Promoting investment through arbitration
Recent reforms in the South Pacific
Global | Publication | 十二月 2021
Content
Introduction
This article provides an update on the progress of international arbitration reforms in the South Pacific region, and offers observations on the potential impact of such reforms on international trade and foreign investment in the region.
Efforts to develop new international arbitration regimes in the South Pacific
International trade plays a crucial role in the economic and social development of South Pacific nations. Despite arbitration being a preferred method for resolving cross-border disputes within the international business community, until recently, most countries in the South Pacific have lacked a developed and modern international arbitration regime.
Recognising the importance of an effective commercial dispute resolution regime for boosting investor confidence, the Asian Development Bank (ADB) has invested in a regional capacity development technical assistance program aimed at establishing an effective commercial dispute resolution regime in Pacific countries through international arbitration reform. The ADB sees the promotion of international commercial arbitration in the region as crucial to creating a better investment climate, facilitating more cross-border trade and investment to accelerate growth, reduce poverty and economic disparity, raise productivity and employment and strengthen national institutions.
The program aims to establish wellfunctioning international regimes in the South Pacific through a combination of modern national laws on arbitration, accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) as well as building domestic capability.
The ADB sees the promotion of international commercial arbitration in the region as crucial to creating a better investment climate
The importance of foreign investment and trade
Comprised of small island nations, the South Pacific region is heavily reliant on growth in international trade and foreign investment for economic development. According to the World Bank, in 2019, exports of goods and services comprised 41.7% of the GDP of the South Pacific small States, but only USD 418 million was invested in the region.
To boost international trade, nations in the South Pacific are increasingly entering into or proposing to enter into bilateral or multilateral free trade agreements (FTAs). For example, a regional FTA, the Pacific Agreement on Closer Economic Relations (PACER Plus), entered into force on 13 December 2020. PACER Plus is a comprehensive FTA covering goods, services and investment and has been signed by Australia, New Zealand, Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. PACER Plus contains an investment chapter but does not provide for investor-State arbitration.
The South Pacific is also a region at high risk from the effects of climate change and will require significant investment in abatement and mitigation measures. Australia has set up the Australian Infrastructure Financing Facility for the Pacific to finance, by way of sovereign loans or grants, infrastructure projects that contribute to the stability of the region. Such projects may well involve private foreign investment.
However, a major barrier in attracting foreign direct investment and stimulating cross-border trade is lack of investor confidence in effective and efficient ways to resolve commercial disputes and enforce resulting decisions.
Increasingly, foreign investors rely on international arbitration as an effective, fair and timely way to resolve commercial disputes and produce awards that can be enforced globally. For many sectors that invest in the South Pacific, particularly mining, oil and gas, international arbitration is the preferred choice for dispute resolution. The absence of effective legal frameworks to facilitate international commercial arbitration and the recognition and enforcement of arbitral awards has therefore been identified as an impediment to the growth of investment and trade in the South Pacific. Recent reforms in the region, supported by the ADB, should contribute to overcoming this barrier.
A major barrier is lack of investor confidence in effective and efficient ways to resolve commercial disputes and enforce resulting decisions.
The Reform Agenda
An effective international arbitration regime requires:
- a modern, fit-for-purpose national arbitration law that facilitates the enforcement of arbitration agreements, provides efficient curial support for arbitration, and ensures the enforcement of arbitral awards consistent with best international practice;
- ratification of the New York Convention and its national implementation; and
- a well-trained legal professional and judiciary that understands and supports international arbitration.
UNCITRAL and the ADB have collaborated to facilitate commercial law reforms, legal harmonisation and implementation of arbitral frameworks in the South Pacific region. Important progress has been made in recent years in respect to (1) and (2) above. The table further below summaries the progress of reform in key Pacific nations, with links to legislation where publicly available.
Legislators in Fiji, Papua New Guinea, Palau and Tonga have expressed confidence that their respective international arbitration laws are now among the most advanced and comprehensive in the world. In all instances, the relevant law implements the UNCITRAL Model Law. Fiji, Palau and Tonga have also borrowed provisions from the Australian, Singaporean and Hong Kong laws to ensure an attractive national arbitration framework. Nauru and Samoa are currently engaging with the ADB and UNCITRAL to develop a modern national arbitration law. At this time, Kiribati, Niue, Tuvalu and Vanuatu have not taken such steps towards reform.
However, these new legal frameworks must also be supported by the local judiciary and legal profession. For this reason, the ADB program also involves capacity building through regional awareness-building and tailored training programs for potential and practicing arbitrators, lawyers and judges. Over time, increased usage of international arbitration in the region will hopefully contribute to strong national regimes supported by a network of skilled and experienced regional arbitration practitioners.
