Head of International Arbitration Francis Goh was quoted in The Straits Times article titled "Business tapping Belt and Road will have recourse"

Eversheds Harry Elias Head of International Arbitration Francis Goh was quoted in The Straits Times article titled "Business tapping Belt and Road will have recourse". The article was first published on February 06, 2018.

Business tapping Belt and Road will have recourse

SINGAPORE - Beijing's recent decision to set up three international commercial courts to resolve disputes arising from its ambitious multi-billion dollar Belt and Road Initiative (BRI) has been viewed as a logical next step, according to observers.

They said China can now set up an internationally-accepted dispute resolution system that businesses can turn to.

Official Chinese media reported late last month that the Chinese Supreme People's Court will set up international courts in Beijing, Shenzhen and Xi'an, the capital of Shaanxi Province, to handle cases related to the BRI.

The Xi'an court in north-west China will handle Silk Road disputes, the Shenzhen court in the south will deal with those related to the Maritime Silk Road and the headquarters will be in Beijing.

The BRI, comprising both roads, will connect over 60 per cent of the world's population in more than 60 countries across Asia, Europe and Africa through a massive logistics and transport network that uses roads, ports, railway tracks, pipelines and power plants, to facilitate the seamless flow of capital, goods and services.

These participating countries cover about 30 per cent of the world's gross domestic product (GDP) and 35 per cent of world trade.

Mr Keith Brandt, managing partner of law firm Dentons Hong Kong,said China's move is an understandable response to the reluctance of many Chinese state-owned enterprises (SOEs) that feel compelled to cede resolution of conflict to foreign arbitration commissions.

He added: "The argument advanced appears to be, why shouldn't dispute resolution be undertaken on home territory, when the very underlying reason for the opportunity that has given rise to potential conflict, emanates from the initiative from the state-owned sectors' benefactor, the Chinese central government?"

Those taking part in the BRI would have to accept that "disputes along the BRI are too delicate and important to be resolved in Hong Kong" said Mr Robson Lee, partner at law firm Gibson Dunn's Singapore office.

Singapore Business Federation (SBF) chairman Teo Siong Seng told The Straits Times that China's effort to create a fair and just international mechanism to settle disputes on BRI will be welcomed by the Singapore business community and boost their confidence in taking part in BRI projects.

The BRI, Mr Teo said, presents great opportunities for Singapore companies in professional services such as engineering, financing and insurance.

"Singapore is also well positioned as an international arbitration hub, with a legal system that is neutral, stable, and with high quality jurisprudence. With our deep roots in Southeast Asia, excellent legal and technological expertise as well as language fluency, Singapore can complement China's efforts as an effective dispute resolution enabler for BRI projects," Mr Teo added.

Benefits of Beijing's decision can also extend beyond businesses.

For example, it can provide momentum for the various legal systems to create common standards that can be applied globally, said Mr Francis Goh, partner and head of international arbitration at Eversheds Harry Elias.

He added: "These international commercial courts are starting to sprout around the world...China's international commercial courts are going to be an addition to the global legal scene and paves the way for rules to be harmonised."

Hong Kong's legal sector, quietly acknowledged by some as being gradually sidelined, could also benefit from the spillover effect since the city is the gateway to China.

Clifford Chance's head of Greater China international arbitration practice Cameron Hassall noted the combination of neutrality together with the depth of Chinese language, legal and business expertise, should ensure that Hong Kong remains well placed to compete for Chinese outbound dispute work.

And with one of the new courts based in nearby Shenzhen, Mr Paul Teo, a partner and head of arbitration for Greater China at Baker McKenzie, believes Hong Kong's legal sector will gain as the two cities increase their economic and professional linkages under the banner of the Greater Bay Area.

In a statement, Ms Sarah Grimmer, secretary-general of the Hong Kong International Arbitration Centre (HKIAC) noted that Hong Kong and HKIAC have had a long history of handling disputes of the kind that would arise under the BRI.

Last year, the number of cases brought to HKIAC increased by 47 per cent from 2016, she said, adding that one third of them involved Chinese enterprises and parties from Belt and Road jurisdictions.

Observers also said the development gives the city's legal sector "the chance to internationalise", similar to how the Singapore International Commercial Court positions itself as the go-to court in the region for cross-border disputes.

Details on implementation are still in the works but state-run Xinhua news agency reported that the courts will be based on China's current judiciary, arbitration and mediation agencies. They will also integrate legal service resources home and abroad.

If the new courts apply only Chinese law, Beijing will be sending out a wrong signal that does not lift confidence said Mr Goh, while Mr Teo noted that the silver lining is that proceedings are likely shorter and possibly cheaper.

On the wish list of the legal fraternity keen to tap the opportunities of the BRI is room for foreign lawyers to practise in the new courts - something not granted now - as well as allowing lawyers to apply foreign law.

Author: Claire Huang