Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.

“Ghosn is gone”: criminal justice and corporate governance in Japan

[Updated 10 July 2020] Japan welcomed in the New Year of the Mouse (or Rat) with intense media coverage nationally and internationally about former Nissan CEO then President, Carlos Ghosn, who escaped bail on 29 December 2019 to return to his native Lebanon. The ongoing saga (with background eg here) mainly highlights pros and cons of Japan’s evolving criminal justice system, where almost all prosecutions are successful. That 99% conviction rate can be seen positively: prosecutors carefully try to second-guess judges, without subjecting the accused to unnecessary trials. This enhances rule of law values such as predictability and equal treatment, even for alleged white-collar crimes (often not successfully pursued, as we have seen world-wide after the Global Financial Crisis, even in the US). [There is a similarly high conviction rate for US federal prosecutions generally, since so few are contested at trial, as pointed out by Bruce Aronson.] But there remain concerns that Japanese prosecutors unfairly force confessions and the criminal justice system undermines other rule of law values. [These various aspects were discussed along with background shifts in the global auto industry in a 30-minute ABC National Radio program, “Ghosn has flown – the rise and fall of an auto industry mogul”, which aired on 9 February 2020 and is available as a podcast here (with extracts from my interview appearing around mid-way.)] The Ghosn affair also uncovers Japan’s relative paucity of extradition treaties, as I mentioned in a 3 January 2020 Bloomberg news article reproduced below (reprinted in the Japan Times, which continues extensive coverage).

The Ghosn case also highlights the latest (December 2019) amendments to Japan’s Companies Act, “designed to increase transparency in executive compensation at major companies in the wake of the ouster of Nissan Chairman Carlos Ghosn, who was arrested last year for allegedly understating his compensation. He has continued to deny allegations of financial misconduct. Boards of directors will now be required to disclose outlines of executive pay, such as whether it is offered in cash or shares and in a fixed or variable amount.” The revised Act also now requires companies to have at least one outside director, rather than on a “comply or explain why not” basis as under the 2014 amendments. But the revision won’t take effect until June 2021. In addition, almost all listed companies already had at least one outside director, and indeed a growing majority had at least two outside directors satisfying stricter “independence” requirements, under the 2015 Corporate Governance Code (slighted revised in 2018) that continues to apply on the comply or explain basis.

Further, as a Japan Times editorial had concluded in February 2019 (“Empower outside directors“) regarding the Companies Act amendments then being proposed by the Ministry of Justice’s law reform council:

“After the arrest of Ghosn on that and other charges that raised questions about corporate governance at the major automaker, Nissan is reportedly considering increasing the number of outside directors from the current three. However, the charges against Ghosn, who is alleged to have wielded unquestioned power within the automaker, including in deciding executive pay effectively at his own discretion, also put into question whether the outside directors have been able to play substantial roles in overseeing the firm’s management.

The arrest and indictment last year of a former outside director of an electric parts manufacturer listed on the TSE’s first section, on charges of insider trading of the firm’s shares based on confidential information he obtained thanks to his position — also highlighted the question of the quality of outside directors that companies are bringing in.

Many companies are believed to look for candidates among top executives of other firms, academics and lawmakers. The companies often reportedly face difficulties finding the right person with sufficient knowledge and expertise on corporate management. In fact, many well-qualified people are reportedly serving as outside directors at several companies simultaneously. Another question is whether the companies that tap them have established an in-house environment in which these directors can fulfil the roles expected of them, such as by providing them with sufficient access to the firm’s relevant information or by enabling them to be regularly heard by the company’s top management.

Merely making it mandatory under the law for companies to have outside directors on their board won’t be enough. A legal step like this needs to be accompanied by measures that ensure they can actually contribute to improving their company’s governance.”

Ghosn’s Escape From Japan Ramps Up Pressure on Foreign Suspects

By  Lisa Du ,  Bruce Einhorn , and  Isabel Reynolds 3 January 2020, 5:55 pm AEDT

  • Foreigners expected to face tougher time posting bail
  • Ex-Nissan boss paid record bail bill, then fled the country

The Tokyo district court let Carlos Ghosn post bail last March, overruling prosecutors’ objections that he was a flight risk. After all, how could one of the most recognizable foreigners in the country flee while under round-the-clock surveillance?

As the world learned this week, the court was wrong and Ghosn’s stunning escape is bound to bode ill for future foreign suspects seeking to post bail. Yet longer term, the fallout could carry broader implications for the pace of reforms to a justice system some regard as draconian.

“It’s ironic that Ghosn criticized the Japanese justice system as hostage justice, because the prosecutor’s judgment turned out to be right since he actually fled,” said Hiroki Sasakura, a professor at Keio University Law School in Tokyo. “His action might have a reverse effect on the criminal justice system, especially the Japanese court’s way of thinking, which was turning more liberal.”

Given the high-profile nature of the suspect, Japan’s legal system was already under heightened global scrutiny, with critics lambasting prosecutors for detaining the fallen automotive titan so long.

Even after gaining release from prison, the former head of Nissan Motor Co. and Renault SA had restricted access to family members and paid the highest bail fees in Japanese history: 1 billion yen ($9.2 million) for his first bail and then another 500 million yen after he was rearrested on new charges. And the court ordered his three passports — from Brazil, France and Lebanon — be confiscated.

(Ghosn’s Legal Odyssey and What It Says About Japan: QuickTake)

Japan is unusual for its lengthy pre-trial detentions, strict bail conditions and long delays before suspects are given their day in court, said Luke Nottage, a professor at the University of Sydney Law School and co-director of the Australian Network for Japanese Law.

More Lenience

In response to criticism from defense attorneys and after the introduction of a new jury trial system and pretrial procedures, Japanese courts in recent years were more lenient in allowing bail, Keio’s Sasakura said. A backlash has already begun, with Ichiro Aisawa, a lawmaker from Japan’s ruling Liberal Democratic Party, denouncing the decision to give Ghosn bail in the first place.

“This should have never happened,” Aisawa wrote on Twitter. “We need to establish measures so we don’t screw up ever again.”

In Japan, authorities are allowed to detain suspects for two 10-day periods for questioning before a decision is made on whether to indict. Sometimes suspects are rearrested on new charges as a way to detain them longer.

Prosecutors rarely pursue cases they think they can’t win, and Japan is known for its near-perfect conviction rate.

Those indicted in Japan may apply for bail as they await trial. About 34% of those detained received bail in 2018, according to the Japan Bail Support Association. That’s up from 15% a decade ago.

‘Rigged’ System?

Such statistics reinforce the criticism by Ghosn, who issued a statement on Dec. 31 from Lebanon saying he had fled there to escape what he called Japan’s “rigged” justice system. This may lead to further calls for a more balanced system, according to Yuichi Kaido, a lawyer who has campaigned for changes to Japan’s criminal justice system.

“I think the international community will look at Japan’s criminal justice system with great severity,” Kaido said. “There will be harsh questions raised there about Japan’s criminal justice system, including the death penalty and what is called hostage justice.”

However, the Ghosn case isn’t likely to have a lasting impact on Japan’s attractiveness as an investment destination, according to Deborah Elms, executive director of Asian Trade Centre, a Singapore-based advisory firm. Foreign companies considering investments in Japan won’t be deterred by the situation surrounding Ghosn, she added, with Asian companies accustomed to unpredictable rules.

“This is just another example of an uncertain legal system that can be worked to your advantage or could come back and bite you,” she said.

Japan should resist internal calls to retaliate by making it even more difficult for suspects to win release from prison ahead of trial, said Nobuo Gohara, a former prosecutor who has been critical of the handling of Ghosn’s case.

“It’s very unfortunate that the efforts of his attorneys to obtain bail and the court’s judgment against the prosecutors to allow it was betrayed,” Gohara wrote in a blog post. “But we shouldn’t simplify the issue to that the court shouldn’t have allowed bail.”

There’s a change that may win widespread support after Ghosn’s escape: a push for more extradition treaties. Japan has only two bilateral agreements, with the U.S. and South Korea. That compares with more than 30 for South Korea and more than 100 for the U.S.

“It’s just one of those areas where they haven’t given much thought and diplomatic attention,” said Nottage, the University of Sydney Law School professor. “The Japanese government might be thinking about maybe we need more extradition treaties.”

— With assistance by Kana Nishizawa

“New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution” (10): New Book with Kluwer

[For updates to chapter titles & authors, plus Abstracts and a link to a free related Webinar on 4 August 2020 5-6pm (Sydney time), please click here.]

Culminating a HKU/USydney joint research project and two conferences over 2019, Kluwer has agreed to publish a monograph under this title co-edited by myself, HKU Prof Shahla Ali, UBrunei A/Prof Bruno Jetin, and Dr Nobumichi Teramura. Manuscripts for the 15 chapters will be submitted by July 2020 so the book is published by early 2021, as part of Kluwer’s widely-read “International Arbitration” series supervised by QMUL Profs Julian Lew and Stavros Brekoulakis. Below is more information on the authors, editors, contributions, and expected readership/features of our new book

Book Contents:

  1. Introduction: New Frontiers in Asia-Pacific Trade, Investment and International Business Dispute Resolution – Jetin & Nottage
  2. ICA and International Commercial Courts: Singapore, Australia and Beyond – Warren & Croft (based on “An International Commercial Court for Australia: An Idea Worth Taking to Market”) [i]
  3. New Frontiers for ICA in Australia: Beyond the ‘(Un)Lucky Country’ – Teramura et al (building on “Country Report on Australia for: International Commercial Arbitration – An Asia-Pacific Perspective”[ii] and “International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards”[iii])[iv]
  4. Transparency versus Confidentiality in ICA and ISDS: Australia and Japan in Regional Context – Nottage (based on “Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations”[v])[vi]
  5. Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS: The CPTPP and Agreements with Hong Kong and Indonesia – Nottage & Ubilava (based on “Costs, Outcomes and Transparency in ISDS Arbitrations: Evidence for an Investment Treaty Parliamentary Inquiry”[vii] and Nottage’s parliamentary submissions regarding new treaties with HK and Indonesia[viii])[ix]
  6. Hong Kong Developments in ICA and ISDS in the Context of China’s Belt and Road Initiative – Ali (based on “ICA and ISDS Developments in Hong Kong in the Context of China’s Belt and Road Initiative”[x])[xi]
  7. Harmonising the Public Policy Exception for ICA along the Belt and Road – Gu (based on “China’s Belt and Road Development and a New International Commercial Arbitration Initiative in Asia”[xii])[xiii]
  8. PRC Developments in Private International Law, ICA and ISDS – Bath[xiv]
  9. Malaysia’s Involvement in International Business Dispute Resolution – Venugopal[xv]
  10. Japan’s New Ambitions as a Regional Dispute Resolution Hub: Better Late than Never? – Claxton, Nottage and Teramura (based on “Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream?”[xvi])[xvii]
  11. Mediating Complex Multi-level Trade and Investment Disputes Between Japan and Korea – Claxton, Nottage and Williams (based on “Resolving Disputes Amidst Japan-Korea Trade and Investment Tensions”[xviii])[xix]
  12. Indian Investment Treaty and Dispute Resolution Practice: Assessing Recent Developments – Singh[xx]
  13. Extending Dispute Resolution Provisions in Free Trade Agreements to Better Enforce Other Treaties: The CPTPP and MARPOL 73/78 – Hu and Huang (based on “Can Free Trade Agreements Enhance MARPOL 73/78 Compliance?”[xxi])[xxii]
  14. Promoting International Mediation through the Singapore Convention – Strong (based on “The Role of Empirical Research and Dispute System Design in Proposing and Developing International Treaties: A Case Study of the Singapore Convention on Mediation”[xxiii])[xxiv]
  15. Conclusions: Expanding Asia-Pacific Frontiers – Reyes, Teramura & Ali

Editors/bios:

  • Dr Shahla Ali is Professor and Associate Dean (International) and Deputy Director of the LLM in Arbitration and Dispute Resolution at the Faculty of Law of the University of Hong Kong. Her research and practice center on questions of governance, development and the resolution of cross-border disputes in the Asia Pacific region. Shahla is the author of Court Mediation Reform (Elgar, 2018), Governing Disasters: Engaging Local Populations in Humanitarian Relief (CUP, 2016); Consumer Financial Dispute Resolution in a Comparative Context (CUP, 2013); and Resolving Disputes in the Asia Pacific Region (Routledge, 2010) and writes for law journals in the area of comparative ADR. She has consulted with USAID, IFC/World Bank and the United Nations on issues pertaining to access to justice, peace process negotiation training and land use conflict resolution. She serves as a bilingual arbitrator (English/Chinese) with CIETAC, HKIAC (ADNDRC), SIAC and has served on the IBA Drafting Committee for Investor-State Mediation Rules, the DOJ Mediation Regulatory Committee, the UN Mediation Roster and the FDRC Appointments Committee. Prior to HKU, she worked as an international trade attorney with Baker & McKenzie in its SF office. She received her JD and PhD from UC Berkeley in Jurisprudence and Social Policy and BA from Stanford University. (Further details can be found here.)
  • Dr Bruno Jetin is Associate Professor and Director of the Institute of Asian Studies, University of Brunei Darussalam (UBD). His current work focuses on the ASEAN Economic Community, the One Belt One Road initiative, Chinese investments in Southeast Asia, and the impact of income distribution on growth in Asia. He is also an expert in the automobile industry. Before joining UBD, he was a researcher at the Institute for Research on Contemporary Southeast Asia (IRASEC, CNRS-MAEE, Bangkok) and Associate Professor at the University of Paris 13 Sorbonne Paris Cité, where he obtained his PhD in economics and was Deputy Director of the Research Center in Economics. He was also involved in promoting taxes on financial transactions as alternative sources for financing development as well as innovative regulation of global finance. Bruno’s recent publications include Jetin and Mikic (eds) ASEAN Economic Community: A model for Asia-wide Integration? (Palgrave McMillan, 2016); Jetin (ed) Global Automobile Demand (2 Vols, Palgrave McMillan); Jetin and Chaisse “International Investment Policy for Small States: The Case of Brunei” in Chaisse and Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018); “One Belt-One Road Initiative and ASEAN Connectivity” in Deepak (ed) China’s Global Rebalancing and the New Silk Road (Springer, 2018). (Further details can be found here.)
  • Dr Luke Nottage specialises in comparative and transnational business law, especially international arbitration and investment law, with a particular interest in Asia. He is Professor of Comparative and Transnational Business Law at Sydney Law School, founding Co-Director of the Australian Network for Japanese Law (ANJeL), and Associate Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS). His books include International Arbitration in Australia (Federation Press, 2010, eds), Foreign Investment and Dispute Resolution in Asia (Routledge, 2011, eds), International Investment Treaties and Arbitration Across Asia (Brill, 2018, eds), Contract Law in Japan (Kluwer, 2019, with Hiroo Sono et al) and 12 other volumes. Luke has or had executive roles in the Australia-Japan Society (NSW), the Law Council of Australia’s International Law Section, the Australian Centre for International Commercial Arbitration, and the Asia-Pacific Forum for International Arbitration. Luke is also a Rules committee member of ACICA and listed on the Panel of Arbitrators for the AIAC (formerly KLRCA), BAC, JCAA, KCAB, NZIAC, SCIA and TAI. Luke serves on Working Group 6 (examining arbitrator neutrality) for the Academic Forum on ISDS. He has consulted for law firms world-wide, the EC, the OECD, the UNDP, ASEAN and the Japanese government; and has made numerous public Submissions to the Australian government on investment treaties, arbitration and consumer law reform. He qualified as a lawyer in New Zealand in 1994 and in New South Wales in 2001. (Full CV downloadable here.)
  • Dr Nobumichi Teramura is Lecturer at the University of Adelaide Law School and Associate at the Centre for Asian and Pacific Law at the University of Sydney, specialising in international commercial law, especially private international law, arbitration, contract law, with a particular interest in Asia and Australasia. He is the author of Ex Aequo et Bono as a Response to the Over-judicialisation of International Commercial Arbitration (Kluwer, 2020 [forthcoming]). He has published and presented his research extensively in various journals and at academic conferences in different jurisdictions in both English and Japanese. He has also received scholarships and fellowships in highly competitive rounds from leading research institutions or foundations and from the Japanese Government. He was invited to De La Salle University in the Philippines (one of its top law schools) three times over 2016-2019 to teach arbitration and international commercial law, first as a visiting lecturer and later as a distinguished visiting professor.