Concluding thoughts
While international arbitration reform in the South Pacific region is in its early stages, there are clear signs that the region is embracing international arbitration as a tool to promote foreign investment and international trade. This is a positive development for companies looking to invest in the South Pacific or with existing investments in the region. As the reform agenda progresses, businesses are well advised to monitor developments in relevant countries and to ensure that contracts are drafted or updated to take advantage of new or amended legal regimes.
Progress of international arbitration reforms
Jurisdiction | New York Convention | ICSID Convention | National arbitration law |
---|---|---|---|
Cook Islands |
Acceded on 12 January 2009 Entered into force on 12 April 2009 |
Not a Contracting State | Arbitration Act 2009 implements the 1985 Model Law, as amended in 2006. |
Fiji |
Acceded on 27 September 2010 Entered into force on 26 December 2010 |
Signed on 1 July 1977 Entered into force on 10 September 1977 |
International Arbitration Act 2017 implements the 1985 Model Law, as amended in 2006. This Act also incorporates ‘best practice’ from Australian, Singaporean and Hong Kong regimes: (i) arbitral proceedings remain confidential, (ii) ensures the autonomy of parties in selecting legal representation, (iii) limits liability and protects the immunity of arbitrators, arbitral institutions and appointing authorities; and (iv) provides for ‘emergency arbitrators’. This Act applies only to international arbitration. The previous regime remains in force for domestic arbitration. Investment Act 2021 introduces reforms to regulatory framework governing investment, aimed at making Fiji a more desirable investment destination. |
Marshall Islands |
Acceded on 21 December 2006 Entered into force on 21 March 2007 |
Not a Contracting State | Arbitration Act 1980 requires reform to modernise in line with the Model Law. However, no steps have yet been taken to reform the arbitration regime. |
Nauru | Not a Contracting State |
Signed on 12 April 2016 Entered into force on 23 May 2016 |
Currently engaged in capacity building with the ADB and UNCITRAL. However, there is currently no official statement on the status of approval of accession to the New York Convention or national arbitration law reform. |
Palau |
Acceded on 31 March Entered into force on 29 June 2020 Two reservations: reciprocity and commercial transactions |
Not a Contracting State |
The International Commercial Arbitration Act 2021 implements the 1985 Model Law, as amended in 2006. This Act also incorporates ‘best practice’ from Australian, Singaporean and Hong Kong regimes: (i) arbitral proceedings remain confidential, (ii) ensures the autonomy of parties in selecting legal representation, (iii) limits liability and protects the immunity of arbitrators, arbitral institutions and appointing authorities; and (iv) provides for ‘emergency arbitrators’. |
Papua New Guinea |
Acceded on 17 September 2019 Entered into force on 15 October 2019 |
Signed on 20 October 1978 Entered into force on 19 November 1978 |
Arbitration Bill 2019 implements the 1985 Model Law, as amended in 2006. As currently drafted, the Bill diverges from the Model Law in a few notable respects: (i) provides there is sufficient evidence of a written arbitration agreement if an agreement is alleged by one party and not denied by another; (ii) all arbitrations must be commenced within the statutory time bars for legal proceedings under domestic law, and (iii) the confidentiality protection includes a broad exception – disclosure can be made to protect or pursue a legal right of a party. The Bill governs both international and domestic arbitrations. The Bill is still in progress and has not yet been tabled for debate in the Papua New |
Samoa | Not a Contracting State |
Signed on 3 February 1978 Entered into force on 25 May 1978 |
Arbitration Act 1976 is based on the English Arbitration Act 1889 and governs domestic Currently engaged in capacity building with the ADB and UNCITRAL. However, there |
Tonga |
Acceded on 10 June 2020 Entered into force on 10 September 2020 |
Signed on 1 May 1989 Entered into force on 20 April 1990 |
The International Arbitration Act 2020 implements the 1985 Model Law, as amended in 2006. This Act also incorporates ‘best practice’ from Australian, Singaporean and Hong Kong regimes: (i) arbitral proceedings remain confidential, (ii) ensures the autonomy of parties in selecting legal representation, (iii) limits liability and protects the immunity of arbitrators, arbitral institutions and appointing authorities; and (iv) provides for ‘emergency arbitrators’. The Act governs both international and domestic arbitrations. Amendments to the Foreign Investment Act 2020 reserve certain business activities for Tongan businesses. |
International arbitration report
Subscribe and stay up to date with the latest legal news, information and events . . .