Commercial court and skilled judges crucial, say legal experts

Myanmar is busy enacting legislation it hopes will help put international investors at ease. But passing laws is not the same as building the institutions and expertise necessary to enforce them, and the legal sector will need to work hard to provide a stable environment for foreign investment, experts have said.

The country has put in place several key pieces of modern legal architecture recently, including a new arbitration law passed in January. That law replaced legislation more than half a century old and provides the legal basis for Myanmar courts to enforce arbitral decisions awarded in other countries.

“Most of the commercial contracts involving foreign investors specify the use of arbitration if any dispute arises,” said Daw Ainzali Kyaw Soe, president of the International Arbitration Club Myanmar. The contracts also specify which country’s governing law will be applied during arbitration and in which country the arbitration will take place, she added.

Arbitration between parties from two different countries – for example a US investor and a Myanmar partner – typically takes place in a neutral third country. For firms operating in Myanmar this is usually Singapore, but until Myanmar’s new arbitration act foreign firms had little confidence that they would be able to enforce foreign arbitral awards in a Myanmar court.

The new act should remove interference from local courts, and give companies looking to invest in Myanmar more confidence, said Abhinav Bhushan, director for South Asia at the International Court of Arbitration.

“Foreign investors will want to deal with a seat [jurisdiction] which is absolutely neutral, and it is important for Myanmar to come out as a good seat for international arbitration,” he said.

But in order to enjoy the benefits of a strong arbitration system Myanmar needs a body of well-trained arbitration practitioners, Robert S Pé, a partner at Gibson, Dunn & Crutcher in Hong Kong said in a speech to a group of junior Myanmar lawyers last week.

“The bigger issue is how you implement the law [that has been passed],” said Mr Pé. “Obviously one of the key characteristics is that judicial interference in arbitration should be minimal, and that the judges should support arbitration [decisions].”

Under Myanmar’s 1944 Arbitration Law, judicial interference was common and considered normal, he said, while a stronger framework for arbitration will rely on members of the judiciary having a sufficient level of expertise and experience.

“The law is only as good as the body enforcing it,” he said.

Mr Pé thinks Myanmar needs to seriously consider establishing a commercial court staffed by judges with expertise in commercial matters. Commercial courts typically handle business disputes under simplified procedures, which helps avoid a business case being stuck in the general court system.

“One thing the foreign investors look for when they are choosing to invest in a country is whether it has a good commercial court,” Mr Pé said.

No such court exists in Myanmar, though they are common throughout the region, said Edwin Vanderbruggen, a partner at Yangon-based law firm VDB Loi. “The difficulty creating one in Myanmar would be finding the resources to staff it,” he said. 

Pyithu Hluttaw representative U Myint Lwin (NLD; Puzuntaung), said that all Myanmar has at present is a mediation centre at the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). But efforts to change this are under way.

“UMFCCI has a task force committee for arbitration, and we are trying to set up an independent arbitration centre,” he said, adding that this would be a step toward a commercial court.

“We’ve sent a proposal to the government [for an independent arbitration centre] but that will require negotiation.”

Myanmar is also making efforts to create a new generation of qualified arbitration lawyers.

Mr Pé’s address kicked off a two day training workshop for junior lawyers, which covered all aspects of international arbitration, specifically in the context of Myanmar’s new arbitration act, said Daw Ainzali Kyaw Soe.

She said the new law should ensure minimal court interference in foreign arbitral awards, although local arbitration is another matter. Daw Ainzali Kyaw Soe said it could take five or 10 years before arbitration disputes can be conducted successfully in Myanmar courts.

“In the meantime [building] a strong legal framework and educating the judges is vital,” she said.