Other book contributors:

  • Professor Vivienne Bath (Director of the Centre for Asian and Pacific Law at the University of Sydney)
  • Professor James Claxton (Kobe University Law School, Japan)
  • The Hon Dr Clyde Croft AM SC (former Judge of the Victorian Supreme Court)
  • Professor Hu Jiaxiang (KoGuan Law School, Shanghai Jiao Tong University, China)
  • A/Professor Jeanne Huang (University of Sydney Law School)
  • James Morrison (Principal of Morrison Law, Sydney; former ACICA Acting Secretary-General)
  • Justice Anselmo Reyes (Singapore International Commercial Court)
  • Prof Jaivir Singh (Centre for the Study of Law and Governance, Jawaharlal Nehru University, India)
  • A/Professor Stacie Strong (University of Sydney Law School, from January 2020)
  • A/Professor Gu Weixia (University of Hong Kong Faculty of Law)
  • Mrs Ana Ubilava (Research Assistant and PhD candidate at the University of Sydney Law School)
  • Professor Marilyn Warren AC QC (former Chief Justice of the Victorian Supreme Court)
  • Dr A Vijayalakshmi Venugopal (Senior Lecturer, Taylor’s University Law School, Malaysia)
  • Dr Brett Williams (Principal of Williams Trade Law, Sydney)

Book Aims, Necessity, Features/Benefits

This book project examines the challenges and opportunities for developing international commercial arbitration (ICA) and arbitration through investor-state dispute settlement (ISDS) particularly in the Asia-Pacific region.

Analysing ICA, the pre-eminent mechanism for resolving cross-border disputes among firms, this book builds on Anselmo Reyes & Weixia Gu (eds), The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia-Pacific (Hart, 2018), but examines more recent challenges for ICA. These include the proliferation of international commercial courts (including in Singapore, but also elsewhere and potentially in Australia) as well as the UN’s 2019 Singapore Convention on enforcement of mediated settlement agreements (Singapore Convention on Mediation). There is also competition now among regional centres to become attractive venues for international business dispute resolution, including resolving “Belt and Road” disputes. The present book focuses mainly on Hong Kong and Singapore (competing jurisdictions in the top “Stage 4” for ICA venues, as identified by Reyes & Gu), Australia and Malaysia (“Stage 3” venues), China and Japan (arguably transitioning from “Stage 2” to “Stage 3”), and India (“Stage 2”) but it in a wider Asia-Pacific context.

In addition, this book project compares approaches in these jurisdictions to ISDS, but we also touch on treaties concluded by Indonesia and Korea as other significant economies in the region. The ISDS procedure allows a foreign investor to bring arbitration claims directly against host states if they violate substantive commitments, such as not discriminating in favour of local investors or expropriation without adequate compensation, usually based on a treaty with the home state of the foreign investor. ISDS has become increasingly controversial as claims have been brought against developed countries, not just developing countries where this enforcement mechanism brings the greatest comfort for foreign firms considering investments. Going beyond Julien Chaisse and Luke Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018) [with an introduction partly here], this book project charts evolving treaty practices and high-profile ISDS cases, assesses whether these do or might impact on public attitudes even towards ICA or other forms of arbitration, and explores alternatives or complements to ISDS arbitration.

Why is there a need for it? / Why is now a good time to produce it?

ICA is already “big business” for leading regional venues such as Singapore and Hong Kong. But the recent social unrest in Hong Kong highlights the potential for unexpected developments, and other regional jurisdictions are anyway seeking to emulate their success. These competing venues include mainland China (where arbitrators and courts have growing capacity in cross-border matters), Australia (which may become a venue for some Belt and Road disputes) and Japan (belatedly establishing new international arbitration and mediation facilities). Yet businesses are increasingly concerned about the costs and delays in ICA. They are considering emerging alternatives such as international commercial courts or cross-border mediation, underpinned by new multilateral treaties. Established and emerging jurisdictions for international commercial arbitration therefore need to consider how to position themselves relative to these new frontiers.

ISDS arbitration is also a large and growing area of legal practice, with more engagement recently by Asian parties, yet it too faces challenges. The Philip Morris Asia claim brought under an old Hong Kong investment treaty against Australia to challenge its plain packaging legislation, although unsuccessful, led to Australia refusing over 2011-13 to agree to ISDS provisions in new treaties. Subsequent governments have agreed to ISDS in some treaties, and did so in recently signed Australia – Hong Kong investment agreement (close to ratification), but ISDS remains highly politicised in Australia. China has also been subjected to ISDS claims recently, and so may be reassessing its gradual shift since the late 1990s towards agreeing to wider ISDS-backed protections in its overseas treaties, despite them assisting Chinese outbound investors. Singapore and other Asia-Pacific states have already agreed to the alternative “permanent investment court” proposed by the European Union in their recent treaties, substituting a two-tier court staffed by judges pre-selected only by the states themselves, rather than ad hoc arbitral tribunals. Another potential alternative to ISDS arbitration is investor-state mediation, which could become a mandatory dispute resolution step in future investment treaties (as in the recently-signed Indonesia-Australia FTA).

The significance of investigating ISDS developments, in the context of possible alternatives and broader trends in ICA, is reinforced by UN deliberations into possible ISDS reforms, underway since late 2017. This book project will integrate written and oral statements made in and around UNCITRAL by some of the delegates from the key Asia-Pacific states subject to analysis.

Five features/characteristics: the book

  • analyses the challenges and opportunities for developing ICA and ISDS in the Asia-Pacific region with the latest updates
  • assesses recent challenges for ICA: the proliferation of international commercial courts and the rise of international mediation as represented by the Singapore Convention on Mediation
  • examines the increasingly vigorous competition among regional centres to become attractive venues for international business dispute resolution, focusing on: Hong Kong, Singapore, Australia, China and Japan
  • compares recent approaches in these jurisdictions to ISDS
  • is written by leading experts for ICA and ISDS in the Asia-Pacific region

Three benefits: the book help the reader to

  • make an informed decision on which dispute resolution method – ICA, international mediation or international litigation – is the most suitable for the international business dispute s/he or clients may be involved in
  • understand recent trends in ADR practice related to business in the Asia-Pacific region, and new resources for dealing with the increasing competition among countries become the next regional dispute resolution hub
  • refresh knowledge on ISDS practice and debates in significant Asia-Pacific economies in the Asia-Pacific region, including features of their recently concluded treaties

Chapter Abstracts (and related works):

[i] Abstract: International commercial courts are proliferating, including in Asia, offering a new alternative to arbitration as the hitherto dominant mechanism for resolving cross-border disputes. When the significant trade and investment treaties being concluded by Australia are considered with respect to the Asia-Pacific, the opportunities to create an Australian international court are almost boundless. Its establishment cannot be left to the Courts themselves or for the Australian legal profession to develop. The experiences of Singapore, China Dubai, Abu Dhabi, and indeed, London demonstrate that it is vital for there to be government interest and support for such a proposal. Adding an Australian international commercial court to the mix also occurs within a wider international context. A stronger contribution can be made to the rule of law by courts working together than if they are working separately. The early 21st Century is being defined by something of a return to internationalisation and globalisation, although the form and forms that will take remain to be seen. It is for judges to help shape those forms and contribute towards global stability, harmonisation and due recognition of the law in the context of commercial enterprise. These common purposes, as well as quality of justice and the manner of its administration provided at commercial courts and arbitral tribunals, international and domestic, should be promoted and indeed marketed.

[ii] Morrison, James and Nottage, Luke R., Country Report on Australia for: International Commercial Arbitration – An Asia-Pacific Perspective (October 23, 2014). Sydney Law School Research Paper No. 14/95. Available at SSRN: https://ssrn.com/abstract=2514124

[iii] Teramura, Nobumichi and Nottage, Luke R. and Morrison, James, International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards (April 10, 2019). Sydney Law School Research Paper No. 19/24. Available at SSRN: https://ssrn.com/abstract=3379494

[iv] Abstract: Some ‘bad luck’ has haunted the arbitration industry in Australia. Geographical remoteness has made the country an unfavourable venue for increasing ICA caseloads compared with its competitors in the Asia-Pacific region. Fortunately, such ‘bad luck’ has not necessarily brought about excessively negative impacts. It has helped the country generate world-class Australian arbitration experts, who are contributors and responsive to developments outside the country, which has indirectly bolstered the Australian ICA industry. Such experts have assist Australia in gradually improving the local legal environment for ICA, following international standards, especially over the last 10-15 years. However, their increasingly concerted efforts and other stakeholders have not yet turned Australia into a popular arbitration hub. The country has not overcome the ‘bad luck’ yet – people still hesitate to seat ICA in the country. Analysing the status quo for ICA in Australia, this chapter discusses recent trends and the possible next steps for its service providers to find new frontiers to develop ICA locally and regionally, without depending on chance or luck.

[v] Nottage, Luke R., Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations (August 29, 2019). Sydney Law School Research Paper No. #19/52, August 2019. Available at SSRN: https://ssrn.com/abstract=3444692

[vi] Abstract: Confidentiality is still widely seen as significant advantage of international commercial arbitration (ICA) over cross-border litigation, especially perhaps in Asia. This can be seen in rules of most arbitral institutions. Automatic (opt-out) confidentiality is also now found in many national laws, including statutory add-ons to the UNCITRAL Model Law and/or through case law for example in New Zealand, then Hong Kong, Singapore, Malaysia, and eventually Australia. Yet there remain variations in the timing of these developments as well as the scope and procedures associated with exceptions to confidentiality. There is also no confidentiality provided in Japan’s later adoption of the Model Law, although parties mostly choose the JCAA so opt-in to its Rules, which have somewhat expanded confidentiality obligations since 2014.

Another recent complication is growing public concern over arbitration procedures through (especially treaty-based) investor-state dispute settlement (ISDS), especially in Australia since an ultimately unsuccessful treaty claim by Philip Morris over tobacco plain packaging legislation (2011-15). Statutory amendments in 2018 reverse automatic confidentiality for Australia-seated ISDS arbitrations where the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. Concerns over ISDS may impede Australia enacting provisions for confidentiality of arbitration-related court proceedings, which could not be revised recently in New Zealand against the backdrop of its new government’s anti-ISDS stance.

Growing transparency around ISDS arbitration is welcome given greater public interests involved in such cases, but transparency should not be simply transposed into commercial dispute resolution through ICA as the fields are overlapping but distinct. Confidentiality in ICA has the disadvantage of exacerbating information asymmetry, making it harder for clients and advisors to assess whether particular arbitrators and lawyers provide value for money. But confidentiality allows arbitrators in particular to be more robust in proceedings and drafting rulings, thus countering the rise in ICA delays and especially costs. More transparency around ISDS, as well as initiatives like “Arbitrator Intelligence” and experiments in reforming Arbitration Rules (eg recently by the ICC), can help reduce information asymmetry for users anyway, while retaining various advantages of confidentiality particularly in ICA.

This chapter elaborates these tensions between confidentiality and transparency in ICA and ISDS, focusing on Australia and Japan in regional context. Both countries still get few ICA cases but are trying to attract more, taking somewhat different approaches to confidentiality in that field, while negotiating investment treaties that increasingly provide transparency around ISDS arbitration.

[vii] Nottage, Luke R. and Ubilava, Ana, Costs, Outcomes and Transparency in ISDS Arbitrations: Evidence for an Investment Treaty Parliamentary Inquiry (August 6, 2018). International Arbitration Law Review, Vol. 21, Issue 4, 2018; Sydney Law School Research Paper No. 18/46. Available at SSRN: https://ssrn.com/abstract=3227401

[viii] https://japaneselaw.sydney.edu.au/2019/10/new-frontiers-in-international-arbitration-for-the-asia-pacific-region-8-confidentiality-vs-transparency-in-icarb-and-isds/

[ix] Abstract: Investment treaties, and especially ISDS provisions, became a political hot potato from around 2011 when Philip Morris brought the first-ever ISDS claim against Australia under an old bilateral investment treaty (BIT) with Hong Kong. A Labor-Greens Government declared that it would no longer agree to ISDS provisions in future treaties, but when a centre-right Coalition Government regained power from 2013 it reverted to concluding treaties containing ISDS clauses on a case-by-case assessment. Australia therefore agreed to ISDS in FTAs with Korea and China, but not bilaterally with Japan. However ISDS-backed provisions apply between Australia and Japan since the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can into force between them (and five other Asia-Pacific nations so far) from January 2019. Yet the Australian parliament engaged in robust debate about ratification of the CPTPP, with Labor Opposition (and Greens) parliamentarians continuing to voice concerns over ISDS provisions, despite the Philip Morris claim against Australia’s tobacco plain packaging having been rejected on jurisdictional grounds in 2015.

