International Arbitration in Asia Is Booming: We’re Your Roadmap to Success

Tuesday, November 3, 2015

Rapid economic growth and an upswing in cross-border investment in Asia have fueled a surge in the popularity of international arbitration across the region. With the rise in stature of Asia’s arbitration venues—particularly in Singapore and Hong Kong—London, Paris, and other European centers are no longer the only options for arbitration of global trade disputes. One reason behind the popularity is the broad enforceability of awards: An award made in almost any country in Asia is enforceable in other Asian countries as well as in most other countries around the world. Another reason is the growing corps of global and industry specialists available on the ground to act as counsel and arbitrators. It’s also worth noting that Asia’s international arbitration agencies have turned into dynamic advocates of the latest thinking and arbitration practices buttressed by solid legislation and supportive courts.

Morgan Lewis invites you to peruse our new publication An Introductory Guide to Arbitration in Asia prepared by Singapore partners Kelvin Aw, Lynette Chew, Timothy Cooke, Justyn Jagger, and Wendy Tan. Although the guide is not a substitute for legal advice, it was conceived as a roadmap of answers to the most common questions concerning arbitration law and practice in 14 countries that have witnessed significant investment activity in recent years. Each chapter covers a single country: Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Myanmar, the Philippines, Singapore, Taiwan, and Vietnam. For a deep dive into arbitration legislation, practices, and procedures in Singapore, read the guide.

Timothy—who advises clients in a variety of international commercial disputes, particularly in the fields of energy and infrastructure, construction and finance, and joint venture and other investment disputes—gave us an overview of common client concerns and the solutions offered by our teams in Singapore, Tokyo, Beijing, and across the globe.

What percentage of the international commercial disputes that you handle are arbitrated in Asia now compared to five years ago?

The vast majority of the regional international commercial disputes we handle are resolved by arbitration in Asia. This reflects the cross-border nature of the disputes we encounter. Many of the countries in the region are emerging markets that have received investment from other parts of the world. The regional company looking to grow its business is wary of resolving disputes in the country of the foreign investor, and likewise, the foreign investor is not usually prepared to resolve disputes in the local courts here. Arbitration is the natural compromise. International arbitration in Asia has proved so successful over the last decade that we are also starting to see a trend of parties wanting to arbitrate disputes here, even though there is no regional connection. This trend is likely to continue.

What concerns do clients voice most frequently about international arbitration agreements or procedures in Asia, and what do you tell them?

Clients have become increasingly concerned about the time and costs invested in resolving a dispute by arbitration. They perceive that it takes too long for arbitrations to be concluded and that the costs are high. On the one hand, these perceptions do reflect a practical reality that disputes in arbitration may be handled differently to litigation: because an arbitration award is not subject to an appeal, the parties have one shot to persuade the tribunal of their case. This can translate to the parties wanting a greater number of issues to be resolved than they might otherwise in litigation. As a consequence, costs may escalate.

On the other hand, these concerns are balanced by other factors. First, the arbitral process is flexible. It can—and should—be molded to suit the individual case at hand, which in turn delivers efficiencies that can translate to savings in time and cost. Second, arbitral tribunals typically require the losing party to pay a substantial portion of the successful party’s costs and expenses of the arbitration. This means a company that has invested in pursuing its legal rights will often be able to recover a significant percentage of its costs.

What are the most surprising elements in this arena for clients, and why?

The process of giving evidence in international arbitration can be surprising for many Asian clients. Many of our clients come from civil law jurisdictions, and this legal heritage shapes the way they understand dispute resolution. International arbitration is, by and large, conducted in an adversarial fashion along the lines of common law litigation. Therefore, some witnesses from a civil law background submit a witness statement but are surprised to learn that the opposing party’s lawyer may cross examine them—and not just in relation to the matters that they have mentioned in their statement, but also about anything else they may know about and is relevant to the case. This has to be handled with sensitivity, because the adversarial experience may not only be unfamiliar to the witness, but also the way in which another party’s lawyer may openly challenge a witness can unintentionally cause offense and affect the quality of evidence the witness gives.

What do we bring to the table in terms of international arbitration capability that our clients especially appreciate?

Our clients appreciate how we incorporate cultural perspectives into our approach to international dispute resolution. Singapore is often described as the gateway to the East. This can be understood on many levels, but in the context of dispute resolution, it is frequently the place where the clash of cultures occurs. Sometimes we see the clash between parties that have come together for a commercial purpose but in the course of working together have fallen prey to misunderstandings, miscommunication, and mistakes that are the product of a difference in approach and assumptions. Sometimes we also see a culture clash in the conduct of the arbitration proceedings themselves, because the parties’ advisers approach the case from different perspectives, sometimes as a result of the civil and common law divide.

Our multicultural disputes team understands these nuances and how they come to bear on the arbitration process. As much as Singapore is a gateway to the East for our clients based predominantly in common law countries, we also see it as a gateway to the West, serving our civil law clients when the tables are turned, and the dispute lies against common law counterparts.

The Morgan Lewis global arbitration team combines dispute resolution strategy and creative legal analysis with insight into intercultural and arbitration dynamics to effectively counsel clients on international arbitration and cross-border disputes. Our highly regarded arbitration lawyers handle significant disputes in the Americas, Europe, Russia and the Commonwealth of Independent States, Africa, Asia, and the Middle East. The team represents clients under all principal international arbitration rules and is well-versed in both civil and common law.

Further Reading

Issue Estoppel and Res Judicata in International Arbitration: More Weapons in the Fight Against Guerrilla Tactics, November 18, 2014

The forthcoming LCIA Rules: a snapshot of current trends in international arbitration, May 28, 2014