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Arbitration’s Shift to the East

[This article is authored by Aman Kumar Yadav and Arjun Chakladar, penultimate year law students at NLIU, Bhopal.]

Keywords: Arbitration, ICADR, SIAC, HKIAC, LCIA, UNICITRAL.

Arbitration in recent times has seen immense global growth and has been recognized almost unilaterally by majority of legal frameworks, as the premier alternative dispute resolution procedure. Arbitration as a process has gained traction due to its methodology and is gaining prevalence outside the walls of litigation. This is because it is a process where both disputing parties come to terms amicably and the arbitration award rendered by the arbitrator/ arbitral tribunal is enforceable and legally binding without the formality and myopic scope of the litigant courts.

Arbitration, as a procedure has its roots and stronghold in Western Europe, namely the United Kingdom and the United States of America, with the "New York Convention" and UNCITRAL Arbitration Rules, which are both landmarks for ad-hoc arbitration procedures being devised in America. There were two main courts located in the Western Hemisphere namely the International Chamber of Commerce ("ICC") court for Arbitration, situated in Paris and the London Court of International Arbitration ("LCIA").

However, in recent times there has been a monumental shift in commercial arbitration, which has migrated to arbitration hubs situated in the east, and gaining preference when compared to erstwhile arbitration hubs in the West. Specifically, it has encapsulated regions such as the Middle East, the Afro-Asian demographic and has mainly centred itself in South-East Asia, especially in the arbitration hubs of Singapore and Hong Kong. However, the niche which has grown into a revolution is majorly based upon matters which are international in nature. The arbitral centre in Dubai, Singapore, Japan and China, cater more towards the matters brought by foreign actors from different countries who have amicably decided that they will conduct their commercial disputes in an arbitral centre situated in the East.

The most prominent international arbitral centre is the Singapore International Arbitration Centre ("SIAC"), which since its establishment in 1991, has gained dominance for arbitration in the East, with a flurry of cases coming in since the year 2014. In 2016 SIAC had more than 300 cases submitted for arbitral proceedings and more than 80%,of these matters had been considered as international cases. The main clientele that the SIAC caters to is not domestic in nature but comes from various nations who agree to arbitrate under Singaporean law, British law and Indian law, and choose not to be governed by the law controlling their nations. The main slew of clients for the SIAC are Indians, who flock to Singapore owing to various reasons- be it the common demographics, the shared linguistic similarities or the similar legal framework. Apart from India, clients from the USA, United Kingdom, China, Japan and Middle East also flock to Singapore for its established reign in the Eastern Arbitration market.

Moving on, the next major hub for arbitral proceedings in the East is Hong Kong, with its arbitral centre Hong Kong International Arbitration Centre ("HKIAC"). In Hong Kong almost all of the cases were classified as "international", wherein almost half of the arbitral parties did not belong to Hong Kong and flocked from various regions in the East, such as Japan, China and other South-Eastern nations. Hong Kong has gained popularity majorly by gaining reliability in arbitrations concerning Chinese parties. In recent time, majority of arbitral parties have engaged in arbitrations governed majorly by Hong Kong Law, subsequently followed by Chinese and English Law to dictate proceedings.

Owing to the fact that the HKIAC was founded in 1985, it outnumbers the SIAC in terms of the number of arbitral seats. However the main character of comparison is that the SIAC, tends to Indian and American arbitral parties with the HKIAC tending to Chinese and South-East Asia based parties. The HKIAC is seen more of a regional arbitration centre and has established a hegemony when it comes to regional disputes but SIAC is the preferred choice for international commercial disputes. However, both the Eastern situated arbitration centres predominantly deal with corporate and commercial disputes, along with any disputes regarding maritime trade or shipping as well as construction or investment.

Apart from the SIAC or the HKIAC, there are some other new players who have begun to make a name in international arbitration.. One such is the People’s Republic of China. The China International Economic and Trade Arbitration Commission (“CIETAC”) was established in 1956, but it begun to get a flurry of international arbitration cases only after it enforced the “New York Convention" in 1987. In present day the Chinese Arbitral scenario has grown leaps and bounds. However, only one third of their total arbitral proceedings conducted are international, with majority being domestic disputes with international players. China has furthered the growth of Chinese Arbitration by setting up centres in Shanghai, Shenzhen and Beijing and further diversifying the CIETAC by implementing a "South China Sub-Commission of the CIETAC" for any arbitral disputes in Southern China concerning issues relating to the British Virgin Islands, which have an insurgence of Chinese Investment companies.

Following in the footsteps of their counterparts in the Eastern region, the Japan Commercial Arbitration Association ("JCAA") is one of the oldest bodies being established in 1950 and subsequently adopting the "New York Convention" in 1967. Despite having restricting regulations placed on Japanese law by foreign lawyers in the mid-1990’s, recently Tokyo, has been chosen as a ‘preferred’ seat for arbitration over other prominent centres in the West such as Paris, London, New York and Geneva. Many international parties are now preferring Tokyo as a new established hub for arbitration rather than arbitration centres which almost have a monopoly in the West. Further, a new arbitral hub competing with the likes of SIAC and HKIAC is the Middle East. Since the 1970’s the Middle-East has seen proliferating growth in International Investments and the area has witnessed large number of international investors and parties flocking the region. Since the advent of the 1990’s majority of the region’s states have begun adopting the UNCITRAL law along with French and English law for the purpose of alternative dispute resolution in the form of Arbitral Proceedings. Since the turn of the 21stcentury, many nations in the region have sponsored arbitration by adopting the UNCITRAL model law. These nations have been leading the forefront, despite being emerging newcomers to the world of international commercial arbitration and have shown prominence and immense growth. They include Bahrain, Egypt, Oman, Qatar, Saudi Arabia and Dubai, The Middle East incorporates three legal framework, namely Sharia law, Shia law and Arbitration model law into its disputes. The Qatar International Court and Dispute Resolution Centre alongside the Dubai International Arbitration Centre are major players, where almost all matters regarding any dispute in the Middle Eastern region are resolved amicably between international investors or parties and Middle Eastern based parties.

In the Indian Subcontinent, arbitration had been present since 1965 with the Indian Council of Arbitration ("ICA") but it achieved prevalence with the codification of the Arbitration and Conciliation Act in 1996. Currently New Delhi is a major center and the recently established Mumbai Centre for International Arbitration ("MCIA") is predicted to take on arbitral proceedings which were earlier being referred to SIAC. Most recently, in 2018 the Central Government introduced the New Delhi International Arbitration Bill, 2018 in accordance to the need to establish India as an investor- friendly nation. The Bill also looked towards the fortification of the Indian Council of Arbitration, the MCIA and International Centre for Alternative Dispute Resolution ("ICADR") situated in New Delhi. The need of the hour is to globally establish that India is fertile for investors and has the groundwork laid out for the facilitation of diverse alternative dispute resolutions. The Indian subcontinent and surrounding nations have preferred India for international arbitration proceedings and many domestic and international issues are being given prevalence vis-à-vis India’s development as an arbitration center.

In conclusion, arbitration has been seen as the premier choice for alternative dispute resolution and in the past few decades the meteoric rise of the East as the preferred hub of arbitration shows that many governments across the enormously diverse region are finding common ground, with the progressive approach of promoting growth and development through arbitration.

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