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Seminar on Legal Aspects of Regional Cooperation : Presentation of Prof. Mochtar Kusuma-Atmadja : Arbitration in the 1990s: Developments in East Asia
Regional PerspectiveAn examination of the situation in PRC, Japan and the Republic of Korea shows an interesting convergence of opinion in respect of the concept of commercial arbitration among Asian countries which differs from the Western concept. That difference is an accurate reflection of a difference of approach between the two worlds. The rapid expansion of international trade and commerce accompanied by large investments has led the developing world to accept and adopt arbitration as the norm. In Asia, however, arbitration is simply unknown to most people. While the Western concept is legalistic and adversarial in nature, the Eastern approach towards arbitration is more flexible. The arbitrator cannot divorce himself from his primary role as conciliator and as an active promoter of dispute solving. In Japan, for example, the arbitrator is free to advise parties to settle; he participates actively in forming the terms of settlement. This, of course, may not be acceptable to those who have been brought up on arbitration as understood by the West. There is thus a fundamental difference of approach between East and West in dispute resolution. PRC, Japan and the Republic of Korea, for example, with their well-developed and time-honored mechanisms for mediation or conciliation are learning, although not without some difficulty, to adjust to Western concepts of arbitration as a means of solving disputes. Countries in the Southeast Asian Region, however, are straddling both Eastern and Western views about arbitration. This is in part due to the colonial background, which has a strong influence on its legal systems and their Asian heritage. Two opposing forces underlie the fundamental policy considerations in the attitude of developing countries towards arbitration. First, there is an effort om the political and economic domination of past colonial rulers and their well-established Western institutions, of which arbitration has, until recently, been considered a part in the commercial and economic field. Second, oriented towards the future there is the vital need to create and secure an environment for cooperation, based on consensus. With respect to the latter, international commercial arbitration has become a reference point of the legal framework in which international trade evolves. All major trading centres of the Southeast Asian Region have undertaken rapid changes in their legal treatment of international arbitration: Singapore is still in the glow of inaugurating its international arbitration centre, while Hong Kong is implementing the liberal UNCITRAL Model Law on arbitration. Malaysia in turn initiated as early as 1978 an original scheme to promote international arbitration by participating in the creation of an arbitral institution of a regional, and subsequently transnational character under the auspices of the AALCC. Arbitration in Asia in the past few years has grown by leaps and bounds. Where previously Western countries have been the main hub of arbitration activity, Asian countries are now pushing to the forefront of the arbitration scene. Businessmen are beginning to recognize the importance of having arbitration clauses in their contracts, as most countries in the Asia- Pacific Region are signatories to the New York Convention on the Recognition and Enforcement of Arbitral Awards. In consequence, an arbitration clause in a contract precludes litigation and protects a party from being sued in a foreign court. It also means that a resulting award is freely enforceable in most countries in the Region. Litigation is taking a back seat as a source of dispute settlement, especially in international disputes, because it is fundamentally unfair to litigate in courts of the country of either party. Courts are rooted in a particular legal system and are not seen as neutral or international fora. In contrast, arbitration is more international in flavour. Moreover, arbitrators, or at least the chairman of an arbitration tribunal, can be drawn from neutral countries, and the tribunal therefore has a more neutral and impartial character. There are several reasons for the explosive expansion of arbitration. First, there has been a vast increase in the volume of international trade, especially in Asia as a result of the establishment of the free trade system in the post-GATT era. Secondly, advances in science and technology have led to a new species of contract, called the international development contract, in which the parties to the contract are the developing country and a private party, contracts of a highly complex and technical nature which are better understood and interpreted by technical experts rather than by judges who are presumed to be experts only in law. Thirdly, the emergence of socialist and "mixed-economy" states often involves contractual relations between the state and a state enterprise as one party and a transnational corporation as the other contractual party. Since the private party is understandably reluctant to submit to the jurisdiction of the state party and the latter is equally reluctant to submit to the jurisdiction of another state, arbitration in a neutral forum is usually the preferred method of dispute settlement. The climate for international arbitration is further enhanced due to improvements and refinements in the international arbitration process as well as the widespread acceptance of the New York Convention, which has made arbitration across national borders easier and more efficacious. Another important agreement, which has also received widespread regional acceptance, is the ICSID Convention, sponsored by the World Bank, which provides for conciliation and arbitration of an investment dispute between a contracting state and a national of another contracting state and established the International Centre for Settlement of Investment Disputes (ICSID) at Washington, DC, which is managed by the World Bank. Two popular sets of international arbitration rules which have helped in the establishment of institutional arbitration in the Region are the ICC Rules of Conciliation and Arbitration and the UNCITRAL Arbitration Rules. UNCITRAL has also formulated a Model Law on International Commercial Arbitration for adoption at the national legislative level. The Asian businessman looking for international arbitration, therefore, has now a very wide variety of rules and venues to choose from and, in fact, is in danger of being overwhelmed by the multiplicity of choices available. Two further developments that have given a boost to international commercial arbitration are the plethora of books and articles on the subject in the last two decades or so and the more friendly attitude to arbitration shown by judges in recent times.
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