This chapter first elaborates on evidence presented to the Australian parliament favouring ratification of the CPTPP, including empirical findings about concerns raised such as the typical amounts awarded, arbitration costs, time-frames and transparency involved in ISDS proceedings. The chapter next compares the parliamentary committee report in 2018 that agreed that ratification should proceed, with a report in 2019 recommending Australia’s ratification of investment agreements (also including ISDS) with Hong Kong and Indonesia – but also early termination of an old Australia-Indonesia BIT. It shows how these two new agreements generally retain (originally US-style) CPTPP drafting, but add some innovative features (notably a mandatory mediation step that the host state can trigger before arbitration, in the Indonesia-Australia treaty), and show some variance between themselves (including more transparency for ISDS proceedings, in the Hong Kong – Australia treaty). The Labor Opposition parliamentarians have also toned down their declared opposition to ISDS, perhaps due to suffering an unexpected election loss in May 2019. Finally, chapter looks at the parliamentary inquiry into Australia ratifying the Mauritius (“UN ISDS”) Convention, retrofitting extensive transparency provisions on earlier treaties between Australia and other states that might also accede to that framework Convention. We conclude from these new developments that Australia is now better placed to play a more active role in guiding the future path of international investment treaty-making especially in the Asia-Pacific region.

[x] Ali, Shahla F., ICA and ISDS Developments in Hong Kong in the Context of China’s Belt and Road Initiative (September 13, 2019). Available at SSRN: https://ssrn.com/abstract=3453061

[xi] Abstract: This chapter examines the impact of both the Belt and Road Initiative and the UNCITRAL Model Law on International Arbitration (the Model Law) on both international commercial and investor state arbitration practice in Hong Kong. Given the significance of Hong Kong as a gateway to OBOR project financing and logistics, understanding current dispute resolution policy is critical for gaining insights into China’s approach to the resolution of OBOR disputes. Measures taken to modernize the practice of arbitration including training programmes and legislative reforms are examined with a view to gaining insights into challenges and future developments.

[xii] Gu, Weixia, China’s Belt and Road Development and a New International Commercial Arbitration Initiative in Asia (2018). Vanderbilt Journal of Transnational Law, Vol. 51, No. 5, 2018; University of Hong Kong Faculty of Law Research Paper No. 2019/012. Available at SSRN: https://ssrn.com/abstract=3346924

[xiii] Abstract: The policy centerpiece of President Xi Jinping’s foreign strategy, China’s Belt and Road Initiative (BRI), ambitiously aspires towards expanding regional markets and facilitating regional cooperation. In context of a rising volume of cross-border transactions generated by the BRI, a robust legal framework on dispute resolution is required to forge investor confidence and enable BRI’s integral goal of economic integration. In light of the substantial levels of harmonization among arbitration laws, arbitration is argued to constitute a primary vehicle of international commercial dispute resolution in an economically integrated Asia under the BRI. It is against this backdrop that the chapter argues that the BRI provides a unique opportunity to contemplate the possibility of regional harmonization, as within the Asian economies along the BRI, of the public policy exception to arbitral enforcement. Such an arbitration initiative in Asia, in which China is anticipated to take a proactive role, holds a wealth of potential to project renewed momentum on China as an engine of not only economic power, but also soft power transformation in pioneering international legal norms.

[xiv] Abstract: This chapter will outline the latest developments in the People’s Republic of China as it promotes itself as a regional hub for international dispute resolution, especially in the context of the Belt and Road Initiative, including the establishing of an International Commercial Court.

[xv] Abstract: This chapter reviews Malaysia’s involvement in international dispute resolution. This includes actual involvement in cases in the WTO and investor-state dispute settlement, and as a venue for international dispute resolution especially through the recently rebranded Asian International Arbitration Centre (AIAC). This chapter also extends to Malaysia’s potential involvement in dispute resolution of international business disputes. This part includes the challenges of enforcing foreign judgments in Malaysia and enforcing domestic judgments abroad, as well as questions around international dispute resolution clauses in Malaysia’s trade agreements. This chapter therefore highlights how Malaysia has been involved in international dispute resolution and the continuing significance of this for Malaysia, against the backdrop of significant domestic political changes in recent years.

[xvi] Claxton, James M. and Nottage, Luke R. and Teramura, Nobumichi, Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream? (December 11, 2018). Journal of Japanese Law, Issue 47, 2019 (Forthcoming); Sydney Law School Research Paper No. 19/01. Available at SSRN: https://ssrn.com/abstract=3299097

[xvii] Abstract: The Japanese government, supported by various stakeholders, has recently been attempting to develop Japan as another regional hub for international business dispute resolution services. Tracking this development is important for both theoretical and practical reasons. How it unfolds should reveal which of various theories for explaining Japanese law-related behaviour have more traction nowadays. Assessing the new initiatives is also important for legal practitioners and others interested in the practical question of where to arbitrate or mediate cross-border business disputes. This chapter therefore reports on current attempts to promote existing and new international arbitration centres in Japan as well as the recent establishment of the Japan International Mediation – Kyoto, in the context of intensifying competition from other regional venues for dispute resolution services.

[xviii] Claxton, James M. and Nottage, Luke R. and Williams, Brett G., Mediating Japan-Korea Trade and Investment Tensions (December 3, 2019). Sydney Law School Research Paper No. 19/73. Available at SSRN: https://ssrn.com/abstract=3497299 (shorter version forthcoming in Journal of World Trade, August 2021)

[xix] Abstract: This chapter first describes the trade tensions between Korea and Japan that escalated from mid-2019. It assesses Korea’s prospects in a formal claim now brought before the World Trade Organization, noting difficulties with substantive law, but especially procedure given the general breakdown in the WTO’s usual two-tier inter-state dispute resolution process. The chapter then outlines the possibility of Japan bringing claims under a 1965 Treaty that purported to settle claims resulting from Japan’s colonisation of Korea, or under two investment treaties, regarding Korean courts recently ordering Japanese companies to pay compensation to war-time Korean labourers. Yet such claims also face procedural and/or substantive law difficulties. The chapter also elaborates the possibility of affected Japanese companies instead or in parallel bringing investor-state dispute settlement claims against Korea, similarly alleging denial of justice in Korean court proceedings, under the two treaties. We conclude that these extra complications bolster the attraction of a formal mediation to bring both countries and the affected companies together in order to achieve an overall negotiated settlement.

[xx] Abstract: This chapter provides a perspective on investment treaty practice from India, which lies at the periphery of what is traditionally associated with the Asia Pacific region. While seemingly on the periphery of this collection of countries, India has signed investment and trade treaties with many of them. It has also recently become involved in disputes under them, and so has started to terminate many bilateral investment treaties. Indians now seeks to renegotiate fresh treaties using a template provided by a new model treaty that is oriented towards privileging state rights. The chapter will look at the narrative led to this point, touching on key cases as well as drawing on some path-breaking (econometric) empirical evidence of the impact of India’s investment treaties on foreign investment. This discussion is aimed to lead to assessing the implications of this emerging configuration for the future of investment law and practice in the wider region.

[xxi] Huang, Jie Jeanne and Hu, Jiaxiang, Can Free Trade Agreements Enhance MARPOL 73/78 Compliance? (October 3, 2018). Tulane Maritime Law Journal, Vol. 43. 2018, pp. 59-91; Sydney Law School Research Paper No. 18/62. Available at SSRN: https://ssrn.com/abstract=3259734

[xxii] Abstract: Whether Free Trade Agreements can effectively encourage states to comply with the International Convention for the Prevention of Pollution from Ships and its Protocols. This question has not been well researched, although the latter has been incorporated into the former since the 2006 US-Peru FTA and most recently in the 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This chapter explores the CPTPP’s achievements and deficiencies to enhance marine environment protection from four aspects: flags of convenience, the vague role of coastal states, affecting trade or investment, and dispute resolution. It adds proposals to address the deficiencies. It concludes by assessing the broader potential for using FTA dispute resolution processes to assist in ensuring compliance with inter-linked treaties, especially for the Asia-Pacific region.

[xxiii] Strong, S.I., The Role of Empirical Research and Dispute System Design in Proposing and Developing International Treaties: A Case Study of the Singapore Convention on Mediation (February 11, 2019). 20 Cardozo Journal of Conflict Resolution __ (anticipated 2019). Available at SSRN: https://ssrn.com/abstract=3332503

[xxiv] Abstract: This chapter seeks to provide insights into the “black box” of early treaty-making processes by undertaking a case study of the development of the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention on Mediation). The discussion focuses on several issues that have seldom been discussed in the legal literature, including the way in which a proposal for an international treaty makes its way to the relevant decision-makers and how those decision-makers determine which of the various alternatives to pursue. In so doing, the article focuses particularly on the role that dispute system design (DSD) and empirical research played in the early development of the Singapore Convention on Mediation. The analysis also considers how interested individuals can assist the treaty-proposing process, particularly if they are not NGO members. The chapter concludes with implications for international dispute resolution policy development and treaty-making, including for the Asia-Pacific region.

Guest Blog: Adj Prof Robertson @ ‘Contract Law in Japan’ Launch

[Ed: These are remarks kindly added by Sydney Law School Adj Prof Donald Robertson (and former HSF partner), after those from Chief Justice Bathurst, at the 27 November 2019 CAPLUS seminar and launch of two Asian Law books hosted by Herbert Smith Freehills, focusing on: Hiroo Sono, Luke Nottage, Kenji Saigusa and Andrew Pardieck, Contract Law in Japan (Wolters Kluwer 2019)]

Introductions

  • It is my pleasure this evening to assist in the launch of this fine book, Contract Law in Japan.
  • To do so, and hopefully to stimulate some questions and debate, I want in the short time available to me to raise 2 issues:
    1. Why do we study foreign law at all? After all, as some say – ‘we do not cite foreign laws – we have our own laws’. I will give 2 reasons why that attitude is wrong.
    1. What can we learn from a study of foreign law? I will give 2 examples of areas which require some further study, from a comparative perspective.
  • The book we launch today provides a helpful summary of the background and sources of Japanese contract law, the first English-language commentary on the Japanese Civil Code of 2017 coming into force on the inauspicious date of 1 April 2020. The introductory chapter teaches us much about the background which is relevant to the examples I raise.

The background to Japanese Contract Law

  • There has been a strong influence on Japanese law of Chinese, German and American law, and more recently European Union law. (1-3, 5)[1] Codifications have been central in the development of Japanese law and hence legislation is a primary source of law.  (7)
  • Japanese law is more open to ‘substantive reasoning’ compared to Anglo-Australian common law. Like US law, it is open to moral, economic, and political reasoning. (6)                                                                                                                     
  • The 2017 reforms are intended to make the Civil Code more ‘modern’ and ‘transparent’ and to align contract law with that of ‘influential jurisdictions’ and international instruments like the UN Convention on International Sales of Goods (CISG) and the UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles). (4)
  • Japanese contract law has some particular characteristics worth noting:
    • There is an emphasis on continuity in long-term or relational contracting. (8)
    • There is no doctrine of stare decisis. There is a large and growing influence of case law due to the career judiciary system and a shared vision of the rule of law that emphasises uniformity and predictability of outcomes. (8-12)
    • There is no strong distinction between public and private contracts. (13-16)
    • There is a role for secondary ordering of outcomes based on Japanese analogues to equity or reasonableness. (28-33)

Why study foreign law

  • Given these differences in the way that contract law is perceived in practice, why should Australian lawyers or judges care about Japanese law – or any foreign law at all?

First reason

  • The first reason, of course, is that Japan is an important trading partner of Australia. Japan is our second largest destination for exports of manufactured goods, and ninth largest in services. It is our third largest importer of goods and fifth largest in services.
  • We have deep and important bilateral and multilateral trade relationships, importantly:
    • The 2015 Japan Economic Partnership Agreement.
    • Both Japan and Australia played a critical role in implementing the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership (CPTPP).
    • The agreed but not yet signed Regional Comprehensive Economic Partnership (RCEP).
  • The mega-regional agreements are hugely significant. The CPTPP covers 14.4% of world trade and has a market size of $10.6 trillion. There is a standing invitation for the US to return to the original TPP. RCEP is more than twice that size, with a market of $27.3 trillion. And it includes China! They will transform our place in the global economic community.

Second reason

  • The mega-regional agreements (CPTPP and RCEP) highlight the second reason why we should be interested in the legal system of Japan and other regional powers. We live in a globalised economy, but one where the form of globalisation takes a radical new form.
  • The previous forces of globalisation (largely, a reduction in transport costs) lead to increased bilateral trade. The new forces (modern information and communications technology) lead to a new paradigm of competition and trade in which it is possible to perform economic functions at long-range:
    • The old paradigm of global competition was trade in goods made in factories in different nations. The new paradigm of global competition is trade in tasks, with competition occurring between workers performing the same task in different countries.
    • Economists[DR1]  call this ‘vertical disintegration’ leading to global value chains (GVCs)[2] in which production occurs in many production stages in different countries.
    • The pattern of trade shows that production occurs in clusters[3]. The Asia-Pacific region is one of those clusters – hence the economic logic of the CPTPP and RCEP. They are not so much free trade agreements as a constitution for the governance of transnational markets, covering topics such as: e-commerce, IP, State-Owned Enterprises, competition rules, and investment protections allowing international arbitration.
  • All of this means economies (and legal issues) are inextricably linked and intertwined:
    • Foreign laws and international law are inherently interesting in every economic transaction that has a transnational characteristic. We need to understand the legal regimes (contract laws and regulations generally) of our trading and production partners, for their regime (often multiple regimes) will often apply directly and, if not, indirectly.
    • The distinction between private and public international law breaks down – international law is part of modern commercial practice. Private international law (conflict of laws) is a central topic in modern commercial practice. The issue of the coherence of laws and regulations also becomes central. Hence the mega-regional agreements have chapters on regulatory best practice.
    • This is also why we have seen the new generation of international instruments – adding to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. This new generation of documents (treaties and statements of principles of law) encourages a global mindset and will transform the international disputes landscape:
      • Convention of 30 June 2005 on Choice of Court Agreements;
      • 2015 Principles on Choice of Law in International Commercial Contracts, allowing, subject to conditions, the use of ‘rules of law’ (soft law) as a valid choice of law;
      • 2018 UN Convention on International Settlement Agreements; and most recently,
      • Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters
  • Within this changing economic and legal environment, a number of concepts compete for attention:
    • Codification (even in Australia – 2012, but still-born);
    • Harmonisation;
    • Restatements (the US Restatement, Second, Contracts; Burrows; Andrews);
    • Statements of general principles of law for international commercial contracts (UNIDROIT Principles, Trans-Lex).
  • Of course, private international law – now reinforced by the 2015 Hague Principles on Choice of Law in International Commercial Contracts – keeps whispering: ‘You are autonomous. Choose your own law. Think about rules of law as a valid alternative’.
  • The Japanese Civil Code has continued in its tradition of codification, even though that course may (in my view) actually undermine the ability of law to respond to modern complex, transnational issues. The uncertainty and obscurity of sources of law is overstated. But law reform may still be needed. I will mention 2 areas where we could think of more deeply about law reform.

