19 November 2018

The Rise Of The Courts

By Daisy Mallett (Sydney), Guan Feng (Shanghai) and Holly Blackwell (Shanghai)

Arbitration arose as a private out-of-court means to resolve disputes. Features such as party autonomy, confidentiality, flexibility, neutrality, and finality attracted users. Ease of enforcement stemming from the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), for the most part, secured its place as the preferred forum for resolving international commercial disputes. However, some of these very features that made arbitration attractive have generated scrutiny in more recent years.

Perceived shortfalls include lack of efficiency, undisciplined application of procedural rules, protracted discovery, increased costs, lengthy proceedings and lack of transparency. Arbitration institutions have responded with various innovations to try to address these issues. So too have states, national courts, and international organisations. A number of developments have emerged that signal a possible resurgence of national and international courts as a viable option for international dispute resolution. These include the creation of international commercial courts and specialist national courts which incorporate the strengths of litigation and preferred features of arbitration. States are also working to improve the recognition and enforcement of foreign court judgments, with the Hague Convention on Choice of Court Agreements (the “2015 Convention”) entering into effect and more liberal enforcement of foreign court judgments at the national level. A new draft convention – the Hague Convention on the Mutual Recognition and Enforcement of Foreign Court Judgments – is also anticipated next year.

This article will consider some of these developments that may make national courts more attractive to parties involved in international disputes. It will compare these developments against some important benefits of international arbitration. 

Increase in specialist commercial courts

Over the past 15 years, we have seen the emergence of specialist international courts that cater to parties engaged in cross-border commercial transactions. They include the Singapore International Commercial Court (“SICC”), the Dubai International Financial Centre (“DIFC”) Courts, the Qatar International Court and Dispute Resolution Centre, the Abu Dhabi Global Market Courts, and most recently the China International Commercial Court (“CICC”). Many of these courts were inspired by the well-established English Commercial Court system, which dates back to 1895.

The DIFC, Qatar, and Abu Dhabi commercial courts were established in 2004, 2009, and 2015, respectively, pursuant to mandates to develop world class international financial centres. They were part of a design to create neutral, transparent, and sophisticated legal and dispute resolution systems to attract foreign investment. These courts are English language common law courts, resident in civil law countries, with international panels of judges. Most have jurisdiction over civil and commercial matters having some connection with their respective financial centres. The DIFC Courts permit opt-in jurisdiction and will accept jurisdiction over disputes with no connection to the DIFC provided the parties have entered into a written jurisdiction agreement in favour of the DIFC Courts.

Singapore took the lead in establishing Asia’s first international commercial court in 2015. The SICC was established as part of Singapore’s aim to enhance its status as a leading hub for international dispute resolution. It also has the ambition of, along with other international commercial courts, creating a body of international commercial law that harmonizes commercial law and practice from both common and civil law jurisdictions. Like the DIFC, the SICC will accept jurisdiction over any action of an international and commercial nature where the parties have agreed to the court’s jurisdiction pursuant to a written jurisdiction agreement, regardless of whether there is a connection to Singapore.[1] The SICC may also hear cases that have been transferred from the Singapore High Court.

International commercial courts are also emerging in Europe, with courts in France, Belgium, Germany, and the Netherlands being established or anticipated. This is partially in response to Brexit, as European Union courts anticipate hearing international disputes that would otherwise have been heard by UK courts and international arbitration tribunals.

Most recently, in July 2018, the CICC was established by the PRC Supreme People’s Court (“SPC”). The CICC was likewise created to hear disputes of an international and commercial matter and is established for the purpose of providing an effective judicial mechanism for resolving disputes arising from China’s Belt and Road Initiative. To adjudicate disputes before the CICC, a jurisdictional nexus to China is required. The CICC has jurisdiction over disputes where the parties have agreed to litigate in the SPC according to Article 34 of the Chinese Civil Procedural Law and the amount in dispute exceeds RMB 300 million (approximately USD 44 million); disputes which should have originally been litigated in a high court but were submitted to the SPC; disputes that have an impact nationwide; disputes where one party applies for interim measures in assistance of arbitration, setting aside and enforcement of arbitral awards according to Article 14 of the SPC Regulations on Several Matters Concerning the Establishment of the China International Commercial Court (effective 1 July 2018) and any other international  commercial disputes that the SPC considers appropriate to be heard by the CICC.

