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Reform of the arbitration law in Myanmar - the wait is over

 

02 February 2016

​On 5 January 2016, the Parliament of Myanmar passed its new and much awaited Arbitration Law. This Arbitration Law follows and gives effect to Myanmar’s ratification of the New York Convention in April 2013.

One of the aims of the Arbitration Law, which is currently only available in Myanmar language, is to encourage the resolution of disputes by arbitration. Many of its provisions are derived from the UNCITRAL Model Law, and the Arbitration Law makes clear that only a handful of its provisions would apply in a foreign seated arbitration.

The implementation of the Arbitration Law represents a positive development and could help improve the appetite for investments in Myanmar. Along with Myanmar’s accession to the New York Convention, the Arbitration Law reflects the Myanmar Government’s focus on improving the process of dispute resolution and thereby the investment climate in Myanmar.

At the request of the Supreme Court of Myanmar, Allen & Overy participated in a review of the Myanmar arbitration legislation. A team at Allen & Overy reviewed the Myanmar Arbitration Bill and offered suggested revisions and commentary. The aim of this process was to import various provisions of the UNCITRAL Model Law into Myanmar’s arbitration legislation and to align the legislation with those of other prominent arbitral jurisdictions.

Introduction

In April 2013, Parliament of the Republic of the Union of Myanmar (Myanmar) ratified the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958 (the New York Convention), becoming the 149 party to the Convention. Our previous update on dispute resolution in Myanmar (click here to read) addressed this development and the changes that this could bring to the landscape of dispute resolution in Myanmar. Since then, the Myanmar Supreme Court published a draft Arbitration Bill in May 2014 for commentary, with a view to speedily enacting legislation to give effect to the New York Convention. Investors and bystanders alike have been watching this development with keen interest, and will be comforted to know that on 5 January 2016, the Parliament of Myanmar passed its new Arbitration Law, Union Law No. 5/2016 (the Arbitration Law).

As set out in its "Objectives" (at Section 4), this Arbitration Law is aimed at the just and effective settlement of business and commerce disputes of a domestic or international nature, the encouragement of the resolution of disputes by arbitration, as well as the recognition and enforcement of foreign awards.

Many provisions of the Arbitration Law find their roots in the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law) or the arbitral legislation of other jurisdictions which have themselves followed the UNCITRAL Model Law. Importantly, this legislation makes clear that not all of its provisions apply where the place of arbitration is outside Myanmar. We have analysed this and some other pertinent provisions of the Arbitration Law below.

The Arbitration Law as enacted is currently available only in the Myanmar language. Our review of the same is based on our translation of the Arbitration Law, and thus the analysis below is founded upon text that may differ from the precise formulation of words adopted in Myanmar language. We understand that Myanmar will at some future point in time release an official English version of the Arbitration Law, albeit the Myanmar version of the Arbitration Law would prevail (according to the Constitution of Myanmar).

Background to the Arbitration Law

By way of background, the legal regime in Myanmar is descended from the English common law system, but has seen little material development since independence in the late 1940’s. Prior to the Arbitration Law, domestic arbitration in Myanmar was governed by the Myanmar Arbitration Act of 1944 (the 1944 Act) which was outdated and required modernisation. In light of the circumstances, the much awaited enactment of the Arbitration Law, which repeals the 1944 Act, is a welcome and positive development. As to foreign seated arbitration or foreign awards, until the enactment of the Arbitration Law the only legislation in force was the Myanmar Arbitration (Protocol and Convention) Act 1937 (the 1937 Act), which governed awards made under the Convention on the Execution of Foreign Arbitral Awards of 1927 (the Geneva Convention). Although the enactment of the Arbitration Law now provides a comprehensive regime for the enforcement of a foreign award, it is unclear what the position will be with respect to foreign awards rendered in non-New York Convention States (given the definition of a "foreign arbitral award" is an award made in a New York Convention State other than Myanmar).