Two areas that could benefit from reform

First area – Good Faith

  • There is a long-standing (and somewhat sterile) discussion of the role of good faith. Even the English courts are introducing the concepts in a more nuanced way, especially in long-term, relational contracts[4].
  • We know that good faith pervades all of contract law rules. If the debate about implied terms of good faith was sterile, it was because of a failure to see what ‘contract’ is. Contracts are not just pieces of paper and an agreement about terms. ‘Contract’ is an institution. Wim Decock[5], reminds us that the foundational principles of contract law were about maintaining relationships. Contract law was Trinitarian in nature and good faith was about maintaining a relationship with God and with each other (a vertical and horizontal dimension).
  • It is interesting to see, therefore, the observation in this book (6) that Japanese law puts greater emphasis on maintaining contractual relationships (62-65), in line with more long-term or relational contracting in business practice, and that therefore good faith plays a major role in Japanese law, more like German law. (64)
  • It would be helpful to Australian contract law to perceive contract as an institution and articulate rules about good faith for the support and protection of that institution, particularly as it weathers the greater volatility that we see in global commercial practice.

Second area – Change of Circumstances

  • The doctrine of frustration is notoriously unsatisfactory in Anglo-Australian common law. It is far from an obsolete doctrine but deals with the problems of the everchanging transnational commercial world. Brexit (or not) is just one of the current issues giving rise to the question of what should happen when circumstances radically change.[6]
  • Putting to one side the issue of what exactly is a sufficiently radical event to call frustration into play, the seriously deficient Anglo-Australian response (termination as a matter of law without recourse to either party) seems hardly satisfactory in a modern commercial contracting environment of Global Value Chains and relational contracts.
  • The judgments in the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW [7] give hints of a broader approach. Both in this and the leading English case of Davis Contractors Ltd v Fareham UDC[8], the parties proceeded with the work and claimed a restitutionary remedy for the different work done after the frustrating ‘event’. As Jane Swanton has noted[9], the continued performance and restitutionary remedy was in effect a variation of the contract. This was appropriate given the subject matter of the contract in Codelfa was with a government entity concerning important public infrastructure.
  • The UNIDROIT Principles (see Art 6.2 Hardship and Art 7.1.7 Force Majeure) and before them the Contract Code drafted by Harvey McGregor for the English Law Commission[10], suggests another, more direct, way of achieving a just result: a legal requirement (or, at least, a precondition of relief) to negotiate in good faith to restore the ‘equilibrium’ of the contract, failing which there is a possibility of a tribunal intervening to itself adapt the contract to the new circumstances.
  • Japanese law, like German law, recognises a right of adjustment. (426-431) Although drawing back from a full adoption of the UNIDROIT Principles in the 2017 Civil Code, the issues surrounding changed circumstances are informed by the greater predilection of Japanese courts to keep the contract alive. A generalised duty to renegotiate in good faith is still being debated. (431)
  • Australian lawyers would do well to participate in this debate, given the importance in modern commercial practice of long-term, relational contracts. It would help inform an Australian attitude to radical changes of circumstances, which changes are more and more likely in a volatile global economy.

Concluding remarks

  • In the context of where it fits in a world community, there is a long and sometimes acrimonious debate in the United States (and sometimes Australia too – although we are much more used to citing foreign case law[11]) as to the permissibility of citing and relying on foreign law[12].
  • A study of this work shows that much can be learnt about the suitability of our own legal system by studying foreign laws and applying the comparative method. The articulation of laws and their reform is part of the art of statecraft, as Justinian describes in his opening paragraphs to his monumental Digest[13]. More attention should be paid to this important public task.
  • Books like the one we launch today are valuable guides along the way. I commend it to your reading.

Donald Robertson
Adjunct Professor of Law, University of Sydney

[1]             References are to paragraph, not page, numbers.

[2]             Paul R Krugman, Maurice Obstfeld and Marc J Melitz, International Economics: Theory and Policy (Pearson, Harlow, 11th ed, 2018), 46; Pol Antràs, Global Production: Firms, Contracts, and Trade Structure (Princeton University Press, Princeton, 2016).

[3]             Richard Baldwin, The Great Convergence: Information Technology and the New Globalization (Harvard University Press, Cambridge, Mass., 2016).

[4]             Sir George Leggatt, ‘Negotiation in Good Faith: Adapting to Changing Circumstances in Contracts and English Contract Law’ [2019] Journal of Business Law 104.

[5]             Theologians and Contract Law: The Moral Transformation of the Ius Commune (ca 1500-1650 (Martinus Nijhoff, Leiden, 2013), 608.

[6]             Canary Wharf (Bp4) T1 Ltd. v European Medicines Agency [2019] EWHC 335 (Ch).

[7]             (1982) 149 CLR 337.

[8]             [1956] AC 696.

[9]             ‘Discharge of Contract by Frustration: Codelfa Construction Pty Ltd v State Rail Authority of NSW’ 57 Australian Law Journal 201 at 213, 217.

[10]           §595, Contract Code: Drawn Up on Behalf of the English Law Commission (1966, – the first project of the then new English Law Commission, but published only in 1993 by an Italian publishing house).

[11]           Jeremy Waldron, “Partly Laws Common to All Mankind”: Foreign Law in American Courts (Yale University Press, New Haven, 2012).

[12]           Stephen Breyer, The Court and the World: American Law and the New Global Realities (Knopf, NY, 2015).

[13]           Digest of Justinian, 533 AD (English translation edited by A Watson, University of Pennsylvania Press, Philadelphia, 1985), p xlvii.

Guest Blog: Chief Justice Bathurst’s launch of Asian Law books

[Ed: The Hon TF Bathurst AC, Chief Justice of New South Wales, kindly launched two Asian law books at a CAPLUS seminar hosted by Herbert Smith Freehills in Sydney on 28 November 2019: ‘Contract Law in Japan‘ by Hiroo Sono, Luke Nottage, Kenji Saigusa and Andrew Pardieck (Wolters Kluwer 2019) and ‘ASEAN Consumer Law Harmonisation and Cooperation‘ by Luke Nottage, Justin Malbon, Jeannie Paterson and Caron Beaton-Wells (CUP 2019). Other discussants included Sydney Business School Adjunct Professor Donald Robertson (expert in international contract law) and Sydney Business School Professor Gail Pearson (expert in comparative consumer law). The Chief Justice’s remarks are uploaded on the Supreme Court website and are reproduced below with permission.]

1. I would like to begin by acknowledging the traditional custodians of the land on which we meet, the Gadigal people of the Eora nation, and pay my respects to their Elders, past, present and emerging.  It took a long time for our legal system to recognise the unique connection with this land which they have under their ancient law and customs.  When it did, a door was opened to a greater understanding which had the potential to enrich both traditions and heal some of the wounds within our community inflicted by more unjust times.

2. In this way, our history demonstrates, rather starkly, the necessity for a dialogue between different systems of law.1  A dialogue offers us the opportunity to take a glimpse into the workings of an unfamiliar system, and, in so doing, see our own in a different light.  It may help us better appreciate the shortcomings and deficiencies of our own approach to important legal questions, and benefit from an understanding of how others have approached them.  In short, it is never enough to compare two systems simply by pointing out the differences.  It is necessary to go further, and reflect on how and why those systems differ, and what they can learn from each other.

3. The two books which we have gathered to launch today are fine examples of scholarly works within this tradition.  Neither could be described solely as a work of “comparative law”, since neither has a narrow, solely comparative focus.  For example, Contract Law in Japan2 seeks to present Japanese contract law largely on its own terms, although this inevitably involves occasional reference to its French, German, and even American progenitors.  In the same vein, ASEAN Consumer Law3 aims to treat the consumer law of ASEAN as a unified, or at least, unifying, entity, rather than as a simple agglomeration of the laws of its member states – although, as I quickly learned while reading, this is something much easier said than done.  

4. On their own merits, both works would stand as comprehensive guides to the substantive law of the jurisdictions which they cover.  However, it would be disingenuous for me to deny that both works invite and encourage the uninitiated reader, such as myself, to whom the contract law of Japan and the consumer law of the members of ASEAN has long remained a mystery, to draw their own comparisons with the law in their home jurisdiction, which in my case is, of course, Australia.  In my brief remarks this evening, I would like to touch on some of the connections and contrasts between Australian, Japanese, and ASEAN law which appear from both works.  To make such a large task feasible given the scope of the coverage in each book, I will focus on only two themes which I think have particular relevance to Australian law at present.

5. The first theme is concerned with the extent to which it is appropriate for a legal system to define causes of action, or otherwise enforce or restrict legal rights, based on broad, normative standards of conduct.  In Australian law, we might take as an example the statutory prohibitions on “conduct that is, in all the circumstances, unconscionable”.4  No further explanation of the nature of “unconscionable” conduct is given, although the legislation does list a sizeable number of factors which might be relevant.5  Ultimately, it is left to the court to determine whether the conduct in a particular case is “against conscience by reference to the norms of society”,6 or more prosaically, whether it was contrary to “accepted community standards”.7  

6. Now, while this does not simply amount to allowing a judge to proscribe conduct which they deem to be “unfair” or “unjust”,8 it may be thought to come closer than many other areas of law permit.  We can see the consequences in the recent decision of the High Court in ASIC v Kobelt,9 where the Court split 4:3 on the issue of whether the provision of an informal system of credit by the owner of a general store in a remote, Indigenous community was “unconscionable”.  The breadth of the standard makes it difficult to attribute the difference in opinion between the members of the Court to any legal error.  Rather, the distinction between the majority and the minority appears to lie in their contrasting views about what the “norms of society” or “accepted community standards” actually require.10  Put this way, difference in opinion ceases to be unexpected, and perhaps, becomes inevitable.11

7. This creates something of a dilemma for the law.  If the “norms of society” or “accepted community standards” are so subtle and esoteric in their application to a particular set of circumstances that even some of the most experienced legal minds in the country cannot agree, then ought the final decision to really remain in their hands?  In these circumstances, it would not be out of the question to believe that the legitimacy of the conduct should really be the subject of consideration by the representatives of the people in the legislature.  A provision which is clearly directed to address a particular situation puts beyond doubt that a matter has been considered by the legislature.  It defines its own standard by which the relevant conduct is to be judged.  To be sure, any statutory provision may be capable of giving rise to its own difficulties of interpretation, but at least these problems are susceptible to the application of more familiar legal reasoning.12  

8. It seems to me that this is an approach which has, to some extent, been adopted by Japanese contract law in analogous circumstances.  Rather than relying on a broadly-expressed criterion of “unconscionable conduct” to define the situations in which a court would be prepared to set aside a consumer contract, it instead states the particular circumstances which will give rise to such a claim.13  One such example, which seems to reflect the narrower, general law doctrine of “unconscionable conduct” in this country,14 is where “a business stirs up [the] excessive anxiety of a consumer without enough ability to judge due to [their] old age or mental disorder about [their] health or living conditions”.15  There are other similar examples, which spell out in some detail the types of conduct which are not regarded as acceptable business practice in Japan when it comes to consumer contracts.16  

9. It is worth noting that these exceptions for consumer contracts were introduced even though Article 90 of the Japanese Civil Code provides that a contract is void if it is “against public policy”,17 perhaps a phrase of even wider import than “unconscionable conduct”.18  Even though the express exceptions for consumer contracts could very well have been analysed as being “against public policy”,19 it was still felt necessary to craft particular provisions to deal with these situations.  It could well be thought that such an approach improves certainty, and promotes greater democratic legitimacy.  

10. While there can be a need to resort to general standards of conduct to ensure that unforeseen and undesirable activities do not escape the supervision of the law, it seems to me that there is much to be said for resisting the temptation to make these standards the “first port of call” for regulation.20  I think the Japanese approach to the grounds on which a consumer contract may be set aside for what we might describe as “unconscionable conduct” provides an interesting perspective on this issue.  There is much more that could be said about this topic, and, no doubt, Japanese law might have difficulties of its own with overbroad standards of conduct.  But the utility of the comparison should be apparent.  It illustrates the different approaches which may be taken to a complex issue, and suggests alternative ways of resolving them.  

11. The second theme I would like to touch on this evening is concerned with the role which regulatory bodies ought to play in policing and enforcing what might broadly be described as “consumer protection legislation”.  Again, this is something that has been a live issue in Australia since the Hayne Royal Commission delivered its Interim Report in 2018, which strongly criticised how ASIC approached the enforcement of the financial services legislation for which it was responsible.21  The Report noted that ASIC’s “starting point” for responding to misconduct appeared to have been to attempt to resolve the issues by agreement and negotiation with the entity concerned,22 with a focus on remediation of harm caused rather than sanction for the misconduct itself.23  In words which bear repeating in full, the Report stated:

“This cannot be the starting point for a conduct regulator.  When contravening conduct comes to its attention, the regulator must always ask whether it can make a case that there has been a breach and, if it can, then ask why it would not be in the public interest to bring proceedings to penalise the breach.  Laws are to be obeyed.  Penalties are prescribed for failure to obey the law because society expects and requires obedience to the law.”24

12. The rhetoric here is certainly characteristic of the direct and forthright attitude of the Commissioner.  It is compelling and persuasive, with seemingly inexorable logic.  However, I think it has somewhat directed attention away from an important anterior question:  to what extent was ASIC conceived to be a “conduct regulator” prior to the Royal Commission?  It must be admitted that now, in light of the Commission, public opinion overwhelmingly favours ASIC taking an active role as a “conduct regulator”.  And ASIC has taken heed.  Shortly after the publication of the Interim Report, in response to its criticisms, ASIC adopted what has been compendiously described as the “Why Not Litigate?” approach,25 placing enforcement squarely at the forefront of its responsibilities, although it has been quick to point out that this is by no means equivalent to a “litigate first, and ask questions later” approach for any breach, no matter how trivial.26  Was this always intended to be how ASIC operated?

