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Preparing For Asean Economic Integration 1

Preparing for ASEAN Economic Integration 1

Contents

Access to dispute resolution process - a role for Third Party Funding? ............................ 3

A. What is TPF? .................................................................................................................... 4

1. The “pro-TPF” view .................................................................................................. 5

2. The “anti-TPF” view ................................................................................................. 5

B. Issues related to TPF ....................................................................................................... 6

1. Chances of settlement ............................................................................................. 6

2. Confidentiality and legal privilege ........................................................................... 6

3. Transparency and disclosure ................................................................................... 7

4. Allocation of costs and security for costs ................................................................ 8

C. States’ stand on TPF ........................................................................................................ 8

1. Developments in Singapore ..................................................................................... 9

2. Forms of control .................................................................................................... 10

D. ALA’s Role .................................................................................................................. 11

Catering to the consumers – Online Dispute Resolution (“ODR”) .................................. 11

A. What is ODR? ................................................................................................................ 11

B. How is ODR being administered? ................................................................................. 12

1. Private sector initiatives ........................................................................................ 12

2. Arbitration centres ................................................................................................ 13

C. Challenges of ODR ......................................................................................................... 13

1. Technical challenges .............................................................................................. 13

2. Cultural and linguistic challenges .......................................................................... 14

1 Jointly prepared for discussion by Lawrence Boo and Christine Artero - Admitted in Paris, Solicitor of England & Wales, LLM, M Jur Sc (Maîtrise), University of Toulouse 1, DESS and DEA (University of Paris II Panthéon-Assas. Both of The Arbitration Chambers, Singapore.


3. Legal challenges ..................................................................................................... 14

D. The UNCITRAL Initiative ............................................................................................ 14

1. Guiding principles for the establishment of rules or principles to support a global ODR mechanism ............................................................................................................... 14

2. The UNCITRAL Draft Rules ..................................................................................... 16

E. Regional Initiatives ........................................................................................................ 17

1. OECD initiative ....................................................................................................... 17

2. EU initiative ............................................................................................................ 17

3. Organization of American States (OAS) ................................................................. 18

F. National initiatives ........................................................................................................ 18

G. ALA’s Role .................................................................................................................. 18

Role of courts in strengthening enforcement regimes for arbitral awards made within ASEAN....................................................................................................................................... 20

A. Enforcement of agreements to arbitrate and applications for stay of proceedings .... 20

B. National courts and Interim measures ......................................................................... 21

C. National courts and arbitral Awards ............................................................................. 22

D. The ALA 2011 Guidelines on Best Practices on the Enforcement of Arbitral Awards in ASEAN (“the ALA 2011 Guidelines”) .................................................................................... 24

1. The ‘agreement in writing’ .................................................................................... 24

2. ‘Authentication’ or ‘certification’ of the award .................................................... 24

3. The ‘certified translation’ of the award and accompanying documents .............. 25

E. ALA Role ........................................................................................................................ 25

Enforcement of Mediated Settlement Agreements ........................................................ 25

A. Existing mechanisms for enforcement of settlement agreements .............................. 26

1. UNCITRAL MLICC.................................................................................................... 26

2. EU DIRECTIVE 2008/52/EC ..................................................................................... 27

3. National legislation ................................................................................................ 28

B. ALA’s Role ...................................................................................................................... 31


2015 is the target date for the ASEAN Economic Community. The legal regimes in the ASEAN nations are admittedly diverse with roots from differing sources of civil and common law origins as well as hybrids of the same. ALA is challenged to think through how, as a body of community thinkers, we could pay our part in bringing about this vision of greater integration to realize the AEC goal. ALA could look at areas of common interest as well as of divergence and attempt to bring about change that could foster greater integration. The ADR committee believes that sound planning and forward thinking in dispute resolution processes within ASEAN would not only foster greater trust and certainty, but also build a firm and sure foundation for the growth of intra-ASEAN trade and investments.

This paper seeks to identify possible areas in which ALA could consider to promote better understanding of best practices, methodology and matters that could be addressed by the ALA community. If properly addressed, ALA could play a positive role in enhancing ALA integration and hasten the fruition of the ASEAN Economic Community.

We present 4 areas in which ALA could consider embarking either jointly or be taken up by individual ALA chapters in the field of dispute resolution. The non-exhaustive areas to be specifically addressed are:

a. Third-party funding of dispute settlement processes b. Online dispute resolution c. Role of courts in strengthening enforcement regimes for arbitral awards made within

ASEAN d. Enforcement of mediated settlement agreements

The writers are not suggesting that these are priority areas but are merely suggesting that ALA should consider adopting an agenda that would, in due time, engender broader (as opposed to parochial) and closer (as opposed to diverse) practices in resolution of cross-border disputes. The suggestions made in this paper are broad and high level, and much more thoughts need to be put into them and much more enthusiasm need to be injected to bring about some semblance of change that would transform ASEAN nations and its dealing with each other, at least on the commercial frontier.

Access to dispute resolution process - a role for Third Party Funding?

