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International arbitration and business culture

International arbitration and business culture

Promoted by Maxwell Chambers.

This article discusses the impact of international arbitration on the business culture of countries that have hitherto been isolated, and the importance of cultural sensitivity on the part of counsel and arbitrators

INTERNATIONAL ARBITRATION has thrived in the six decades following the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1958. The New York Convention is the cornerstone of international arbitration’s success. It has enabled arbitration awards made in any signatory country to be enforced readily in any other signatory country, without reconsideration of the merits of the dispute which is the subject matter of the award. This is the critical advantage that arbitration holds over proceedings brought in national courts: enforcing national court judgments in other nations is typically subject to a longer and more involved process, and often includes some examination of whether the judgment is rightly granted.

In 2013, Myanmar became the 149th signatory to the New York Convention. Myanmar’s accession to the New York Convention was hailed as a significant step toward fostering inward investment, as it allowed investors to choose arbitration in a neutral offshore forum for the resolution of investment disputes in preference to the local courts. Local courts, in addition to being unfamiliar terrain for the investor, may also lack expertise in commercial disputes, and be under-resourced, and so subject to delays.

Signing up for a globally recognised and effective means of dispute resolution permits a country to leapfrog, at least in the commercial sphere, the tedious process of legal education and infrastructure-building attendant in upgrading its justice system. It is similar to how countries with a poor fixed-line telecommunications system have been able to jump straight to mobile. Investors can now opt into the same system of dispute resolution, namely international commercial arbitration, that is available across the globe, and so, by definition, of world-class standard.

Subscribing to international commercial arbitration has the potential to transform Myanmar’s business culture. As businessmen come to cherish the ability to enforce rights in the business sphere, the appetite will grow for the domestic court system to improve in efficiency, and, as this happens, citizens will begin, bit by bit, to see how valuable practical recourse to the law can be in daily lives. Slowly, this reshapes behaviours and expectations, and people grow out of the helplessness and apathy that accompany non-functioning state institutions.

Change in the underlying legal and social culture of Myanmar is a likely long-term effect of accession to the New York Convention, but in the short-term Myanmar businesses are starting to adapt in three significant ways.

First, once it becomes a realistic prospect that one will be held to a promise – making promises becomes a much more serious matter, and greater care is taken in drafting contracts. In particular, understanding how the assignment of responsibilities and allocation of risks in the contract affects pricing, and margins becomes essential. Experience is often the best education, and businessmen will not need to go to a business school to learn this lesson.

Secondly, businesses will rapidly improve their own record-keeping, and how they document what happens in the course of performing a contract. Confirming conversations with one’s counterparty via email will soon become second nature.

Culture changes from the optimistic adage that ‘my (spoken) word is my bond’ to the more realistic practice that ‘if it’s important it’s on email’.

Thirdly, once businessmen see that their conduct will be scrutinised by an independent third party (the arbitrator), this becomes a brake on unreasonable conduct. An effective way for disputes to be resolved imposes the adjudicator’s lens of reasonableness on behaviour during performance of the contract. Naturally, this also breeds posturing, with parties cloaking ruthless actions beneath apparently reasonable words, but this is the exception rather than the rule.

While recourse to international arbitration moulds business and legal culture of new adherents, international arbitration practitioners, both counsel and arbitrators, in turn need cultural sensitivity. It is important also to broaden diversity within the ranks of arbitrators. This is in part because arbitrators should be attuned to the different ways in which witnesses speak and answer questions. Witnesses, from a culture, such as Myanmar’s, are likely to be more soft-spoken and conflict-avoidant than those from more developed jurisdictions. This has to be kept in mind when evaluating their evidence. One of the strengths of international arbitration is that it can accommodate having three-person tribunals, where at least one member of the tribunal, having been nominated by a party from, in this example Myanmar, has experience of and is culturally sensitive to the nuances of how business is done and communications undertaken in that country.

 

Philip Jeyaretnam is a senior counsel, global vice chair and regional CEO of Dentons Rodyk & Davidson LLP, and chairman of Maxwell Chambers.

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