13. Interesting light is shed upon this question by Mr Alan Cameron AO, a former Chair of ASIC and its predecessor from 1993 to 2000, in an address he delivered some months before the delivery of the Interim Report,27 although at a time when many of the shortcomings in the financial services sector had already been exposed in hearings before the Commission.  He reflected on the fact that, from its inception, ASIC has never seen itself solely as an enforcement body.  It has also regarded itself as having a “market facilitation role”,28 and, I might add, with some justification, because this objective is still reflected prominently in its enabling legislation today.29  Indeed, even as late as 2014, in a “Statement of Expectations for ASIC” published by the Government, enforcement was not mentioned as part of its “key role”, or even as one of its objectives.30  

14. It is striking the degree to which the same concerns and ambiguity about the proper role of a regulator appear in the topics discussed in ASEAN Consumer Law.  While no single chapter discusses the work of consumer protection regulators as its primary focus, it is a background theme which recurs with surprising frequency in other chapters when discussing the efficacy of the substantive law.  Importantly, one gets the sense that this results from much the same concerns which have motivated the discussion about the role of ASIC as a regulator in Australia:  despite the introduction of relatively strong protections for consumers “on the books” in most members of ASEAN in recent years,31 there has been little tangible evidence that these protections have translated into better outcomes for consumers.  

15. Even for those countries which have had consumer protection legislation for some time, there is often a dearth of filings in courts attempting to utilise these laws.32  Thailand appears to be an exception to this trend, but even then, there are few cases in which a consumer protection claim has proceeded to reported judgment.  Most are settled.33  Part of the reason for the slow uptake might be attributed to the lack of an effective and well-resourced regulator to educate the public about their rights as consumers, and where necessary, to step in and take appropriate enforcement action.34  In many countries, it falls to consumer advocacy NGOs to raise awareness about consumer protection issues, in the absence of better-resourced government programs.35  It should be no surprise that Thailand, with its higher filing rate, is also the country with the greatest consumer NGO activity.36  

16. Now, it may be accepted that there are significant differences between the level of economic development between most members of ASEAN and Australia.  Nevertheless, the experience of ASEAN ought to remind us that legislation needs to be coupled with an appropriate enforcement strategy if it is to be effective.  Introducing legislation to prohibit undesirable conduct is one thing.  Translating that legislation into practical outcomes for consumers is another.  And, ultimately, it is that second step which proves difficult.  As we have seen, perhaps there were grounds for believing that ASIC’s former approach was too lenient.  But it is a matter of balance.  There is always a risk that things may swing too far in the other direction.  

17. The themes I have discussed this evening are just two small examples of the way in which contemporary legal debate in Australia can be seen to overlap with those in other jurisdictions.  This focus might have given the mistaken impression that I believe that comparative law is only useful for what it can tell us about our own system of law.  This could not be further from the truth.  But, I firmly believe that the first step in motivating policy-makers and lawyers to engage with comparative law is to highlight the connections and similarities which we have with other systems.  It is only then that we can demonstrate that comparison opens a door to a dialogue from which both systems can benefit.

18. Both of the works being launched tonight are excellent examples of how such scholarship can incisively deconstruct unfamiliar legal systems and make them more accessible to a wider audience.  And, what is more, each clearly exposes and explains the challenges which each system faces on its own terms.  This is an admirable achievement, and one for which the authors deserve our congratulations.

19. Thank you.

Footnotes:

1  See also Uwe Kischel, Comparative Law (Oxford University Press, 2019) 46 ff.

2  Hiroo Sono et al, Contract Law in Japan (Wolters Kluwer, 2019).

3  Luke Nottage et al, ASEAN Consumer Law Harmonisation and Cooperation: Achievements and Challenges (Cambridge University Press, 2019).  

4  Competition and Consumer Act 2010 (Cth) sch 2 (‘Australian Consumer Law’) s 21(1); Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’)s 12CB(1).

5  Australian Consumer Law s 22(1); ASIC Act s 12CC(1).

6  ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [41] (Allsop CJ, Jacobson and Gordon JJ); ACCC v Medibank Private Ltd [2018] FCAFC 235at [239] (Beach J); ASIC v Kobelt [2019] HCA 18 at [57] (Kiefel CJ and Bell J), [87] (Gageler J).

7  Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15 at [195] (Bathurst CJ); ASIC v Kobelt [2019] HCA 18 at [59] (Kiefel CJ and Bell J).

8  Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [120] (Spigelman CJ); cf ACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 64 [11] (Gleeson CJ).

9  [2019] HCA 18.

10  Ibid [75]–[79] (Kiefel CJ and Bell J), [101]–[111] (Gageler J), [124]–[129] (Keane J), [235]–[240] (Nettle and Gordon JJ), [296]–[302] (Edelman J).

11  Ibid [95] (Gageler J).

12  Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 at 436–7 [58]–[59] (Allsop CJ), 442–3 [85]–[87] (Edelman J); cf ASIC v Kobelt [2019] HCA 18 at [267]–[268] (Edelman J).

13  Sono et al (n 2) 79 [168] ff.

14  See Thorne v Kennedy (2017) 263 CLR 85 at 102–3 [37]–[39] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ). 

15  Sono et al (n 2) 80, quoting art 4(3)(v) of the Consumer Contract Act (Japan); cf Blomley v Ryan (1956) 99 CLR 362 at 405 (Fullagar J).

16  See also Sono et al (n 2) 83–4.

17  Civil Code (Japan) art 90.

18  Cf Sono et al (n 2) 81–3 .

19  See ibid 83 [182]–[183].

20  Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [121] (Spigelman CJ).

21  See Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Interim Report (September 2018) vol 1, ch 8.

22  Ibid 277.

23  Ibid 296.

24  Ibid 277 (emphasis original).

25  Australian Securities and Investments Commission, ‘Update on Implementation of Royal Commission Recommendations’ (Paper, February 2019) 3.

26  See, eg, Commissioner Sean Hughes, ‘ASIC’s Approach to Enforcement after the Royal Commission’ (Speech, 36th Annual Conference of the Banking and Financial Services Law Association, 30 August 2019).  

27  Alan Cameron, Reflections on Regulators, Without Casting Aspersions’ in Pamela Hanrahan and Ashley Black (eds), Contemporary Issues in Corporate and Competition Law (LexisNexis, 2019) 165.  The speech was originally delivered on 26 June 2018.

28  Ibid 167.

29  ASIC Act s 1(2).  

30  Australian Government, ‘Statement of Expectations for ASIC’ (April 2014) <https://www.asic.gov.au/about-asic/what-we-do/how-we-operate/accountability-and-reporting/statements-of-expectations-and-intent/statement-of-expectations-april-2014/>; see also Cameron (n 26) 173.

31  See Nottage et al (n 3) chs 3–4.

32  Ibid 163–73,.

33  Ibid 167.

34  Ibid 240–1, 246–7.

35  Ibid 365–6.

36  Ibid 165–7.

New Frontiers in International Arbitration for the Asia-Pacific Region (9): Arbitration and Protest in Hong Kong

Guest post written by: A/Prof Jie (Jeanne) Huang and Winston Ma (Sydney Law School)

Following the promulgation of the judicial interpretation by the Supreme People’s Court (“SPC”) on 26 September 2019, the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“Arrangement”) signed by Mainland China and Hong Kong on 2 April 2019 came into effect in Mainland China from 1 October 2019. This Arrangement provides mutual recognition and enforcement of interim measures between Hong Kong and Mainland China. It has generated broad coverage.[1] This post tries to add to the discussion by providing a note on the first case decided under the Arrangement on 8 October 2019, and more broadly, some reflections on the continuing protests in Hong Kong and arbitration under “One Country, Two Systems’.

Mutual recognition and enforcement of interim measures between Hong Kong and Mainland China

Hong Kong Arbitration Ordinance has long been allowing parties to arbitral proceedings in any place to apply to the courts of Hong Kong for interim measures. Interim measures include injunction and other measures for the purpose of maintaining or restoring the status quo pending determination of the dispute; taking action that would prevent, or refraining from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral proceedings; preserving assets; or preserving evidence that may be relevant and material to the resolution of the dispute. However, in contrast to the liberal Hong Kong counterpart, people’s courts in Mainland China are conservative. Chinese law limits interim measures to property preservation, evidence preservation and conduct preservation. More important, Mainland courts generally only enforce interim measures in support of arbitration administered by domestic or foreign-related arbitration institutions of the People’s Republic of China (PRC). This is because Article 272 of Chinese Civil Procedure Law provides that where a party applies for a preservation measure, the foreign-related arbitral institution of PRC shall submit the party’s application to the intermediate people’s court at the place of domicile of the respondent or at the place where the respondent’s property is located. Article 28 of Chinese Arbitration Law states that if one of the parties applies for property preservation, the arbitration commission shall submit to a people’s court the application of the party in accordance with the relevant provisions of the Civil Procedure Law. Article 10 of Chinese Arbitration Law restricts arbitration institutions to those registered with the judicial administrative department of the relevant province, autonomous region or municipalities directly under the Central Government.[2]

There are few exceptions to the Mainland conservative approach. First, since 2017, ad hoc arbitration has been permitted in China’s pilot free trade zones.[3] Therefore, Mainland courts are likely to issue interim measures in support of such ad hoc arbitration. Second, a party to a maritime arbitration seated outside of Mainland China can apply for property preservation to the Chinese maritime court of the place where the property is located.[4] However, the property to be preserved was limited to vessels, cargos carried by a vessel, and fuel and supplies of a vessel.[5]

The third exception is created by the recent Arrangement. Arbitral proceedings commenced both before and after 1 October 2019 are potentially caught by the Arrangement, under which property, evidence and conduct preservation orders could be granted by the courts in Mainland China to assist the Hong Kong arbitration.

The scope of the Arrangement confines to arbitral proceedings seated in Hong Kong and administered by institutions or permanent offices meeting the criteria under Article 2 of the Arrangement. Six qualified institutions have been listed on 26 September 2019, being Hong Kong International Arbitration Centre (“HKIAC”), ICC Hong Kong, CIETAC Hong Kong, Hong Kong Maritime Arbitration Group, eBRAM International Online Dispute Resolution Centre and South China International Arbitration Centre (Hong Kong). Future applications will also be considered and the list may be subject to alteration.

Articles 3-5 of the Arrangement set out the procedural requirements for applying to the courts in Mainland China for interim measures. Since time is of essence, application can be made by a party to the arbitration directly to the relevant Mainland Chinese court before an arbitration is accepted by an arbitration institution.[6] If the arbitration has been accepted, the application should be submitted by the arbitration institution or representative office.[7]

Article 8 of the Arrangement further reflects the importance of timeliness by demanding the requested court to make a decision after examining the application “expeditiously”. Nevertheless, the Arrangement is silent on the specific time limit applicable to the court’s examination process. Pursuant to Article 93 of the Chinese Civil Procedure Law, the court is to make an order within 48 hours after receiving an application for property preservation prior to the commencement of arbitration; Furthermore, Article 4 of the Provisions of the SPC on Several Issues concerning the Handling of Property Preservation Cases by the People’s Courts demands the court to make an order within 5 days after the security is provided, and within 48 hours in cases of emergency.

The first case decided under the Arrangement demonstrates how “expeditiously” a people’s court can make a decision. In the morning of 8 October 2019, the Shanghai Maritime Court received a property preservation application submitted by HKIAC. In this case, the arbitration applicant is a maritime company located in Hong Kong and the respondent is a company in Shanghai. They concluded a voyage charter party which stated that the applicant should provide a vessel to transport coal owned by the respondent from Indonesia to Shanghai. However, the respondent rescinded the charter party and the applicant claimed damages. Based on the charter party, they started an ad hoc arbitration and ultimately settled the case. According to the settlement agreement, the respondent should pay the applicant USD 180,000. However, the respondent did not make the payment as promised. Consequently, the respondent brought an arbitration at the HKIAC according to the arbitration clause in the settlement agreement. Invoking the Arrangement, through the HKIAC, the applicant applied to the Shanghai Maritime People’s Court to seize and freeze the respondent’s bank account and other assets. The Shanghai Court formed a collegial bench and issued the property preservation measure on the same date according to the Arrangement and Chinese Civil Procedure Law.

Protests in Hong Kong

As the first and so far the only jurisdiction with the special Arrangement through which parties to arbitration can directly apply to Mainland Chinese courts for interim measures, Hong Kong has been conferred an irreplaceable advantage while jockeying to be the most preferred arbitration seat for cases related to Chinese parties. Arbitration that is ad hoc or seated outside Hong Kong cannot enjoy the benefits of the Arrangement. Parties to an arbitration seated in Hong Kong are encouraged to select one of the listed institutions to take advantage of the Arrangement. Meanwhile, the Arrangement also attracts prominent international arbitration institutions to establish permanent offices in Hong Kong.

One may argue that the Arrangement is the necessary consequence of the “One Country, Two Systems” principle and the increasingly close judicial assistance between Mainland China and Hong Kong. Especially in the context of China’s national strategy to develop the Greater Bay Area, the notion of “one country, two systems, three jurisdictions” makes Hong Kong the only common-law jurisdiction to deal with China-related disputes.[8]

However, to what extent may the recent protests negatively impact on the arbitration industry in Hong Kong? Notably, London and Paris have also experienced legal uncertainly (Brexit in the UK) and protests (Yellow vests movement in France) in recent years. Nevertheless, the Hong Kong situation is more severe than its western counterparts in two aspects. First, currently, the protestors have impacted on the traffic inside Hong Kong. Last month, they even blocked the Hong Kong airport. It is not surprising that parties may want to move the hearings outside of Hong Kong just for the convenience of traffic, if the arbitration is still seated in Hong Kong. Second, the continuation of protests and the uncertainty of the Chinese government’s counter-measures may threaten parties’ confidence in choosing Hong Kong as the seat for arbitration. The Arrangement brings an irreplaceable advantage to Hong Kong to arbitrate cases related with Chinese parties. However, this significance should not be over-assessed. This is because by choosing a broad discovery and evidence rule, parties and tribunals have various means to deal with the situation where a party wants to hide a key evidence. Arbitration awards can be recognized and enforced in all jurisdictions ratified the New York Convention. Therefore, the value of the Arrangement is mainly for cases where the losing party only has assets in Mainland China for enforcement.

