arbitrator, he suggested approaching the arbitrator directly to respectfully request their withdrawal. He conceded that this was dependent on an arbitrator who was willing to respect the arbitration and the institution, as opposed to wanting to hold onto a prestigious appointment. “To do nothing, knowing enforcement of the award might be vulnerable” he said, “that would be a serious concern for any lead counsel for a claimant”.
It was a topic which Jagusch would return to later, ending the webinar with the view that China’s sanctioning of Essex Court and its members “was a real problem and a real blow to international arbitration”, as the chambers had a large number of leading counsel and arbitrators, with consequences for them and their awards.
While not advocating for the inclusion of sanctioned individuals in arbitrations, he thought they might provide advice behind the scenes, but it is clear that the implications will be felt for a long time yet.
With many more topics to consider and some questions from the floor, Ong concluded the webinar.
[Authorized repost by ICLG.com: https://iclg.com/cdr/arbitration-and-adr/17750-the-changing-practice-of-belt-and-road-disputes]