New Frontiers in International Arbitration for the Asia-Pacific Region (1): HKU/USyd research project

The central administrations of the University of Hong Kong and the University of Sydney have provided A$17,000 each for this joint research project over 2019, centred around two conferences at HKU on Monday 15 July and at USydney on Monday 18 November. The lead co-investigators are respectively A/Prof Shahla Ali and Prof Luke Nottage. Below we set out the project’s Aims, Significance and Outcomes. Further updates are expected on this Blog.

This 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, we will build on Anselmo Reyes & Weixia Gu (eds), The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia-Pacific (Hart, 2018). That was edited by HKU Co-investigators from a conference held at HKU in 2015 and included chapters by the PIs on Hong Kong and Japan. This new project will examine more recent challenges for ICA, especially the proliferation of international commercial courts (including Singapore) and the 2018 UN Convention on enforcement of mediated settlement agreements, as well as competition now among regional centres to become attractive venues for resolving “Belt and Road” disputes [as outlined recently by Gu]. To keep the project manageable, we will focus 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 project will also compare approaches in these jurisdictions to ISDS. This 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], we will chart evolving treaty practices and high-profile ISDS cases, 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 arbitration.
ICA is already “big business” for leading regional venues such as Hong Kong. But other jurisdictions are seeking to emulate their success, such as 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 (establishing new arbitration 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. Jurisdictions like Hong Kong and Australia therefore need to watch how leaders like Singapore are adapting 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 may do so in the Australia – Hong Kong Free Trade Agreement (close to completion), 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.
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.
(i) In the first stage, this project will engage early-career researchers to build capacity together with more experienced scholars at or affiliated with HKU and USyd, to track these recent challenges and opportunities for Asia-Pacific ICA and ISDS arbitration. In particular, key ICA developments will be summarised by Nobumichi Teramura (who recently completed his UNSW PhD thesis on lex mercatoria in ICA, with Prof Nottage as external associate supervisor, and co-authored the Japan chapter in the Reyes & Gu volume). ISDS developments will be summarised by Ana Ubilava (USyd PhD student, supervised by Nottage, focusing on partly empirical analysis related to investor-state mediation). HKU will also engage a postgraduate student or early-career researcher to help research developments in both rapidly-evolving fields. Some of their summaries will be disseminated publically through widely-accessed websites such as the Kluwer Arbitration Blog. They will also provide more targeted research assistance to the two co-PIs plus these 6 professors as Co-investigators:
– at HKU: Prof Anselmo Reyes (retiring soon from HKU but remaining an occasional Visiting Professor, Judge of the Singapore International Commercial Court, and advisor to the new Japan International Mediation Centre – Kyoto) and A/Prof Gu Weixia (co-editor with Prof Reyes);
– at USyd: Prof Simon Butt (who wrote on Indonesia for the book by Profs Gu and Reyes), Prof Vivienne Bath and A/Prof Jeanne Huang (experts in international business law, especially regarding China), and Prof Chester Brown (expert in ICA and international investment law)
(ii) In the second stage, draft papers by these professors and the PIs will be prepared for presentation at public conferences held in Hong Kong and Sydney. The RAs / early-career researchers will be involved in the respective local conferences. If our application is successful, we expect to hold these events at and/or with promotional support from major arbitral institutions (eg HKIAC and ACICA) and/or law firms, as in the past.
(iii) In the third stage, based on feedback from the conference presentations and with further assistance from the research assistants, the co-PIs and all or some CIs will finalise sole- or co-authored articles for submission to leading refereed journals such as the Asian International Arbitration Journal. Pre-publication versions of their papers will be publically available via the HKU and USyd Law School series on
[A draft paper on Japan is already available as follows:
Claxton, James 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. at SSRN:]