The flourish of arbitration in Hong Kong is closely related to Mainland China. However, Hong Kong, if losing its social stability due to the protests, will lose its arbitration business gradually. In the Chinese Records of the Grand Historian (Shiji by Han dynasty official Sima Qian), there is a famous idiom called “cheng ye xiao he bai ye xiao he”.[9] It means the key to one’s success is also one’s undoing. It is the hope that Mainland China and Hong Kong can find a solution quickly so that the arbitration industry in Hong Kong can continue to be prosperous. This is more important than the implementation of the Arrangement.

Guest Authors:
– Jie (Jeanne) Huang is an associate professor at the University of Sydney Law School, Australia, jeanne.huang@sydney.edu.au
– Winston Ma is an LLB student at the University of Sydney Law School, Australia

Reproduced (with minor edits) with permission from:
http://conflictoflaws.net/2019/arbitration-and-protest-in-hong-kong/

[1] E.g. http://arbitrationblog.kluwerarbitration.com/2019/07/24/arrangement-concerning-mutual-assistance-in-court-ordered-interim-measures-interpretations-from-a-mainland-china-perspective-part-i/?_ga=2.249539525.310814453.1570572449-887368654.1570572449.

[2] There are different opinions regarding whether Article 10 and 28 of Chinese Arbitration Law restrict the interim measures to arbitration administered by Chinese arbitration institutions. See the judgment of [2016] E 72 Cai Bao No. 427 issued by Wuhan Maritime Court. In this case, the Ocean Eleven Shipping Corporation initiated an arbitration in HKIAC against Lao Kai Yuan Mining Sole Co., Ltd. The applicant was a company in South Korea and the respondent a Chinese company. The parties had disputes over a voyage charter party. In order to ensure the enforcement of the coming award in Mainland China, the applicant applied to Wuhan Maritime Court to freeze USD 300,000 in the respondent’s bank account or seizure, impound or freeze other equivalent assets. The People’s Insurance Company provided equivalent insurance for the applicant’s property preservation application. Wuhan Maritime Court permitted the property preservation application according to Article 28 of Chinese Arbitration Law and Article 103 of the Civil Procedure Law. However, this case is inconsistent with majority cases where Chinese courts rejected to issue interim measures for arbitration administered by ad hoc or arbitration institutions registered outside of Mainland China.

[3] SPC Opinions on Providing Judicial Safeguard for the Building of Pilot Free Trade Zones, Fa Fa [2016] No. 34, http://www.court.gov.cn/fabu-xiangqing-34502.html.

[4] Art. 21(2) of the Interpretation of the SPC on the Application of the Special Maritime Procedure Law of the PRC, Fa Shi [2003] No. 3.

[5] Ibid., art. 18.

[6] Art. 3 of the Arrangement.

[7] Ibid., art. 2.

[8] China has made the economic integration between the Grater Bay Area a national strategy. The Greater Bay Area includes Hong Kong, Macao and Guangdong Province https://www.bayarea.gov.hk/sc/outline/plan.html.

[9] https://en.wiktionary.org/wiki/%E6%88%90%E4%B9%9F%E8%90%A7%E4%BD%95%EF%BC%8C%E8%B4%A5%E4%B9%9F%E8%90%A7%E4%BD%95.

Comparing Consumer Product Safety Law for New Markets and Technologies

In the context of changes in the consumer marketplace and regulatory frameworks locally and internationally, the Australian government is re-initiating public consultations about introducing an EU-style “General Safety Provision”. Although this requirement for suppliers pro-actively assess risks and put or keep only safe products products has also been introduced beyond Europe in Hong Kong, Macau, Malaysia and (partly) Singapore, it has also not yet been introduced in Japan. However, Japan may have a better regulatory framework in other respects (eg mandatory accident reporting requirements on suppliers that extend to some “near misses”, along with public disclosure of such reports) and better enforcement (eg of mandatory safety standards for specific products).

Japanese courts also continue to generate more case law applying EU-style strict product liability, introduced by a 1994 Act, compared to an analogue introduced in 1992 in Australia (and increasingly in other parts of Asia, including many ASEAN states). This helps promote and clarify more indirect incentives on suppliers to source and provide safe products. However, such impact for product liability litigation is still constrained by issues such as effective access to justice / courts. This is evident from a recent book examining major EU and some other countries, reviewed below for the Journal of European Tort Law: Piotr Machnikowski (ed) European Product Liability: An Analysis of the State of the Art in the Era of New Technologies (Intersentia, Cambridge, 2016, ISBN 978-1-78068-398-0, ix+705pp):

This is a very useful reference book especially for academic researchers and legal practitioners, but also policy-makers or law reformers, as it compares product liability law and practice across 12 countries in Europe as well as five other countries. A key question is whether the 1985 product liability (PL) Directive (85/374/EEC), compensating consumers for physical harm as well as certain consequential property losses caused by product safety defects, remains “fit for purpose” – especially given the proliferation of new technologies.

The Introduction by Machnikowski succinctly outlines those as including: mobile internet (smartphones, tablets etc), the automation of knowledge work, the “internet of things” (such as connected home appliances), cloud technology, advanced robotics, autonomous vehicles, next-generation genomics and regenerative medicine, advanced materials (eg through nanotechnology), energy storage, advanced oil and gas exploration and recovery, renewable energy sources, and 3D printing (pp3-8). He explains how these technologies require us to reconceptualise the role of substantive private law, as they often have global reach and prompt calls for public regulation. The new technologies also strain the capacity of the legal system to respond quickly and effectively. They often implicate intellectual property and services rather htan movable or tangible products, and networks of suppliers rather than just manufacturers and some specified intermediaries, as primarily envisaged by the PL Directive. The new technologies raise questions about its focus on product defects linked to physical safety (rather than infringements of privacy or non-economic rights and interests), the exemption from liability usually provided for “development risks” (the no-one-could-have-known defence), attributing causation, and the scope of (potentially catastrophic) damages claimable. The book therefore aims to analyse how conventional PL law is or could be addressing such questions, as well as how PL law interacts with other areas of tort law and public regulation (pp 8-13).

The volume compares the law of European Union member states selected from both the “Old” and “New” Europe (Austria**, the Czech Republic, Denmark*, England*, France**, Germany**, Italy*, the Netherlands*, Norway*, Poland and Spain) and the European Economic Area (Norway) as well as Switzerland. It therefore reviews legal systems in the “Roman, German, common law and Nordic traditions”, along with “two important common law traditions from outside Europe (USA** and Canada*) as well as two mixed jurisdictions (Israel* and South Africa” (pp 13-14). The back cover blurb adds that this hefty book “is the result of an extensive international research project funded by the Polish National Science Centre. It brings together experienced scholars associated with the European Group on Tort law (EGTL) and the European Research Group on Existing EC Private Law (Acquis Group) … The country reports show that the practical significance of product liability differs widely in the various Member States”.

The preceding paragraph above tries to give a sense of this variable significance of PL law by indicating with an asterix (*) or double asterix (**) those countries where there is respectively extensive or very extensive litigation and case law; those without any asterix are countries where lawsuits reportedly remain rare. This rough appraisal is derived mainly from each country report’s concluding Part X (Assessment of Domestic Law), except for the chapter on Spain (lacking Part X), as well as each chapter’s respective Part IX (Alternative Regulations and Remedies) and Part VIII (Procedural and Evidential Issues). The comparison reinforces the well-established general proposition that it is factors beyond reforms to substantive PL law, even the shift from negligence-based to strict liability under the 1985 Directive model (inspired by some earlier US case law), which primarily generate lawsuits and therefore case law that might offer more guidance on what constitutes appropriate safety for consumer products.[1]

The country reports identify (sometimes overlapping) factors arguably impacting on whether or not PL law is extensively litigated:

  • effectively enforced public regulation preventing harmful products coming on the market (also in Norway, per Askeland, p 375), and strong social welfare or insurance schemes (eg in Denmark, per Holle and Mogelvang-Hansen, pp 171-2);
  • expenses in accessing evidence, and lawyers open to contingency fees, compared to non-legal dispute resolution avenues (in England, per Oliphant and Wilcox, p 203);
  • linking of civil with criminal proceedings to ease plaintiffs’ evidentiary burden (in France, per Borghetti, p235);[2]
  • scope of claimable damages (with lawsuits under PL Directive implementing legislation only really since a 2002 amendment allowing claims also for pain and suffering in Germany, per Magnus, p 272);
  • reversed burden of proof under still more familiar Civil Code negligence provisions in Italy, per Comande, pp 307-8);
  • quite predictable law (facilitating settlements), business reputation, products (like mobile phones) bundled with services facilitating claims against direct suppliers rather than manufacturers (in the Netherlands, per Keirse – but noting that general tort law has also become stricter: pp 355-6);
  • unpredictability in civil processes and litigation outcomes due to limited legal aid, variability in lawyers’ fees, high litigation costs, the “loser pays principle”, complex and lengthy procedures, problems with experts and judicial methodologies, and unclear standard of proof (p 404, per Baginska);
  • “almost impenetrable” commentary with very limited case law (in Switzerland, per Winiger, pp 477-8);
  • potential claims versus regulators and perhaps related compensation schemes, as well as class actions (in Canada, per Arbour, pp 513-9);
  • no-fault liability schemes precluding personal injury claims for defects in automobiles, and comparative ease of suing actors (eg doctors or employers) than manufacturers of potentially unsafe products (in Israel, per Gilead, p 544).

Each country report also succinctly sets out Parts dealing with “Sources of Law”, “Basic Elements of Liability”, “The Person Liable for Damage”, “The Aggrieved Person and Damage”, “Causality”, “Defences and Exclusions”, and “Remedies”. This structure facilitates easy comparisons on points of interest (eg on the extent to which an intermediate supplier might have contributed sufficiently to be deemed a joint “manufacturer”[3]), although it would have been helpful for the book to add an Index.

Especially for the (many) countries where case law is sparse, the country reporters do not delve into great detail about the potential applicability of especially Directive-based PL law to the various new technologies (but see Austria, per Koch, p 147). However, in his Conclusions, Machinowki nonetheless includes a very interesting analysis that can be seen as challenging the “Adequacy of the European Product Liability Regime for Threats Posed by New Technologies”, focusing on what should now constitute a “product”, “defect”, “development risks”, the “entity liable for composite products”, and appropriate “time limits”, as well as generally the “possible development paths for product liability law” (pp 691-705). Readers familiar with PL law could perhaps begin the book here, at the end. For particular points of interest, they can cross-reference to the detailed and authoritative commentary on the “Product Liability Directive” itself (pp 17-108) co-authored by Fairgrieve, Howells, Machinowski and five others. That will also be essential background reading for those less familiar with PL law. Academics and policy-makers, rather than practitioners, may also find some related insights in the penultimate chapter by Faure, setting out a rather general “Economic Analysis of Product Liability” (pp 619-65).


Overall, this is a very well conceived and executed comparative reference book that can be highly recommended, especially for those interested in PL law in the context of proliferating new technologies. A second edition or companion volume might usefully extend the analysis to other European countries as well as those, especially in the Asian region, that have increasingly adopted the PL Directive approach – often with more pro-plaintiff innovations.[4] However, other than Japan and Australia to some extent, these Asian countries have so far even less case law and related commentary that may help guide them as well in addressing emergent consumer product safety issues.

[1] Matthias Reimann, “Liability for Defective Products at the Beginning of the Twenty-First Century: Emergence of a Worldwide Standards?”, 51 American Journal of Comparative Law, 751-38 (2003). For a recent illustration, showing almost no lawsuits filed in five Southeast Asian countries that have adopted Directive-style PL legislation, except in Thailand thanks to contemporaneous  legislation facilitating consumer claims through regular courts, see Luke Nottage and Sakda Thanitcul, “Economic Integration and Consumer Protection in Southeast Asia: ASEAN Product Liability Law and Safety Regulation” in ibid (eds) ASEAN Product Liability and Consumer Product Safety Law (Winyuchon, Bangkok, 2016), available via https://ssrn.com/abstract=2703130.

[2] On the synergies between civil and criminal proceedings in medical malpractice and (especially mass tort) PL claims in Japan, see also respectively Robert Leflar, “Medical Error as Reportable Event, as Tort, as Crime: A Transpacific Comparison” 22 Journal of Japanese Law 39-76 (2005) available at https://www.zjapanr.de/index.php/zjapanr/article/view/478/503; and Luke Nottage, Product Safety and Liability Law in Japan (Routledge, 2004) especially ch3.

[3] See a class action settlement regarding imported soy milk, approved by the Victorian Supreme Court, which might have had otherwise to rule on this point under either Australian or Japanese law (both incorporating variants of the PL Directive since the early 1990s): Erin Downie v Spiral Foods Pty Ltd and Others [2015] VSC 190, available at http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSC/2015/190.html.

[4] See also Luke Nottage, Justin Malbon, Jeannie Paterson and Caron Beaton-Wells, ASEAN Consumer Law Harmonisation and Cooperation (Cambridge University Press, Singapore, 2020) especially ch3; Geraint Howells, Hans Micklitz et al (eds) Consumer Law in Asia (Cambridge University Press, forthcoming 2021).

New Frontiers in International Arbitration for the Asia-Pacific Region (8): Confidentiality vs Transparency in ICArb and ISDS

Confidentiality is still widely seen as significant advantage of international commercial arbitration (ICA) over cross-border litigation, especially perhaps in Asia. This can be seen in rules of most arbitral institutions. Automatic (opt-out) confidentiality is also now found in many national laws, including statutory add-ons to the UNCITRAL Model Law and/or through case law for example in New Zealand, then Hong Kong, Singapore, Malaysia, and eventually Australia.

Yet there remain variations in the timing of these developments as well as the scope and procedures associated with exceptions to confidentiality. There is also no confidentiality provided in Japan’s later adoption of the Model Law, although parties mostly choose the JCAA so opt-in to its Rules, which have somewhat expanded confidentiality obligations since 2014.

Another recent complication is growing public concern over arbitration procedures through (especially treaty-based) investor-state dispute settlement (ISDS), especially in Australia since an ultimately unsuccessful treaty claim by Philip Morris over tobacco plain packaging legislation (2011-15). Statutory amendments in 2018 reverse automatic confidentiality for Australia-seated ISDS arbitrations where the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. Concerns over ISDS may impede Australia enacting provisions for confidentiality of arbitration-related court proceedings, which could not be revised recently in New Zealand against the backdrop of its new government’s anti-ISDS stance.

