5 October, 2018
The last several years have witnessed the proliferation of international commercial courts. Despite their “international” moniker, these courts sit wholly within, and are products of, domestic legal regimes, and they apply municipal law.
The newest additions are in China. On 1 July 2018, the Regulations of the Supreme People’s Court on Certain Issues Concerning the Establishment of International Commercial Courts came into effect, setting out the scope and operation of two new such courts: the China International Commercial Courts or CICCs. The CICCs are a bold innovation, seeking to provide an alternative international dispute resolution mechanism for disputes arising out of President Xi Jinping’s Belt and Road Initiative.
But the CICCs are far from the first of their kind. Launched in 2015, their more developed Asian cousin – the Singapore International Commercial Court (SICC) – enjoys a healthy docket of cases transferred from Singapore’s line commercial courts. Similar courts exist in Dubai, Qatar and Abu Dhabi – and there are plans for others in Europe.
What does this mean for commercial parties? First and foremost, it means more choice – a fuller suite of dispute-resolution options for commercial parties.
Differences
International arbitration is well-established as the dominant mode of resolution of cross-border commercial disputes. With the emergence of international commercial courts, it is important to understand key differences between arbitration and dispute resolution before those courts. We identify several.
Enforceability
First, given the international character of the CICCs and the SICC, judgments from those courts may need to be enforced abroad.
Being part of their respective domestic legal systems, judgments of the CICCs and the SICC enjoy the same status as judgments of the Supreme People’s Court of China and the Supreme Court of Singapore, respectively.
As such, the prospect of success will depend on the available mechanisms for enforcement of foreign court judgments, including any applicable treaties the domestic court’s State has with the foreign State.
For example, Chinese court judgments may be enforced in Hong Kong under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597). For SICC judgments, Singapore is a party to the 2005 Hague Convention on Choice of Court Agreements, a treaty requiring State parties to recognise and enforce each other’s judgments when it applies.
China is a signatory to the 2005 Hague Convention on Choice of Court Agreements but has yet to ratify it. There are reports that such rati cation may be imminent. China is also said to be actively negotiating the Hague Convention on the Recognition and Enforcement of Foreign Judgments to improve the enforceability of its court judgments.
In comparison, as is well-known, awards rendered by arbitral tribunals seated in a New York Convention State may be enforced in any of the more than 150 States that are party to the New York Convention. This is the bedrock of the dominance of international arbitration, and undoubtedly provides a greater level of certainty of enforceability of an arbitral award.
In practice, of course, many parties voluntarily comply with awards and judgments – and that is a factor sophisticated parties will need to weigh in choosing between arbitration and an international commercial court.
Party autonomy
There is also a di erence in the autonomy a orded to parties in international commercial courts as compared to arbitration. Autonomy – and the control it entails – is often a major appeal of arbitration.
While the CICCs Regulations and the SICC Practice Directions are tailored to international commercial disputes, their position within broader local court contexts necessarily limits their exibility.
For example, SICC proceedings ultimately defer to the Singapore Rules of Court, meaning that, while parties can apply to replace domestic court rules of evidence with others, or to determine questions of foreign law on the basis of submissions instead of proof, the outcome is ultimately out of their hands.
At present, the CICCs are even more restrictive: the language of proceedings is limited to Chinese, as are the procedural law and eligible judges. Parties can also only be represented by lawyers quali ed in Chinese law.
More broadly, parties choosing to submit their disputes to the CICCs or SICC will surrender control over the identity of their decision-makers. This distinction – the party autonomy that is characteristic of international arbitration – should serve as an incentive to those active in arbitration to take advantage of its potential exibility. In many cases, parties and counsel follow the ordinary course, ghting an arbitration as they would a state-court litigation, leaving exibility and party autonomy as theoretical benefits.
The emergence of international commercial courts should encourage arbitrators and arbitration counsel to tailor the arbitral process, affirmatively choosing from a limitless menu of options:
- considering issues for preliminary determination;
- having more assertive arbitrators give procedural directions earlier and more frequently; and
- having preliminary oral argument long before the final merits hearing, so issues begin to crystallise earlier.
At the same time, it is worth noting that the CICCs and the SICC judges do maintain an international element – SICC judges include highly regarded international jurists, and the CICCs are supported by an International Expert Committee comprised of foreign experts.
Litigation benefits
The above-mentioned restrictions posed by international commercial courts are tempered by the broader options they afford due to their litigious roots.
Importantly, it is much easier to join third parties to cases, as compared to the frequent inability of arbitrators in multiparty disputes to join all relevant parties. Judges have greater enforcement powers within proceedings, whereas arbitrators can encounter diffculties ensuring compliance with their procedural orders. SICC judgments are also appealable (unless parties have agreed otherwise) and CICC parties may, in accordance with the Civil Procedure Law, “apply to the main body of the Supreme People’s Court for a retrial of a legally effective judgment, ruling or conciliation statement made by the International Commercial Court”.
More broadly, international commercial courts may allow greater convergence of procedural and substantive commercial law, and hence more certainty, through developing consistent jurisprudence.
In contrast, unpublished awards are the norm in international commercial arbitration, which – as Lord Thomas's controversial 2016 speech suggested – arguably makes developing consistent jurisprudence diffcult (Lord Thomas’s “wrong turning” to arbitration over litigation).
Harmony?
International commercial courts can be seen as complementing, rather than competing with, international arbitration. For example, under the SICC rules, parties may submit international arbitration-related cases to the SICC, including enforcement of international arbitration agreements or arbitral awards.
The SICC is particularly appropriate to hear cases involving issues related to international arbitral awards because of its international character, including international judges who may have particular expertise in the law governing the underlying dispute and its exible procedural rules.
There are also opportunities for collaboration between international commercial courts and arbitral centres. For the CICCs, a specific framework of collaboration is envisaged. Article 11 of the Regulations calls for coordination with international commercial arbitration and mediation institutions to make the CICCs a “one-stop” international commercial dispute resolution platform.
Specifically, the Supreme People’s Court of China seeks to “link” mediation, arbitration and litigation. When a dispute is referred to the CICCs, the parties will be given a choice between mediation, arbitration and litigation. If the parties choose mediation and come to a mediation agreement, the CICCs may issue a judgment based on that mediation agreement and thereby convert it into a binding judgment. If the parties choose arbitration, it is envisioned that the parties may seek interim measures from the CICCs or apply to the CICCs to set aside or enforce the arbitral award.
It is unclear which mediation and arbitration institutions will be “linked” with the CICCs. Commentators have suggested that they may be limited to domestic rather than foreign institutions.
Currently, there is no guidance on how this collaboration will be implemented and as such, realising this goal will likely take time.
Nonetheless, the endorsement of cross-institutional collaboration speaks to broader opportunities for achieving harmony, rather than discord, among international dispute-resolution institutions.
More fundamentally, the emergence of international commercial courts should contribute to cross-pollination between and among diverse dispute resolution options, encouraging each to innovate.
By Nicholas Lingard, Partner, and Kate Apostolova, Senior Associate at Fresh elds, Singapore
The authors thank Sophie Ryan for her excellent assistance with this article.
For further information, please contact:
Ruth Stackpool-Moore, Director of Litigation Funding / Head of Harbour Hong Kong
ruth.sm@harbourlf.com