Aside from the emergence of new international commercial courts, there has also been an increase in specialist national courts and specialised lists within existing national courts. In China this has seen the creation of specialist intellectual property courts, while in Singapore the High Court has developed a comprehensive range of specialised lists to ensure complex commercial disputes are placed before judges who are able to bring expertise in specialist areas of law, including building and construction, shipbuilding, finance, securities and banking, and intellectual property and information technology.

Increased ease of enforcement

Ease of enforcement is one of the prominent benefits of arbitration. The New York Convention has provided an unrivalled framework for global recognition and enforcement of arbitral awards in the nearly 160 contracting states.

No similar treaty for the recognition and enforcement of court judgments on a global scale exists. The Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971 (the “1971 Convention”) failed to replicate the success of the 29 Section 18F Supreme Court of Judicature Act 1969 (Singapore) The rise of the courts? www.kwm.com 7 New York Convention with only three states ratifying the convention (Cyprus, The Netherlands and Portugal). The 2015 Convention provides for the mutual recognition and enforcement of court judgments, provided those judgments were rendered pursuant to an exclusive jurisdiction agreement for the courts of a particular country. Again, this convention has limited reach. To date, there are 31 contracting states to the 2015 Convention, including Singapore, Mexico, Montenegro, and the 27 European Union member states. The US, China, and Ukraine have all signed the Convention but have not ratified it.[30] Pending ratification, the 2015 Convention is not yet binding on these states.31 As a result, despite attempts, it has not been possible to create a regime providing predictable enforcement of court judgments globally like there has been for arbitral awards pursuant to the New York Convention. 

In the absence of a global enforcement regime, foreign court judgments may be enforceable pursuant to regional enforcement regimes. A framework for the recognition and enforcement of civil and commercial judgments exists between member states within the European Union under the recast Brussels Regulation (Regulation (EU) No 1215/2012). Under Articles 36 and 39 of the Brussels Regulation, a judgment given in a member state is recognised and enforceable in all other member states without any special procedure or declaration of enforceability being required and with few defences available which could prevent enforcement. Similarly, in the UAE and Qatar (neither of which are contracting parties to the 2015 Convention), there is the 1983 Riyadh Arab Agreement for Judicial Cooperation, which provides the framework for the recognition and enforcement of judgments made by the courts of any other contracting party.

Most recently, members of the Hague Conference on Private International Law have been advancing a draft Convention for the Recognition and Enforcement of Foreign Court Judgments. The draft Foreign Judgments Convention is broader than the 2015 Convention and does not require that a judgment be rendered pursuant to an exclusive jurisdiction agreement as a precondition for enforcement. Several drafts of the Convention have been released. A final version is expected to be presented for diplomatic consideration sometime in 2019.

In the absence of an international convention or bilateral or multilateral treaty, a party must rely on national law to recognise and enforce foreign court judgments, which can significantly thwart recognition and enforcement. Outside of regional regimes such as those in the EU and the Middle East, mutual recognition and enforcement treaties are not widespread. China, for example, has entered into less than 40 treaties for the mutual recognition and enforcement of foreign court judgments. It also has arrangements with Hong Kong SAR and Macau SAR for the mutual recognition and enforcement of court judgments, but the arrangements apply only to judgments rendered pursuant to an exclusive jurisdiction clause. China likewise has judicial provisions in place to guide the recognition and enforcement of judgements issued by Taiwan courts (Provisions of the Supreme People’s Court on the Recognition and Enforcement of Civil Judgments of Courts of the Taiwan Region (1 July 2015)). China does not have judicial assistance treaties with key trading parties such as Australia, the US, and the UK.

However, in recent years Chinese courts have shown a willingness to recognise and enforce foreign judgments, first with the Nanjing Intermediate People’s Court (Jiangsu Court) recognising and enforcing a civil judgment made by the Singapore High Court in 2016 and then last year the Intermediate People’s Court of Wuhan, Hubei Province recognising and enforcing a civil judgement made by the Los Angeles Superior Court in California. In both cases recognition and enforcement was granted based on the principle of reciprocity in the absence of a treaty for mutual recognition and enforcement of judgments. While these developments are encouraging, commercial parties cannot be 30 HCCH, ‘Status Table - 37: Convention of 30 June 2005 on Choice of Court Agreements’ (1 July 2018) https://www.hcch.net/en/instruments/conventions/ status-table/?cid=98.[3] It is not clear when they will do so. The US signed the convention in 2009; China signed in 2017. confident that court judgments will be enforced in a predictable manner in the same way they can with arbitral awards. 