Growing transparency around ISDS arbitration is welcome given greater public interests involved in such cases, but transparency should not be simply transposed into commercial dispute resolution through ICA as the fields are overlapping but distinct. Confidentiality in ICA has the disadvantage of exacerbating information asymmetry, making it harder for clients and advisors to assess whether particular arbitrators and lawyers provide value for money. But confidentiality allows arbitrators in particular to be more robust in proceedings and drafting rulings, thus countering the rise in ICA delays and especially costs. More transparency around ISDS, as well as initiatives like “Arbitrator Intelligence” and experiments in reforming Arbitration Rules (eg recently by the ICC), can help reduce information asymmetry for users anyway, while retaining various advantages of confidentiality particularly in ICA.

My draft paper, presented recently in Rome and for the USydney conference on Friday 15 November, elaborates these tensions between confidentiality and transparency in ICA and ISDS, focusing on Australia and Japan in regional context. Both countries still get few ICA cases but are trying to attract more [see the ABA inquiry report by Roger Gyles QC now available via https://austbar.asn.au/singapore-2019/papers]. They are taking somewhat different approaches to confidentiality in that field, while negotiating investment treaties that increasingly provide transparency around ISDS arbitration.

Nottage, Luke R., Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations (August 29, 2019). Sydney Law School Research Paper No. #19/52, August 2019. Available at SSRN: https://ssrn.com/abstract=3444692

ASEAN consumer law harmonisation: trends and prospects

[Written by Luke Nottage, Justin Malbon, Jeannie Paterson and Caron Beaton-Wells, for a posting on the blog of Cambridge University Press, which has just published the e-book version of our 8-chapter book on “ASEAN consumer law harmonisation and cooperation: Achievements and challenges”. It will be launched by NSW Chief Justice Bathurst and discussed, with “Contract Law in Japan” co-authored by Luke Nottage, on 27 November 2019 at HSF in Sydney.]

The ten states now comprising the Association of Southeast Asian Nations have collectively become a major part of the world economy, bringing together over 600 million people including a growing middle class. Yet they are highly diverse in socio-economic development, political structure and legal traditions, as outlined in chapter 1 of our book. What hope is there for real legal harmonisation or cooperation, especially for consumer protection?

The “ASEAN Economic Community” project significantly expanded intra-regional trade and investment liberalisation commitments, aiming to raise individual member states’ living standards. But this does not necessarily mean weakening consumer protection. Chapter 2 shows how and why ASEAN, through AEC Blueprints and related law reform and capacity-building initiatives, has tried to “trade up” to higher consumer law standards. It also applies other theoretical perspectives to explore the actual achievements of ASEAN, generally and for consumer protection.

Chapter 3 chronicles national enactments of consumer product safety laws and regulations, often as part of general consumer protection law statutes, as well as (often strict liability based) product liability laws, in three stages including the 2007-2015 AEC phase. It highlights regulatory gaps and demarcation problems among “line ministries” and newer consumer affairs regulators, as well as problems of access to justice for consumers seeking compensation for harm from unsafe products.

Chapter 4 focuses on consumer contracts, contrasting the widespread bans on misleading conduct with more variable treatment of unfair contract terms. A uniform approach is more unlikely but most existing laws may be sufficient if backed by effective education and enforcement.

Chapters 5 and 6 take a regional perspective in examining how ASEAN collectively can deal with pressing issues regarding consumer finance and professional health services. The challenge for consumer finance is having all states apply consumer protection measures at least against abusive lending practices, including debtor harassment. Another challenge reducing the number of people who are financially excluded. New technologies offer opportunities to achieve this, but ASEAN can strengthen knowledge and experience sharing networks amongst government agencies and other key players in this fast-evolving field.

ASEAN’s trade liberalisation agenda needs to be applied in a carefully nuanced way concerning professional health services. These services are not only a consumer product; access to health services is a basic human right. Attuning public policy to meet universal health objectives while also gaining the benefits of being subjected to competitive marketplace disciplines is tricky, especially when national budgets are highly constrained. The challenges may be exacerbated if members implement ASEAN’s commitment to mutual recognition of professional qualifications, so health professionals gravitate from poorer countries to higher income states.

Chapter 7 explores the development of competition policy and associated laws and enforcement institutions in ASEAN, at both the national and regional levels. It explains the interface between competition and consumer protection and examines the implications for substantive and institutional design and operation that have been increasingly recognised around the world.  Highlighting the general lack of coordination between competition and consumer protection endeavours in ASEAN to date, it poses some explanations for this and argues that a more coordinated and outcome-focused approach would assist in achieving the economic and social objectives of the AEC.

The book concludes by considering whether transgovernmentalism or “regional shared value” can promote more coordinated and effective consumer law, galvanising the cooperative and consensus-building approach traditionally preferred by ASEAN.

New Frontiers in International Arbitration for the Asia-Pacific Region (7): Australia’s parliamentary inquiries into ISDS in HK, Indonesia and UN/Mauritius treaties

Related to the joint HKU/USyd research project on Asia-Pacific international dispute resolution, and for possible discussion at the related 15 November symposium at USydney, recently I was asked to give evidence at Joint Standing Committee on Treaties inquiries into Australia’s ratification of a new FTA with Indonesia (including an Investment Chapter) and a new Investment Treaty with Hong Kong (alongside an FTA). A transcript of my one-hour Q&A with parliamentarians is here, and my Submission (No 6, including comparative table) is eg here. My key points favouring ratification are set out below, followed by a related news article from the Australian Financial Review on 26 August soon after the Sydney hearings.

I then provided a Submission to JSCOT for its inquiry into the “UN ISDS Convention”, for public viewing soon here. (My Submission appends a draft paper on confidentiality vs confidentiality in ISDS vs international commercial arbitration, focusing on Australia and Japan in regional context, which I will present at the USyd symposium on 15 November.) I also favour Australia quickly ratifying this framework convention so as to retrofit expansive transparency provisions to its many past treaties if counterparties (like Indonesia) similarly ratify this 2014 Mauritius Convention on Transparency in Investor-State Arbitration.

***

JSCOT Submission on Australia-Indonesia CEPA (FTA) & Australia-Hong Kong revised Investment Agreement: compared

(a) Both treaties are generally well drafted and balanced, in the familiar (US-inspired) CPTPP-like style, so should be ratified.

(b) The treaty with Indonesia is more pro-host-state (as indicated in red [in the comparative table]). This may be why Australia doesn’t seem to be proposing to terminate the existing BIT, but because AANZFTA also remains in effect with Australia (with clearer advance consent to ISDS arbitration[1] and significant pro-investor features), Australia should consider terminating the existing BIT (as it usually does when concluding broader new treaties).[2]

(c) The treaty with Indonesia helpfully innovates in allowing the host state to require the foreign investor to mediate before filing for ISDS arbitration.[3] This is useful in light of recent empirical evidence from settlement patterns, suggesting that there exists more scope than perceived for pre-arbitral settlements (perhaps therefore with the help of formal mediation)[4] to address concerns over arbitration costs.[5]

(d) It is disappointing that double-hatting by arbitrators is not expressly prohibited in either treaty (unlike under the CPTPP), nor that there is any mention of (even potential future) appellate review mechanisms for ISDS arbitrators. But these are still not deal-breakers.[6]

(e) Ratification is important for Australia to retain credibility in debating and promoting further reforms to ISDS in multilateral forums (especially UNCITRAL), and to encourage Indonesia as it re-engages with ISDS-backed treaties after terminating many old ones amidst pressures towards “economic nationalism”.[7]

[1] But cf Nottage, Luke R., Do Many of Australia’s Bilateral Treaties Really Not Provide Full Advance Consent to Investor-State Arbitration? Analysis of Planet Mining v Indonesia and Regional Implications (April 14, 2014). Transnational Dispute Management, Vol. 12, No. 1, pp. 1-18, 2015; Sydney Law School Research Paper No. 14/39. Available at SSRN: https://ssrn.com/abstract=2424987.

[2] See also Voon, Tania and Mitchell, Andrew D., Old Agreements Must Be Terminated to Bring Life to Investment (May 18, 2019). Available at SSRN: https://ssrn.com/abstract=3390677.

[3] Nottage, https://www.eastasiaforum.org/2019/05/25/settling-investor-state-disputes-asia-pacific-style/

[4] Ubilava, Ana, Amicable Settlements in Investor-State Disputes: Empirical Analysis of Patterns and Perceived Problems (March 13, 2019). Sydney Law School Research Paper No. 19/17. Available at SSRN: https://ssrn.com/abstract=3352181.

[5] Nottage, Luke R., In/Formalisation and Glocalisation of International Commercial Arbitration and Investment Treaty Arbitration in Asia (2014). Formalisation and Flexibilisation in Dispute Resolution, J. Zekoll, M. Baelz, I. Amelung, eds, Brill, The Netherlands, 2014; Sydney Law School Research Paper No. 17/47. Available at SSRN: https://ssrn.com/abstract=2987674.

[6] Nottage, Luke R. and Ubilava, Ana, Costs, Outcomes and Transparency in ISDS Arbitrations: Evidence for an Investment Treaty Parliamentary Inquiry (August 6, 2018). International Arbitration Law Review, Vol. 21, Issue 4, 2018; Sydney Law School Research Paper No. 18/46. Available at SSRN: https://ssrn.com/abstract=3227401.

[7] Nottage, Luke R. and Butt, Simon, Recent International Commercial Arbitration and Investor-State Arbitration Developments Impacting on Australia’s Investments in the Resources Sector (April 16, 2014). ARBITRATION AND DISPUTE RESOLUTION IN THE RESOURCES SECTOR: A COMPARATIVE PERSPECTIVE, P. Evans and G. Moens, eds., Springer, 2015; Sydney Law School Research Paper No. 13/71. Available at SSRN: https://ssrn.com/abstract=2340810.

***

Trade pacts needed amid global turmoil: Birmingham

Andrew Tillett

Political Correspondent Aug 26, 2019 — 5.28pm [Australian Financial Review]

Free trade deals with Indonesia and Hong Kong are needed to help protect Australia’s economy against the  worsening stand-off between the US and China, Trade Minister Simon Birmingham warns.

Ratcheting up pressure on Labor to support the FTAs, Senator Birmingham said the Indonesian deal was also critical to Australia’s “regional and strategic architecture”. Parliament’s treaties’ committee opened hearings on Monday into both deals, taking evidence from industry groups and trade experts.

The vexed issue of investor state dispute settlement [ISDS] clauses emerged, with the inquiry hearing the multitude of free trade agreements and investment treaties involving the same countries is adding to red tape for governments and businesses.

University of Sydney transnational law professor Luke Nottage told the committee the Indonesian FTA, a 26-year-old Indonesian bilateral investment treaty and the separate ASEAN-Australia-New Zealand FTA all contained ISDS provisions, which allow foreign companies to sue governments over policy decisions. Advertisement

“One thing is the extra complications and therefore potentially the costs involved in trying to work out what you can and cannot do as a host state if you try to change your regulatory system,” he said.

Professor Nottage said the Australian government was not proposing to eliminate the Indonesian bilateral investment treaty, despite doing so in the past when other treaties had been superseded by FTAs.

He suggested this might be because the Indonesian FTA is more in favour of the host state when in dispute with a company, whereas the older treaty was more pro-investor.

Professor Nottage said the older bilateral treaties had helped attract foreign investment in developing countries but newer trade deals sought to strike a better balance between the rights of investors and government autonomy, and the 1993 treaty should be scrapped when the Indonesian FTA was in place.

With Donald Trump escalating his trade war with China by urging US companies to withdraw from China, roiling global markets, Senator Birmingham said the region and the world had benefited from the opening up of global trade and deeper integration of investment flows.

He said the agreements with Indonesia and Hong Kong would continue to contribute to two-way growth in trade and investment.

Senator Birmingham said a raft of business groups wanted the agreements to “come into force as quickly as possible because it will allow those Australian businesses to diversify their exports, to have new market opportunities, and critically, to be more deeply engaged in the case of Indonesia, with a very close, very large, and rapidly growing economy”. Advertisement

He said Indonesia was projected by some to become the fourth biggest economy in the world and also had huge strategic importance to Australia.

“So against the backdrop of all of those points, I would hope that the Labor Party make it clear as quickly as possible that they will allow entry into force of this trade agreement with Indonesia which is so critical to our economic positioning as well as to our regional and strategic architecture,” he said.

Senator Birmingham said the government looked forward to the treaties’ committee report on the FTAs and would consider the inquiry’s findings in due course.

Labor is yet to say whether it will back the free trade agreements, with the inclusion of ISDS clauses a major sticking point. The party’s trade spokeswoman Madeleine King last week said Labor would let the treaties committee run its course before making a decision.

But Opposition Leader Anthony Albanese signalled his support for good ties with Indonesia and the trade opportunities by making his first overseas visit as Labor leader to Jakarta.

“Indonesia is central to the shape and character of our region,” Mr Albanese said.

New Frontiers in International Arbitration for the Asia-Pacific Region (6): 15 November symposium @USydney

As part of a research project jointly funded by HKU and USydney over 2019 (see background and many related postings via https://japaneselaw.sydney.edu.au), Sydney Law School will host a second symposium on Asia-Pacific business dispute resolution, all day on 15 November (the Friday before Australia Arbitration Week, this year in Brisbane), with support from CAPLUS, SCIL, TDM and various other ADR or international law related organisations. Registration and speaker bios are here, and presentation Abstracts and/or online publications are being uploaded below. During refreshments following symposium presentations and panel discussions, there will also be a book launch of Vivienne Bath and Gabriel Moens, Law of International Business in Australasia (Federation Press, October 2018).

Challenges and opportunities for Asia-Pacific international commercial arbitration symposium

15 November 2019

Building on Reyes & Gu (eds), The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia-Pacific (Hart, 2018), this symposium examines more recent challenges for international commercial arbitration (ICA), especially the proliferation of international commercial courts, the 2018 UN Convention on enforcement of mediated settlement agreements, and dispute resolution for the Belt & Road initiative. The main focus is on Hong Kong and Singapore (competing jurisdictions in the top “Stage 4” for ICA venues, as identified by Reyes & Gu), Australia (a “Stage 3” venue), China and Japan (“Stage 2” venues).