The mechanisms and processes available for dispute settlements are varied but not always accessible. While large corporations have the ability to engage large legal teams and fight battles on many fronts, the small and medium enterprises may find such doors are effectively shut from them due to the high costs of litigation and international dispute resolution processes. The white knight that has been offered in recent years comes in the form of the third party funder.


Parties, whether in financial distress or not, explore the possibility of using funders to provide the necessary cash to pay for their lawsuit, allowing the funder to realize in return a percentage of the proceeds of the case if successful. To a certain extent, therefore, third party funding (“TPF”) shows similarities with insurance contracts and with contingency fee arrangements. But the exact definition of TPF remains elusive and its legal and ethical implications in international arbitration, mostly unexplored. The increasing interest in TPF has attracted the attention of several organizations and working groups. For instance, ICCA2 and Queen Mary University of London recently established a Task Force on Third party Funding in International Arbitration (“the Task Force”) to assess both real and perceived concerns that the practice of TPF raises, as well as what might be done, and why. The International Bar Association also adopted “new” IBA Guidelines on Conflicts of Interest in International Arbitration on 23 October 20143 (“the new IBA Guidelines”) which contain, inter alia, new provisions in relation to third party funders.

Is TPF a positive or a negative for ASEAN companies? What are the risks, advantages, upside and effects it could bring to our economies?

A. What is TPF?

TPF is an investment per se in arbitration by a corporation specialized in this business. It is a scheme whereby a party unconnected to a claim will finance all or part of the parties’ arbitration costs, generally the claimant’s. The funder will be remunerated by an agreed percentage of the proceeds of the award, a success fee, a combination of the two or more sophisticated devices. In case of an unfavorable award, the funder’s investment will be lost.

In theory, funders can provide support to both claimants and respondents,4 but the funding of claims provides the greater upside potential and therefore attracts more attention.

The relationship between the funded party and the third party funder is crystalized in a funding agreement wherein the rights and obligations of both parties are set out, that is, inter alia, the method of payment, the payment criteria (establishing a minimum and maximum according to the result of the arbitral award), the funder’s final share in the event of a settlement, the nature of the funder’s participation into the proceedings (some only want to be kept informed whilst others want to have a more active role), and the cause whereby the relationship may be terminated.

Funding agreements can be entered into after a dispute has arisen, but also sometimes before or even after the case is filed.

There have been many debates and discordant opinions as to the definition of TPF, but for the purpose of this paper, we may refer to the Task Force’s definition, which in fact defines not TPF, but “third party funders”, as follows:

2 The International Council for Commercial Arbitration. 3 The new IBA Guidelines were published on 28 November 2014. 4 This would particularly be the case if the respondents are bringing costly counterclaims or cross-claims.


“The terms ‘third-party funder’ and ‘after-the-event-insurer’ refer to any person or entity that is contributing funds or other material support to the prosecution or defence of the dispute and that is entitled to receive a benefit (financial or otherwise) from or linked to an award rendered in the arbitration.”5

1. The “pro-TPF” view

Those in favour of encouraging and promoting TPF argue that TPF:

a. Provides access to justice in that TPF enables claimants to pursue claims that they would not otherwise be able to afford, thereby facilitating access to justice.

b. Provides financial and operational support in that it is a mechanism through which the claimant can share with the funder the financial risk and operational burden of pursuing its claim.

c. A commercial funder will add value to the arbitration in the form of operational and risk management support by assisting the lawyers and claimant in the due diligence and investigation stage of the arbitration.

d. The presence of TPF can be seen as a guarantee that there is a solid basis for the claim e. Whilst TPF has historically been criticized for exposing respondents to vexatious and

frivolous claims, it is now being argued that TPF would rather tend to filter frivolous and unmeritorious claims as the funders will not be willing to take any risk. In that context, it has been recently observed, in the United States, that funders have threatened to sue claimants they have funded (and their advisers) for fraud and misrepresentation inducing them to provide the funding.6

2. The “anti-TPF” view

TPF has also been criticized for the following reasons:

a. Overwhelming economic power of the commercial funder: When TPF is essential to a claimant’s ability to pursue its claim, a commercial funder may be able to take advantage of their economic power by including unfair terms in the funding agreement. This would be a risk for the claimant because there are no overarching regulations that would control TPF and regulate such behaviors.

b. Conflicts of interest of lawyers: There is a risk that a lawyer may be unduly influenced by a commercial funder under the terms of the funding agreement: the funder would pay the lawyer’s bills and so it is not inconceivable that this may result in the lawyer developing competing interests between its client and the funder as the arbitration progresses.

5 It should be noted that this definition was however adopted in the context of the study of conflicts of interest as between the funders and the arbitrators.