Increased adaptability to international users

Confidentiality is a hallmark of arbitration which international commercial courts are seeking to make available. In the 2018 International Arbitration Survey undertaken by Queen Mary University of London, 87% of respondents noted that confidentiality in international commercial arbitration is of importance and is a feature that distinguishes arbitration from national courts. The SICC seems aware of this issue and while proceedings will generally take place in open court, parties have the option to apply for the proceedings and judgment to remain confidential.[4] In deciding to make a confidentiality order, the SICC will take into account whether the case is an offshore case and whether there is an agreement between the parties on the making of such an order. This is an interesting development in cross-border litigation given the calls within the international arbitration community for greater transparency and one not seen in other international courts to the same extent. The DIFC, for example, requires hearings to be held in public as a general rule, but does allow proceedings to be heard in private if certain limited factors are present, including whether publicity would defeat the object of the hearing; confidential information is involved and publicity would damage that confidentiality; and the court considers it necessary in the interest of justice.[5]

 The common criticism by parties that judges may be biased towards an international party or lack the specialist technical knowledge to properly decide a dispute is also being addressed. As discussed earlier, many countries now have specialist lists within their national courts that ensure highly complex disputes are heard by judges that have particular subject matter expertise. Further, many of the international commercial courts have international panels of experienced and prominent judges who join prominent local judges in presiding over disputes. While in the case of the CICC, the current PRC law does not permit foreign judges to adjudicate disputes in China, the CICC bench is comprised of top PRC judges from the SPC and other jurisdictions. Further, the CICC has an Expert Committee comprised of prominent international arbitration and litigation practitioners who can advise on foreign law issues and act as mediators in disputes for the court. In the case of the SICC and the DIFC, both courts allow the appointment of foreign judges. Since its commencement, judges have been appointed to the SICC from both common and civil law countries, including Singapore, the United States, Australia, Austria, France, England, Hong Kong and Japan. The DIFC has followed a similar pattern but with judges appointed from common law countries including Singapore, England, Malaysia, Australia and New Zealand.

Finally, a court has the ability to join third parties, which is only permitted in some circumstances in an arbitration. The SICC has the power to join third parties to an action, even if the third parties are not parties to a written jurisdiction agreement and do not consent to being joined as a party. 

Conclusion

Recently, there has been much activity directed to promoting the  international dispute resolution capabilities of national courts. Although national and international efforts have sought to make international dispute litigation more attractive, it has yet to match some of the unique benefits of international arbitration, key to these being enforcement, confidentiality and neutrality. The critical feature of arbitration for many commercial parties is enforcement. There is still no convention to rival the New York Convention’s ability to offer predictable enforcement across the globe. Whether the new conventions will be able to attract the attention of sufficient states to ratify them in order to close this gap is question to watch with keen interest.


[1]Section 18F Supreme Court of Judicature Act 1969 (Singapore)

[2]HCCH, ‘Status Table - 37: Convention of 30 June 2005 on Choice of Court Agreements’ (1 July 2018) https://www.hcch.net/en/instruments/conventions/status-table/?cid=98.

[3]It is not clear when they will do so. The US signed the convention in 2009; China signed in 2017.

[4]Rules of Court (Singapore, cap 322, 2014 rev ed) O 110 r 30.

[5]Rules of the Dubai International Financial Centre Courts 2014 r 35.4.


Download Crossing Borders: International Arbitration Insights - Where will we be in 2028?

Crossing Borders is a periodic review of developments in international arbitration across the world. Included in this special 10th edition, we explore what arbitrations will be like going into 2028 - where, how and by whom disputes will be decided.

Belt and Road Initiative

Insights and publications for public and private sector players looking to explore the opportunities presented by the Belt and Road Initiative.

Belt and Road

A Guide to Doing Business in China

We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

Doing Business in China
Share on LinkedIn Share on Facebook Share on Twitter Share on Google+
    You might also be interested in

    Our experts give their top 10 predictions about international arbitration in 2028

    19 November 2018

    Learn about the new International Court International Centre for Settlement of Investment Disputes Rules

    19 November 2018

    One reason for electing for arbitration as a dispute mechanism is confidentiality of proceedings. But what does that mean?

    19 November 2018

    Meet the 10 Arbitration Centres from around the world that you may not have never heard of

    19 November 2018

    Legal services for your business

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.