The Creation of a Dispute Resolution Regime for the Belt & Road Initiative

1. The Creation of a Dispute Resolution Regime for the Belt & Road Initiative Middle East Institute (MEI), National University of Singapore MEI Annual Conference 2019, Singapore 11 February 2019 DrMichael Hwang S.C. Despite the huge scale of the Belt & Road Initiative (“BRI”), Chinese authorities have not yet announced meaningful measures to deal with BRI disputes in general, other than setting up the Chinese International Commercial Court last year. This talk will discuss in broad terms what existing measures could be adapted to resolve the specific nature of BRI disputes.

2. Introduction • What is the current situation? • Apart from the Chinese International Commercial Courts, no grand infrastructural plan is apparent. • Existing arbitration institutions have advertised slightly modified versions of their existing offerings but have not seriously promoted them yet. • Current alternative solutions under public discussion: • International commercial courts • International arbitration • Working through existing domestic courts and expanding range of reciprocal enforcement between BRI member countries • Mediation

3. Chinese International Commercial Court (“CICC”) • Established in 2018, the CICC is in reality a division of the Supreme People’s Court (“SPC”). • Although the CICC is supposed to be situated in Xi’an and Shenzhen, it is for the moment run out of Beijing by the SPC. • Judges appointed so far are all from the SPC, but they are all supposed to be fluent to some degree in English.

4. Jurisdiction of the CICC The CICC has jurisdiction to hear five categories of disputes: • International commercial cases in which the parties have chosen the jurisdiction of the SPC according to Article 34 of the Civil Procedure Law, with an amount in dispute of at least RMB 300 million(approx. USD 45 million). • International commercial cases which the Higher People’s Courts have jurisdiction, but which the Higher People’s Courts consider should be tried by the SPC, and the SPC approves the transfer of the case to the CICC. • International commercial cases that have a nationwide significant impact. • Applications for preservation measures in arbitration, for setting asideor enforcement of international commercial arbitration awards pursuant to Article 14 of the Regulations. • Any other internationalcommercialcases that the SPC considers appropriate to be tried by the CICC.

5. CICC – Two Difficulties • Two difficulties with the CICC as a truly international court under the existing legal framework in China: • Language: The language in all Chinese courts must be Chinese. • Nationality of Judges: All judges in Chinese courts must be Chinese nationals, so even foreign jurists who are fluent in Chinese cannot be appointed to the CICC. • Some features of the CICC to alleviate these two difficulties: • Exhibits may be tendered to the CICC in English. • Appointment of an advisory panel (consisting mainly of foreign nationals) of experts in foreign law to advise the CICC judges – this may be a precursor to allow the experts to effectively decide a case referred to them and then the expert’s recommendations may then be approved and issued by the Chinese judges on the CICC itself.

6. CICC – Inherent Limitations? • But however you tweak the CICC, it has limitations as an international court to resolve BRI disputes. • It will have no automatic jurisdiction over non-Chinese parties involved in BRI projects outside China. So those non-Chinese parties have to voluntarily agree to submit their BRI disputes to the jurisdiction of the CICC. • It is questionable how many foreign parties would be willing to submit to the jurisdiction of the CICC, especially in its present form, unless the relative bargaining strength of the Chinese counterparty proves decisive.

7. Other International Commercial Courts • London Commercial Court • Hong Kong • Singapore International Commercial Court • Dubai International Financial Centre (DIFC) Courts • Others • Qatar International Court • Abu Dhabi Global Market Courts • Astana International Financial Centre Court

8. International Arbitration Aside from resolving BRI disputes through international commercial courts, international arbitration has traditionally been viewed as the best option to resolve cross-border disputes, for two key reasons: • New York Convention – Enforceability of Arbitral Awards • 159 countries have ratified the New York Convention. • Vast majority of countries in the BRI region has ratified the New York Convention (the exceptions are: Ethiopia, Iraq, Maldives, Timor-Leste, Turkmenistan and Yemen). • Therefore, an arbitral award may be seen as the most widely enforceable type of legal order in BRI disputes.

9. International Arbitration • UNCITRAL Model Law – Legal Convergence of National Arbitration Law • 80 States in a total of 111 jurisdictions have adopted legislation based on the Model Law. • Majority of countries in the BRI region has adopted legislation based on the Model Law (i.e. 43 out of 70+ countries in the BRI region). • Such harmonisation and legal convergence may give support to the efficient functioning of international arbitration, and for the resolution (via arbitration) of BRI disputes.

10. International Arbitration –Challenges and Limitations BRI poses particular challenges that may limit the utilisation of international arbitration for the resolution of BRI disputes. • China is not a Model Law country and it has some serious deficiencies in its current Arbitration Law. • In particular, China does not allow foreign arbitration institutions to conduct its arbitration on Chinese soil, so those who want to arbitrate their Chinese disputes have to use one of the Chinese arbitration institutions most notably CIETAC, Beijing Arbitration Commission, or the arbitration centres in Shanghai, Shenzhen and Hainan. • China also does not recognise ad hoc arbitrations held within China. This means an arbitration administered by the tribunal itself without the assistance of a recognised arbitration institution.

11. Resolving BRI Disputes through Existing Domestic Legal Framework Another alternative to resolving BRI disputes may be through existing domestic legal framework. This is emerging as a credible alternative for the following reasons: • Consistent enforceabilityof foreign judgments in common law countries. • Contemporary trends that are gradually improving the enforceabilityof foreign judgments in civil law countries. • Fledging potential of the 2005 Hague Convention on Choice of Court Agreements, which is the latest global effort to regulate the treatment of exclusive choice of court agreements and the enforcement of judgments of designated courts. • Under the 2005 Hague Convention, member states are bound (unless a ground for refusal of enforcement is established) to recognise and enforce the judgment of the court chosen by the parties pursuant to their choice of court agreement. Further, the chosen court must in principle hear the case and any court not chosen must in principle decline to hear the case. • To date, the 2005 Hague Convention has 34 members, of which 15 are also participants in the BRI. China has signed the 2005 Hague Convention on 12 September 2017.

12. Mediation Mediation is also emerging as an alternative method for resolving BRI disputes. • On 20 December 2018, the UN Convention on International Settlement Agreements Resulting from Mediation (which will be known as the “Singapore Convention on Mediation”) was adopted by the UN General Assembly. • The Convention will provide for the cross-border enforcement of mediated settlement agreements, and will give businesses greater certainty that mediated settlement agreements can be relied upon to resolve cross-border commercial disputes. • On 24 January 2019, the Singapore International Mediation Centre (SIMC) signed a MOU with the China Council for the Promotion of International Trade (CCPIT) and China Chamber of International Commerce (CCOIC) Mediation Centre to offer world-class mediation services to resolve BRI disputes. • The MOU includes the establishment of a BRI Mediator Panel which will comprise of skilled and experience dispute resolution professionals from China, Singapore and BRI recipient countries.

13. Concluding Thoughts • While there is as yet no grand infrastructural plan for the resolution of BRI disputes, it is clear that there is no shortage of methods and legal mechanisms for resolving BRI disputes. • But for any initiative as large as the BRI, it is inevitable that there will be a lack of legal uniformity (at least in the short run) of the rules and practices from the sheer diversity of legal traditions which comprise the BRI region. • What is important, at this juncture, is to promote knowledge and understandingof what those rules and practices currently are in order to establish a base of common knowledge from which legal convergence in this field may emerge. • Perhaps, a practical solutionmay be achieved through bilateral memorandums of understanding and memorandums of guidance in order to bridge gaps in knowledge and mitigate challenges (real or perceived).