The symposium will also compare approaches in these jurisdictions to investor-state dispute settlement (ISDS). Building on Chaisse and Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018), participants will chart evolving treaty practices and high-profile ISDS cases (including eg in Indonesia), assess whether these do or might impact on public attitudes even towards ICA or other forms of arbitration, and explore alternatives or complements to ISDS.

Speakers:

  • Professor Shahla Ali, University of Hong Kong
  • Professor Vivienne Bath, University of Sydney Law School
  • Adj Prof Max Bonell, Henry Williams Lawyers & Sydney Law School
  • Professor Simon Bronitt, Dean, Sydney Law School
  • Professor Simon Butt, University of Sydney Law School
  • Professor James Claxton, Kobe University
  • The Hon Dr Clyde Croft AM SC, Supreme Court of Victoria
  • Daniel Forster, Clifford Chance & University of Sydney Law School
  • Dr Benjamin Hayward, Monash University
  • Brenda Horrigan, ACICA President & Herbert Smith Freehills
  • Dr Jeanne Huang, The University of Sydney Law School
  • Wilson Mbugua, University of Hong Kong
  • James Morrison, ACICA & Morrison Law
  • The Hon Kevin Lindgren AM QC FAAL, formerly Federal Court of Australia (in lieu of Roger Gyles AO QC, ABA rapporteur for inquiry available via https://austbar.asn.au/singapore-2019/papers)
  • Professor Luke Nottage, University of Sydney Law School
  • Jonathan Redwood, Banco Chambers
  • Yi Tang, University of Hong Kong
  • Dr Nobumichi (Nobu) Teramura, University of Adelaide
  • Professor Leon Trakman, UNSW
  • Professor The Hon Marilyn Warren AC QC, former Chief Justice of the Supreme Court of Victoria

VIEW THE DRAFT PROGRAM (as at 9 August 2019; update via Registration webpage)

ABSTRACTS:

Ali, Shahla, “ICA and ISDS Developments in Hong Kong in the Context of China’s Belt and Road Initiative” (September 13, 2019). Available at SSRN: https://ssrn.com/abstract=3453061
This article examines the impact of both the Belt and Road Initiative and the UNCITRAL Model Law on International Arbitration (the Model Law) on both international commercial and investor state arbitration practice in Hong Kong. Given the significance of Hong Kong as a gateway to OBOR project financing and logistics, understanding current dispute resolution policy is critical for gaining insights into China’s approach to the resolution of OBOR disputes. Measures taken to modernize the practice of arbitration including training programmes and legislative reforms are examined with a view to gaining insights into challenges and future developments.

Claxton, James M. and Nottage, Luke R. and Teramura, Nobumichi, “Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream?” Journal of Japanese Law, Issue 47, 2019; Sydney Law School Research Paper No. 19/01. Available at SSRN: https://ssrn.com/abstract=3299097
The Japanese government, supported by various stakeholders, has recently been attempting to develop Japan as another regional hub for international business dispute resolution services. Tracking this development is important for both theoretical and practical reasons. How it unfolds should reveal which of various theories for explaining Japanese law-related behaviour have more traction nowadays. Assessing the new initiatives is also important for legal practitioners and others interested in the practical question of where to arbitrate or mediate cross-border business disputes. This paper therefore reports on current attempts to promote existing and new international arbitration centres in Japan as well as the recent establishment of the Japan International Mediation – Kyoto, in the context of intensifying competition from other regional venues for dispute resolution services. [Our presentation also updates on the Japan-Korea trade and investment tensions that escalated from mid-2019, and the various dispute resolution options that could be engaged.]

Teramura, Nobumichi, Luke Nottage and James Morrison, “International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards” (updated June 2019)
Geographical remoteness has not prevented Australia from pursuing its ambition to become a major hub for international commercial arbitration (ICA). While regional competitors in the Asia-Pacific region such as Singapore and Hong Kong have already achieved great success in the arbitration world, Australia’s ‘Tyranny of Distance’ requires extra efforts to attract ICA cases. Recent marketing from the Australian government emphasises (1) a harmonised legal framework for ICA in line with international standards; (2) sophisticated arbitration institutions; and (3) some of the world’s leading arbitration practitioners.
While these factors do reveal strong potential to attract ICA cases, to ensure that this goes beyond a mere possibility, the Australian government and judiciary are making quite concerted broader efforts. The former has recently become more vigorous in marketing Australia-based ICA in and out of the country. The latter has generally tried to issue pro-arbitration judgments particularly over the last ten years, and in public speeches or publications leading judges have been actively summarising and promoting Australian developments both domestically and world-wide. However the court system has structural problems, due to the shared ICA jurisdiction of State and Territory Courts alongside the Federal Courts, compared to the unitary system in Hong Kong and Singapore. There are also persistent delays in court-related ICA matters under the IAA, even in the Federal Court of Australia. Nonetheless, perfection is never attainable.
The rest of this paper argues that Australia has significantly improved legal environment for ICA in line with international standards, focusing on the main topics identified for a wider cross-jurisdictional research project: (1) arbitrator bias; (2) conflicts of interests; (3) procedural irregularities and arbitrator’s misconduct during proceedings; (4) arbitrability (objective arbitrability) (5) judicial interpretation of arbitration clauses (subjective arbitrability); and (6) enforceability of arbitral awards (especially regarding public policy).

Nottage, Luke, “Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations” (August 29, 2019) Sydney Law School Research Paper No. #19/52, August 2019. Available at SSRN: https://ssrn.com/abstract=3444692

Both Australia and Japan lie geographically on the periphery of the Asian region, where international arbitration has been burgeoning especially over the last 15 years. Both countries have struggled to attract significantly more arbitration cases, despite quite extensive efforts (especially by Australia); most cases still go to Hong Kong, Singapore and (especially where local parties are involved) China. This is despite increasingly strict confidentiality obligations being introduced through the rules of the major arbitration institutions, and/or legislation, in Japan and especially Australia. Although aiming to meet the usual expectations of businesspeople and their legal advisors in international commercial dispute resolution, these changes may be “too little, too late”. By contrast, transparency obligations have been added increasingly around the investor-state dispute settlement (ISDS) option included in almost all investment treaties concluded respectively by Australia and Japan. This tendency arguably reflects growing concerns about the public interests implicated by ISDS cases (especially in Australia). Australia has gone the next step of revising its legislation in 2018 to automatically exempt some investment treaty arbitrations from the confidentiality obligations otherwise imposed by default on parties and others in Australia-seated international arbitration proceedings since 2015. Japan does not need to, because its legislation does not apply confidentiality to arbitrations by default. This paper explores possible tensions between these two trajectories in each country. The lessons may be particularly interesting for other jurisdictions (perhaps like Italy) interested in how best to promote and attract international arbitration cases amidst evolving expectations in business and wider communities. The tensions may also influence the EU’s ongoing negotiations for investment protection treaties with respectively Australia and Japan.

Hayward, Ben, “Arbitration in Australia – Efficient, Effective, Economical? A Retrospective”
On 4 December 2009, Australia’s arbitration profession met in Melbourne for a conference hosted by ACICA – the Australian Centre for International Commercial Arbitration – Australia’s leading international arbitral institution. The conference was titled ‘International Commercial Arbitration: Efficient, Effective, Economical?’ – reflecting efficiency, effectiveness, and economic viability’s status as important concerns held by the profession.  Australia’s arbitration laws have been amended many times since then, with a number of significant cases also having been handed down since that time.  One decade later, it is an apt time to ask whether post-2009 developments in Australia’s arbitration laws have addressed these three concerns, and if so, to what extent.  This is the analysis undertaken by this project, which draws upon ten years of developments in Australian arbitration law to identify implications for future law reform in this area.

Warren, Margaret and Croft, Clyde, “An International Commercial Court for Australia: An Idea Worth Taking to Market”

[Extracted from Conclusion of the draft paper:] When the significant trade agreements negotiated by the Federal government are considered with respect to Asia, especially China, and the Pacific, the opportunities offered by an Australian international court are almost boundless. Indeed, there is a symmetry in the establishment of an Australian court which would complement the trade agreements. The proposal for an international commercial court for Australia cannot be left to the Courts themselves or the legal profession to develop and agitate. The experiences of Singapore, Dubai, Abu Dhabi, and indeed, London demonstrate that it is vital for there to be government interest and support for such a proposal.

It is also important to be reminded that a proposal for an Australian court occurs within an international context [… including also] an important legal institute … established in the Asian region in which Australia is an active participant: The Asian Business Law Institute …

A stronger contribution can be made to the rule of law by courts working together than if they are working separately. The early 21st Century is being defined by something of a return to internationalisation and globalisation, although the form and forms that will take remain to be seen. It is for us to shape those forms in the capacity we can and to make contributions towards global stability, harmonisation and due recognition of the law in the context of commercial enterprise. These common purposes, as well as quality of justice and the manner of its administration provided at commercial courts and arbitral tribunals, international and domestic, should be promoted and indeed marketed.

Trakman, Leon “An Australian Perspective on Investment Treaty Negotiations and Investment Arbitration“

Notwithstanding the vision of model Investor-State Dispute Settlement (ISDS) provisions across the international community of states, the obstacles are profound.  Supporters propose a cost-benefit analysis to determine the provisions’ utility.  But states are likely to diverge over the costs and benefits of such a multilateral instrument  Material factors will include the stages of development of the states in issue, the kinds of foreign investors (likely) attracted, and alternatives to investor-state arbitration (including recourse to host state courts). Prospects for a model investment treaty that applies internationally are doubtful at best.  Indeed, states that already have their own models, such as the US and China, agonise over their content when revising them, including in relation to ISDS. 

Notably, too, some (especially developing) states that have lost arbitration claims brought by foreign investors have forsaken ISDS in favour of leaving recourse to domestic courts.  Some Latin American states, such as Ecuador and Bolivia, adopted this position after massive losses to foreign investors from developed countries.  More recently, developed states have displayed wariness of ISDS. Australia, unlike Germany and Canada, has never lost an investor-arbitration claim – including the ISDS claim brought by Philip Morris. But it briefly forsook ISDS arbitration a decade ago under a Labour Coalition Government, partly due to a recommendation of Australia’s Productivity Commission.  A Liberal Government soon reverted to a case-by-case approach towards ISDS, excluding it from a new bilateral treaty with Japan (although ISDS is now available via CPTPP) and PACER Plus, while including ISDS in treaties with Korea, China, and (updated) Singapore. Australia’s most recent but as yet unratified treaties, notably with Hong Kong and Indonesia, also include ISDS.  What is distinctive in these various treaties providing for ISDS is how that choice is expressed.

This presentation will explore ISDS in Australia’s bilateral treaties. It will identify disparate provisions, the manner in which they are manifest, and the reasons for and significance of their adoption.  It will explore some perceived costs-benefits underlying such divergence over ISDS.  It will evaluate the rationale that Australian seeks to shield its outbound investors from the domestic courts of its treaty partner states, while protecting itself from excessive claims by their inbound investors.  It will critically evaluate the proposition that ISDS may be more expeditious and transparent than proceeding before domestic courts.  [For an earlier paper focusing on the Asia-Pacific, see here.]

Tang, Yi, “Applying PRC’s BITs in Hong Kong and Macao SARs: Contradictions Between the Chinese Government and Investment Tribunals”

In recent years, it is observed that the investor-state tribunals have more frequently encountered a difficult problem of the territorial application of investment treaties, especially bilateral investment treaties (BITs). Among all the investment treaty arbitration cases concerning the application of BITs concluded by the People’s Republic of China (PRC), the cases of Tza Yap Shum v Peru and Sanum Investment Ltd v Laos stand out due to the special status of China’s Hong Kong and Macao Special Administrative Regions (SARs). In these two cases, one key dispute is whether PRC’s BITs can be applied to Hong Kong or Macao SARs. And the tribunals and courts in both cases reached the conclusion that PRC’s BITs do apply to Hong Kong or Macao, which has presented a sharp contrast with the Chinese official stance. Against this background, this paper intends to analyze how and why the international investment tribunals’ decisions contradict from the Chinese official position. It will first examine the two controversial cases by teasing out the opposing arguments and standpoints, then it will analyze what might explain the confrontation between the positions held by the Chinese government and the investment tribunals respectively. What are the driving forces behind the two contradictory stances? This paper attempts to conduct a relatively comprehensive analysis on this issue by delving into the reasons from historical, legal, political and economic perspectives. This analysis hopes to offer an innovative prism through which we can gain some new insights into the question of applying PRC’s BITs to SARs. It is also of value to the future implications and policy suggestions as to what China should do to solve the current dilemma, and to prevent future confusion. 

Mbugua, Wilson, “Dispute Resolution in International and Bilateral Investment Agreements” (earlier draft paper with Shahla Ali at: https://ssrn.com/abstract=3168996)

Investor-state dispute settlement (ISDS) claims have mainly centred on impairment of investments by the host state in banking, infrastructure development, mining, among other sectors. Intellectual properties as a form of investments are protected by a considerable number of bilateral investment treaties, however, they have rarely been invoked in ISDS claims until recently. This paper sketches the fabric and the structure ISDS in bilateral investment treaties and how it is applied in practice. Secondly, it will examine how arbitration tribunals have dealt with the subject of intellectual property rights by focusing on two standards of protections- expropriation and fair and equitable treatment. Lastly, the paper will conclude with a discussion on the criticism facing ISDS and possible paths for reforms.   

Huang, Jie (Jeanne), “Data Protection in Investment Arbitration: Privacy, Confidentiality and Transparency“

Two recent cases, Tennant Energy v Canada and Elliott v. Korea, demonstrate that the booming domestic and regional data protection laws have brought real and significant challenges to investment arbitration. The unprecedented but unclear role of data protection in investment arbitration requires serious attention from both academic and practising communities. This paper intends to address four issues. Firstly, how to determine whether an investment arbitration is subject to a domestic or regional data protection law? Second, suppose that a domestic or regional data protection law (e.g. GDPR) should be applied to an ISDS, what are the similarities and differences between the concept of ‘privacy’ under the data protection law and the general assumption that arbitration proceedings are both ‘private’ and ‘confidential’? The third issue is the interplay between the immunity under public international law and the privacy obligation under a domestic and regional data protection law. Last but not least, may the transparency obligation under the UN Convention on Transparency in Treaty-based Investor-State Arbitration (now being considered by the Australian Parliament) conflict with the privacy obligation under a domestic or regional data protection law? If so, how to resolve the conflict?