Commercial Arbitration EuroCham Breakfast Talk InterContinental Hotel - Phnom Penh Presented by Alex Larkin | 22 September 2015

2 Presentation Outline 1 1 What is Commercial Arbitration? 2 2 Why Commercial Arbitration? 3 3 Comparing Court Action to Arbitration 4 4 Things to be Aware of

3 Alternatives for Resolving Commercial Disputes -Mediation -Court Action in Cambodia -Foreign Court Action -Commercial Arbitration Resolving Commercial Disputes

4 Mediation -Mediation is an informal process -The parties select one or more persons to mediate their dispute -Mediators typically seek a compromise solution, rather than forming a view as to which party is right and which party is wrong -Mediation only works if the parties are generally cooperative, which often is not the case Resolving Commercial Disputes

5 Court Action in Cambodia -Cannot research or rely on prior court decisions -Lack of predictability of outcome -Inefficiencies Resolving Commercial Disputes

6 CountryRank (out of 189 Countries)Key Indicators Cambodia 178 Days to Resolve: 483 Cost (% of claim): Lao PDR 99 Days to Resolve: 443 Cost (% of claim): 31.6 Myanmar 185 Days to Resolve: 1,160 Cost (% of claim): 51.5 Vietnam 47 Days to Resolve: 400 Cost (% of claim): 29.0 Enforcing Commercial Contracts in Court World Bank 2015 Survey The highest ranked jurisdictions are Singapore at No. 1, Luxembourg at No. 2, Iceland at No. 3, South Korea at No. 4

7 Foreign Court Action -In theory, Cambodia recognizes foreign court judgments, but only where there is an agreement between Cambodia and the foreign jurisdiction where the court judgment is issued for mutual recognition of court judgments -To date, Cambodia has not entered into an agreement with any other country for mutual recognition of court judgments -Therefore, foreign court judgments cannot be enforced in Cambodia Resolving Commercial Disputes

8 Arbitration Arbitration is a private dispute resolution procedure whereby the parties to a dispute mutually and voluntarily agree to have their dispute heard and resolved by one or more arbitrators, known as an arbitral tribunal. Arbitral institutions are not courts or governmental entities. They are private enterprises which exist for the sole purpose of resolving disputes efficiently. Resolving Commercial Disputes

9 What is Commercial Arbitration? “Commercial Arbitration” (as opposed to labor arbitration or other arbitration) is specifically intended for resolving commercial disputes, typically breach of contract disputes. Arbitration can be institutional or ad hoc. The right to submit disputes to arbitration and to engage in arbitration proceedings, and the jurisdiction of arbitrators to hear cases and issue decisions, is derived from law on arbitration.

10 Commercial Arbitration is suitable for disputes arising from: Joint venture agreement / partnership agreements Shareholders’ agreement Share Purchase agreement Franchise agreement Distributorship agreement Construction contract Lease agreement Licensing agreement (such as trademark) Contract for the sale of goods Consultancy agreement What is Commercial Arbitration?

11 Presentation Outline 1 1 What is Commercial Arbitration? 2 2 Why Commercial Arbitration? 3 3 Comparing Court Action to Arbitration 4 4 Things to be Aware of

12 When considering whether to enter into a commercial arrangement or whether to invest in a company or project, investors should take into account the ability to, and efficiency of, resolving disputes, should a dispute arise Civil litigation in court is one method of resolving commercial disputes Commercial arbitration is an alternative method, which usually is more efficient than court action Institutional commercial arbitration offers an alternative to court action, wherein the arbitration institution is incentivised to resolve disputes efficiently and transparently Why Commercial Arbitration? Investors Often Seek an Alternative to Court Action

13 In underdeveloped markets, local courts may be perceived as inefficient and lacking transparency Local judges are not specifically trained in, or knowledgeable of, commercial relationships and transactions Local courts are not focused on commercial disputes – they handle all civil, criminal, family, and insolvency matters Why Commercial Arbitration? Investors Often Seek an Alternative to Court Action

14 Commercial Arbitration within CLMV: – Vietnam: Vietnam International Arbitration Center (founded in 1993) Has heard approximately 1,000 cases Now receives more commercial dispute cases than the courts of Vietnam receive Local and foreign arbitrators – Cambodia: National Commercial Arbitration Center (recently launched) Limited track record Ad-hoc arbitration is possible, rarely used – Myanmar: No commercial arbitration center Arbitration Law since 1944, but only now is Parliament considering enabling legislation on enforcement of arbitration awards – Lao PDR: No commercial arbitration center Arbitration available under the Ministry of Justice (Economic Arbitration Organization) Ad-hoc arbitration is possible, but not used in practice Resolving Commercial Disputes in Emerging Markets Arbitration – Comparing Local Jurisdictions

15 Presentation Outline 1 1 What is Commercial Arbitration? 2 2 Why Commercial Arbitration? 3 3 Comparing Court Action to Arbitration 4 4 Things to be Aware of

16 Neutrality The parties choose the language in the arbitral proceedings The parties choose applicable law The parties choose the arbitrators ARBITRATION Use national language; generally do not permit foreign languages Judges are assigned to cases on a rotational basis. COURT

17 Expertise The parties choose arbitrators who have expertise in the area of law, or the industry sector, relevant to your dispute ARBITRATION Judges cover many different areas of expertise (commercial disputes, banking, construction, real estate, criminal cases, marital dissolution, insolvency) A judge assigned to your case may have to be educated by legal counsel in the area of law specific to your dispute COURT

18 Flexible procedures The parties can agree on certain aspects of the arbitral proceedings (dates for submission of documents, hearing dates, or agree to no hearing at all) There is limited opportunity for motions and appeals ARBITRATION Compulsory procedures of law The parties cannot negotiate about proceedings (timing, schedule of submission of briefs, hearing dates…) Motions practice, appeals, can prolong the dispute for years and drive up legal fees COURT

19 Predictability The parties choose the law governing their contract, and therefore the law governing any dispute arising from their contract Choose law that suits your contractual arrangement ARBITRATION Courts may not be bound by their own prior decisions Court decisions, and the reasoning to support such decisions, may not be made public COURT

20 Presentation Outline 1 1 What is Commercial Arbitration? 2 2 Why Commercial Arbitration? 3 3 Comparing Court Action to Arbitration 4 4 Things to be Aware of

21 Commercial arbitration is not a complete replacement for court action A party may seek injunctive relief in the courts, regardless of an agreement to submit the dispute to arbitration Commercial arbitrators and arbitration institutions generally do not have enforcement power –The parties must voluntarily agree not to oppose enforcement of the arbitral award, or –The prevailing party must seek a court order to recognize and enforce the arbitral award Things to be Aware of

22 Lack of ability to compel discovery Lack of certain judicial safeguards such as right to appeal, right to request reconsideration of decisions (the possible downside of arbitration efficiency) Relaxed rules of evidence (admissibility of evidence) can have negative consequences Things to be Aware of

Thank you Alex Larkin Representative of EuroCham at the NCAC ( Contact: This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of Eurocham Cambodia and can in no way be taken to reflect the views of the European Union. EUROCHAM Contact Phone: