Resolving Belt and Road Disputes through Alternative Dispute Resolution

By Zuzanna Cieplinska, ADC/ACICA Intern
LLB of International and European Law, The Hague University of Applied Sciences

With the launch of the 21st Century Maritime Silk Road, and the Silk Road Economic Belt, ‘One Belt, One Road’ initiative (‘OBOR’), the need for ADR has never been more critical. International economic cooperation among countries on the Belt and Road routes are aimed at financial integration, trade growth and investment opportunities, and policy integration. Disputes are an inevitable upshot of pursuing these objectives. In 2018, the China International Economic and Trade Arbitration Commission (‘CIETAC’)[1] found that financial disputes in connection with OBOR were the most common form of dispute that arose. However, the diversity of Belt and Road transactions makes it more difficult to choose one method of dispute resolution. The transactions occurring range from a one-off facility, short-term arrangements as well as large-scale and long-term infrastructure projects. Further, there is often a cross-border element. Various arbitration institutions also provide informative schemes and programs to facilitate the rapidly growing number of disputes.

International Chamber of Commerce perspective

Recently, the International Chamber of Commerce (‘ICC’) published guidance notes entitled Resolving Belt and Road Disputes using Mediation and Arbitration[2]. The approach of the ICC leans positively towards mediation, positing that it is highly effective in most cases. The ICC contends that the primary advantages of mediation include, inter alia, the possibility of resolving disputes quickly, amicably, and with lower costs than arbitration or litigation. It further highlights the ability of mediation to make space for cultural considerations. On this point, Chinese parties particularly view mediation favourably compared to other ADR mechanisms as it allows them to easily and effectively preserve business relationships while maintaining their reputation.

With the consent of the parties, a mediation agreement can also be recorded in the form of an arbitral award. This is a highly effective option in facilitating both the enforcement and legal recognition of the mediation agreement.[3] When mediation is unsuccessful, and the process becomes adversarial, a ‘mediation award’ can assist in refining and consolidating the issues in dispute within a legal framework. The combination of a mediation process with an arbitral award culminates in a mixed-mode ADR process, a common option along OBOR. Considering the parties’ preferred dispute resolution mechanism is critical at the contract drafting stage. Arbitration, as well as mediation, is also a practical choice for parties attracted to the prospect of a final and binding award.

China-Singapore Pro-Mediation Statement

International cooperation and consensus within ADR have been strengthened, particularly in Belt and Road countries. The most significant project to date is the Memorandum of Understanding (‘Memorandum’) signed between the Singapore International Mediation Centre (‘SIMC’) and the China Council for Promotion of International Trade China Chamber of International Commerce Mediation Centre (‘CCIOC’) on 24 January 2019. The Memorandum provides for the joint development of rules and enforcement procedures for disputes arising from the Belt and Road Initiative submitted to mediation. The recent cooperative statement further evidences the popularity of mediation in South East Asia and is a testament to the success of ADR in resolving cross-border disputes, not only in OBOR matters.

In 2017, prior to the Memorandum, SIMC and CCIOC had already undertaken efforts to enhance cooperation by encouraging and facilitating Chinese companies to invest in Singapore (33% of its investment in OBOR countries), Singaporean companies to invest in China (85% of the total investment from BRI countries), and companies to invest in other markets under the OBOR[4].

Difficulties of ADR in OBOR disputes: Distributed Ledger Technology

Recently, Distributed Ledger Technology (‘DLT’) has gained popularity between Belt and Road countries. DLT is a novel method of ‘smart contracting’, facilitating transactions and payments simultaneously. Serving as an asset database that is shared consensually and synchronised across networks in different site dimensions,[5] the data is protected by cryptographic hashes, creating a secure platform on which to share information.

While OBOR disputes vary, questions have emerged concerning whether DLT coding accurately reflects the intent of the parties and whether coding failures are resulting in improper payments. As arbitration requires consideration of evidence and the resolution of questions of law, a technical overlay may complicate the efficacy of ADR. Accordingly, extra care should be taken in the selection of arbitrators.[6]

Another issue that may arise is where parties originate from two different jurisdictions and where one of these jurisdictions may not recognise smart contracts. While the arbitral seat may allow for smart contracting, this may not be the case in the country of enforcement. Subsequently, the arbitration could be challenged on public policy grounds.[7]

Facilitating ADR for Belt and Road related disputes in Australia

Choosing the right institution when combining mediation and arbitration clauses in contracts may become problematic due to its complex nature. As a leading international ADR institution in the Asia-Pacific region, ACICA has a variety of suitable tools to facilitate the resolution of Belt and Road-related disputes. ACICA can also act as an appointment body for international mediations in such disputes, administer mediations, or facilitate arbitration. ACICA ensures neutrality, offers a modern and transparent framework based on international standards, and has an independent body of mediators and expert arbitrators to ensure an efficient and flexible process.

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[1]Wang Wenying ‘Development and reform of CIETAC’ Norton Rose Fulbrigh (Blog Post) <https://www.nortonrosefulbright.com/en-nl/knowledge/publications/ca2c8f17/development-and-reform-of-cietac>.

[2]‘ICC Guidance Notes on Resolving Belt and Road Disputes’ International Chamber of Commerce <https://iccwbo.org/content/uploads/sites/3/2019/02/icc-guidance-notes-belt-and-road-disputes-pdf.pdf>.

[3] Ibid.

[4] May Tai, Alastair Henderson, Jessica Fei, Peter Godwin ‘The role of mediation in the resolution of Belt and Road Initiative Disputes’ Herbert Smith Freehills LLP Blog (Blog Post) <https://www.lexology.com/library/detail.aspx?g=c27b1e23-d58d-4bb7-9472-b0d59d36280f>.

[5]Meg Utterback ‘Technology Meets Dispute Resolution on the Belt and Road’ King & Wood Mallesons Blog (Blog Post) <https://www.kwm.com/en/au/knowledge/insights/technology-meets-dispute-resolution-on-the-belt-and-road-20181119>.

[6] Ibid.

[7] Ibid [2].

2019-10-21T17:15:39+11:00

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