Experts Divided Over Ramifications of Belt and Road Courts on Myanmar

“This is bad news for Myanmar. It will undermine Myanmar’s sovereignty and empower multinational corporations,” said Dr Charlie Thame from Thammasat University.

CRITICS questioned Beijing’s decision to set up three commercial courts in China to resolve Belt and Road-related project disputes, arguing that legal disagreements involving transnational investors should be settled in host states or third-party territories. An academic further lambasted such arrangements as “essentially tools for corporations to restrict access to justice” which will erode community rights, Nay Pyi Taw’s right to regulate as well as Myanmar’s sovereignty.

However, other lawyers welcomed the development and were confident that the new courts would be “neutral and fair” and would facilitate BRI expertise, saying that the mechanism is “ultimately a matter of convenience.”

New Belt and Road courts in China

The Chinese embassy in Yangon confirmed to The Myanmar Times on Wednesday that Beijing will set up a new Belt and Road dispute settlement mechanism, but did not comment further on the location or structure of the new courts.

Chinese news media reported that the new BRI dispute settlement mechanism will be comprised of three international commercial courts set up by China’s Supreme People’s Court in Xi’an, Shenzhen and Beijing, with the headquarters in the capital. The court in Xi’an will cover commercial disputes along the Silk Road Economic Belt, a land-based route which runs from western China to Europe and the Middle East through Central Asia, while the Shenzhen court will oversee cases arising along the 21st Maritime Silk Road, a sea route which links the Chinese coast to Europe and Africa via Southeast Asia and other waters. The courts would resemble Singapore’s International Commercial Court and Dubai’s International Finance Centre Courts. It was also reported that Beijing’s top legal body is eager to promote mediation to resolve BRI disputes.

BRI projects in Myanmar are ruled, in principle, by existing bilateral or multilateral treaties, according to HRMR lead director Eric Rose. In Myanmar’s case, the projects are ruled by the 2012 “Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation” between ASEAN and China, and the 2002 Sino-Myanmar bilateral investment treaty. Both treaties provide for similar conflict resolution: consultation, followed by mediation, followed by arbitration by an ad-hoc arbitration tribunal, with no preset venue or choice of law, either procedural or substantive.

In Myanmar, Kyaukphyu is the foremost BRI project but businesses expect more investment projects, especially infrastructure investments, to come in. Hence, this development has huge implications on those businesses who seek to attract Chinese investments.

Existing alternatives

Mr Rose said that there are already existing alternatives than accepting arbitration in China.

In September last year, the Singapore International Mediation Centre and the China Chamber of International Commerce Mediation Centre (CCOIC) entered into an MoU to resolve BRI cross-border disputes. Meanwhile, Dr Shahla Ali, deputy director of Hong Kong University’s arbitration and dispute resolution programme, further confirmed to The Myanmar Times that Hong Kong’s justice department has been developing eBRAM.hk, an online dispute resolution tool for major BRI infrastructure projects.

Given the alternatives, Mr Rose argued, “it really appears that the Chinese government is trying to force the other sides to accept Chinese mediation and arbitration through its proposal to have these three courts rule on all BRI disputes.”

“The BRI recipients, however, always have the option of saying ‘NO!’” he commented.

China’s top legal body has been in the process of “internationalising” its domestic court system and the three new courts are supposed to be modelled after the established ones in Singapore or Dubai. But Mr Rose remained unconvinced.

“Despite these steps, given the ‘novelty’ of these concepts to most Chinese jurists, the imposition of a requirement for BRI projects to be settled in the three Chinese courts smacks of … ‘Chinese Arrogance Concept’. The choice of arbitration venue and law, both procedural and substantive, should be left to the negotiation between the parties,” he said, adding that third party jurisdictions with established rules and an experienced body of jurists are “always preferable to those jurisdictions affiliated with one or the other of the parties to a contract”.

On the contrary, Bob Tseng and Mariano Suarez, partners of Thanlwin Legal, noted that traditional arbitration centres such as Singapore, London and Hong Kong are for highly sophisticated businesses. While these remain worthy options, Belt and Road countries should be “pleased that China is developing these international commercial courts which has expertise in Belt and Road projects and great understanding of Belt and Road participating countries.”

“Bad news for Myanmar”

Not everyone shares that optimism.

For Dr Charlie Thame, lecturer in International Relations at Bangkok’s Thammasat University, having mainland China courts to settle disputes is “bad news for Myanmar” and will undercut sovereignty, community rights, access to justice and, ultimately, democracy.

“This is bad news for Myanmar. It will undermine Myanmar’s sovereignty and empower multinational corporations. Transnational investors have sued states for billions of dollars under similar mechanisms for taking measures to protect public health or the environment, review exploitative contracts acquired through allegations of corruption, promote industrialisation, or even adjust corporate taxes. This has a chilling effect, undermining democratic decision making and restricting states’ right to regulate in the public interest and protect the rights of their people, environment, and resources,” he replied in an email.

Dr Thame argued it is unlikely Myanmar would have been able to review Myitsone Dam or Kyaukphyu SEZ if such provisions were in place.

“These mechanisms are essentially tools for corporations to restrict access to justice. The OECD estimates that expenses for a single Investor-State Dispute Settlement case amounts to $8 million. Even if a state wins, they must pay half of this, so litigation is prohibitively expensive for countries like Myanmar.

“Moreover, it’s unlikely there will be provisions for communities facing negative impacts of these investments: human rights violations, environmental degradation, or loss of livelihoods. Even in internationally reputable permanent arbitration institutions, arbitrators usually interpret investors’ rights broadly, and conflicts of interests are common, since arbitrators sometimes also work as counsels for investors. Many BRI companies are Chinese, and often state-owned enterprises, raising further questions about independence and impartiality of the proposed courts,” he explained.

The academic stressed that governments have a right to regulate and that legal disputes involving transnational investors should be resolved in host states, so governments can protect the interests of their citizens.

“Reasonable and expected”

But other experts are more positive, seeing that as a natural consequence of China’s rising bargaining power.Mr Tseng and Mr Suarez defended the new development as “reasonable and expected”, especially when both parties are Chinese corporate entities.

“International dispute resolution is ultimately a matter of convenience.

“China is, in most situations, the ‘investor’ across the many projects within the Belt and Road Initiative. It makes sense that China would enjoy the bargaining power to have any disputes settled within China,” they commented.

Myanmar courts retain legal authority

William Greenlee from DFDL, who’s chair of American Chamber of Commerce Myanmar’s legal committee, said that courts in Myanmar will retain the legal authority to review whether an award is in line with the local law even when the arbitration is done outside the country.

“It is true that some local investors and relevant project target governments, in this case Myanmar government, may prefer to have the relevant seat of arbitration in a third country. However, China is experienced in international investing and I assume arbitration in China would be neutral and fair.

“Either way, any resulting arbitration award would have to be enforced by the relevant local government’s courts and such courts generally do have legal authority to review the award and underlying case and determine if fair and/ or complies with local laws,” he said.

He added that it is up to the relevant parties in Myanmar to decide whether to sign up for individual BRI projects and the related arbitration arrangements.

“Some particular [Belt and Road-driven] investments will likely be accepted by the relevant international government and some will not. A condition of any potential arbitration in China is one of many terms that the parties will look at and determine if acceptable or not,” he said.

 

Source: The Myanmar Times

 

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