Analysis of select provisions of the new Arbitration Law

  • Domestic vs. international arbitration: One of the key concerns of arbitration-related court proceedings is the multiplicity of proceedings. This is usually the case where the party resisting arbitration proceedings or court proceedings at the seat of arbitration initiates a parallel proceeding in another jurisdiction as either a delaying tactic or in the hope of being granted the relief sought by it where the tribunal or courts of the seat will unlikely do so. Recent jurisprudence has shown that the arbitral legislation of various jurisdictions is not clear enough as to when its courts assert jurisdiction even where the seat is in another country. Myanmar is off to a good starting point, having adopted in this regard language similar to that contained in the UNCITRAL Model Law. Section 2 of its Arbitration Law endorses a distinction between domestic arbitration – to which the whole of the Arbitration Law applies – and foreign arbitration – to which only certain relevant provisions apply. This distinction suggests on its face that for those involved in a foreignseated arbitration with a Myanmar connection there should be little room for the Myanmar courts to import domestic aspects of the Arbitration Law into their dispute.
  • Place vs. location of arbitration: Of utmost importance in the section on definitions (Section 3) is the definition of “the place of the arbitration”, which is defined as the legal seat of arbitration designated by the parties to the arbitration agreement, by an institution, or by an individual or an arbitral tribunal authorised by the parties to the arbitration agreement. Similarly, Section 23 sets a clear distinction between place (i.e. legal seat) of arbitration and location (i.e. venue) of arbitration. This definition of "place" and distinction between "place" and "location" has the important consequence of ensuring that the parties’ choice of place/seat is not undermined by a finding that such choice was merely intended to dictate the location of hearings. It avoids parties having to relive the battle of words before the Myanmar Courts, as many have endured in various other jurisdictions.
  • Interim relief from courts: Section 11 gives the Myanmar courts jurisdiction to grant interim relief, in both domestic and foreign arbitration proceedings, to decide matters relating to obtaining testimonies, protecting evidence, preserving custody of assets which are subject to a dispute, etc. The courts shall only exercise this power when an arbitral tribunal cannot do so or cannot do so effectively. In addition, Section 30 gives the
    Myanmar courts jurisdiction to rule on matters relating to the taking of evidence in bothdomestic and foreign arbitration proceedings. These provisions are consistent with thepredominant UNCITRAL Model Law jurisdictions whose courts are entitled to grant interimrelief in both domestic and foreign seated matters. Further, in respect of Section 11,parties may choose to opt out of this provision by agreeing otherwise.
  • Appointment of arbitrators: In relation to the appointment of arbitrators, Section 13 provides that where a party seeks recourse from the courts to make an appointment to the arbitral tribunal, it shall do so by request to the “Chief Justice”. As to which Chief Justice the request should be made to, a distinction is made between domestic and foreign arbitral proceedings. In respect of domestic proceedings, it is a State Chief Justice or Division Chief Justice who will make the relevant appointment. In respect of foreign proceedings, it is the Chief Justice of the Republic of the Union of Myanmar who has the power to make the relevant appointment.
  • Immunity of arbitrator: Section 20 contains an interesting provision which states that provided an arbitrator carries out his mandate with “reasonable care” he shall be immune from any liability relating to the carrying out of his mandate. This provision touches upon the much debated topic of the extent to which an arbitrator can be reprimanded for failing to perform his/her duties or being absent for a prolonged period of time. Whilst this provision makes clear that an arbitrator cannot be reprimanded if he/she has acted with “reasonable care”, parties may find themselves having to argue the age old question of what is considered "reasonable".
  • Enforcement of interim award, order or direction: Section 31 - applicable to domestic and foreign matters - is important, as it gives effect to an interim arbitral award, order or direction as if it were an order or direction of the Court. Again this is a provision which various arbitration-friendly jurisdictions have adopted so as to provide parties with reassurance that relief granted by an arbitral tribunal bears equal weight to that granted by the courts. However, it remains to be seen whether this will include orders or decisions of emergency arbitrators, given that there are no provisions in the Arbitration Law on emergency arbitrators.
  • Governing law of domestic disputes: In respect of domestic disputes, it is noteworthy that Section 32 dictates that a domestic seated arbitral tribunal “shall” decide a dispute in accordance with Myanmar law. Some other jurisdictions have followed the same approach.
  • Appeal on a point of law: Interestingly, in respect of domestic seated disputes, the Arbitration Law permits parties to appeal on a preliminary point of law during the course of the arbitration (Section 39) or on a point of law arising from the award (Section 42). In light of Section 32 above, this must necessarily mean that the point of law would be one of Myanmar law.
  • Enforcement of foreign awards: Chapter X of the Arbitration Law deals with the enforcement of foreign awards. This largely follows the UNCITRAL Model Law precedent, with minor deviations. One not-so-minor deviation arises in one of the grounds for refusal of enforcement, at Section 46(c)(ii). This ground would, by Model Law terms, be referred to as the "public policy" ground, i.e., where an arbitral award could be refused recognition or enforcement if the same would be contrary to the public policy of the relevant State. However, this provision in the Arbitration Law adopts the term “national interests”, as literally translated from Myanmar language, instead of public policy. There is no definition offered for this term, and it therefore remains to be seen whether "national interests" would in effect have the same meaning as "public policy". The same terminology appears in the provision for challenges to domestic awards (Clause 41).
  • Prospective application: The Arbitration Law contains various provisions which address its prospective application (in whole or in part): (i) Clause 48 states that Chapter X of the Arbitration Law does not affect a situation where a party has the right to enforce a foreign award made prior to the enactment of the Arbitration Law (nor does it affect a situation where a party’s right to enforce an award has become invalid); (ii) Chapter X is expressed not to apply to the 1937 Act (Section 49), i.e., the enactment of the Arbitration Law does not interfere with awards which would fall within the regime of the 1937 Act (although in practice the 1937 Act is obsolete); (iii) this Arbitration Law is not to apply to arbitration proceedings commenced prior to its enactment, and where proceedings have already been so commenced, the parties must continue to conduct the arbitration in accordance with the law agreed in the arbitration agreement (Clause 58).

Conclusion

The enactment of the Arbitration Law brings with it a positive ray of hope in Myanmar and in the arbitration community globally. It demonstrates Myanmar’s willingness and enthusiasm to position itself as an arbitration-friendly jurisdiction. The precise meaning and effect of some of the provisions of the Arbitration Law, and the approach of the Myanmar courts towards arbitration, will remain to be seen in practice. For the time being, foreign investors involved in a foreign seated arbitration with a Myanmar connection may seek reassurance from the noninterventionist approach of the Arbitration Law.

 

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