6 http://finance.fortune.cnn.com/2013/01/10/burford-capital-chevron-ecuador/

http://finance.fortune.cnn.com/2013/01/10/burford-capital-chevron-ecuador/


c. Conflict of interest of arbitrators: This could arise in two different situations. E.g. If an individual arbitrator was repeatedly appointed in cases involving the same third party funder. Just like situations where an arbitrator keeps being appointed by the same party, such repeated appointments would raise sufficient concerns to warrant disclosure and raise the possibility of disqualification. Another scenario would involve a situation where the person acting as sole or presiding arbitrator in one case involving a party funded by a third party funder, would also serve as counsel to the claimant in another unrelated case which is funded by the same third party funder. Not only may the funder have participated in the choice of the arbitrator in the first case, but the funder would also be the one paying the counsel’s fees in the second arbitration. Such financial arrangement, as well as possible ongoing contacts between the funder and the arbitrator/counsel raise questions about the arbitrator’s impartiality and independence in the first arbitration. The resolution of the latter scenario seems self-evident, but only if the arbitrator is actually aware of the existence of the relevant funding arrangements. This then give rise to the question of the need for transparency and dis closure, to be discussed below.

B. Issues related to TPF

1. Chances of settlement

It has been postulated that the fact that a party is being funded would lower the likelihood that it would consider settling a dispute as it is not alone in assuming the financial risks of its claim. On the other hand, it has also been argued that if a funding arrangement was disclosed, such disclosure may increase the prospect of respondents wishing to settle future arbitrations as the presence of a funder is a sign that the claim was considered to have a reasonable prospect of success.

2. Confidentiality and legal privilege

Before entering into a funding agreement, a commercial funder will normally conduct a thorough due diligence process. In order to facilitate this process, the lawyer will have to provide the funder with sufficient access to information, subject to the duties of confidentiality owed to his client. It is therefore important for a lawyer to be fully aware of the extent and scope of his duties of confidentiality, which may vary from one country to another.

Commercial funding arrangements also generate difficult questions in relation to “legal professional privilege.” While some funders would avoid obtaining privileged information and written legal analysis from the claimant’s counsel, other funders may seek access to confidential and privileged information. Does such disclosure of privileged information to the funder constitute a waiver of privilege? The answer to that question may depend on the rules


of the jurisdiction where privilege applies, and it might also considerably vary from one country to another.

In that context, the Task Force has decided to investigate whether it would be possible to develop international evidentiary privilege standards that relate to TPF.

Two further recurring questions or issues in relation to TPF are the need for transparency and disclosure of any funding arrangement, and questions about security for costs and to the final allocation of costs.

3. Transparency and disclosure

There has been many debates on the question as to

- whether or not TPF should be disclosed, and whether it should it be a mandatory or a voluntary disclosure.

If the answer is that it should be disclosed, then the remaining questions are:

- to what extent should TPF be disclosed: should the mere existence of a funding arrangement be disclosed or the actual terms of the funding arrangement?

- to whom should it be disclosed: to the tribunal only or to the tribunal and all parties involved?

- and when should it be disclosed: before or at the beginning of the arbitral proceedings, or at some point during the proceedings?

The new IBA Guidelines require that third party funders must disclose their identity, and share the “identity” of the party they are funding.

Standard 6(b) (“Relationships”) of the new IBA Guidelines has been amended so that a

“legal or physical person having a controlling influence on the legal entity or a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration may be considered to bear the identity of the legal identity.”

The explanatory note in relation to this provision clarifies that “third party funders and insurers in relation to the dispute may have a direct economic interest in the award, and as such, may be considered to be the equivalent of that party.”

This revision means that parties who have third party funding arrangements are now expected to disclose the existence of such funding to the tribunal and to the other party(ies) whilst no such obligation existed in the original IBA Guidelines. The new IBA Guidelines do not, however, require the parties to disclose the terms of its funding arrangements.

That way, the new IBA Guidelines’ obligation of disclosure grants parties an insight into their respective abilities to finance the arbitration, and as such could change parties’ assessments as to how they conduct the arbitration and their willingness to pursue or defend their cases to an award.


4. Allocation of costs and security for costs

The presence of TPF is increasingly being raised as an issue in applications for security for costs, as well as in final applications regarding allocations of costs. There are anecdotal reports showing unsuccessful funded claimants who were ultimately unable to pay costs. Indeed, it seems unlikely that the prevailing party could turn to the third party founder to recover its legal costs, and the arbitral tribunal is also very likely to lack jurisdiction to order the third party funder to pay advances on costs.

A stipulation that the third party funder “bears the identity” in the new IBA Guidelines is certain to increase the likelihood of opposing parties either applying for a security for costs order early in the arbitration, or requesting that the tribunal hands down a costs award that is to be enforced against the third party funder as well as the party to the arbitration. It is conceivable that parties may argue that the third party funder can also be considered a party to the arbitration, or at the very least, within the jurisdiction of the tribunal. In light of the recent judgments ordering security for costs against third party funders,7 or that indemnity costs are payable by third party funders,8 in litigation, this revised IBA standard of a funder bearing the identity of the party funded would certainly buttress and encourage such applications.

Concerns have been raised suggesting that funding agreements should be subject to some regulatory control such as in the areas of the method of payment, the payment criteria, the funder’s share in case of settlement, the funder’s degree of participation in the proceedings etc. shall be regulated and controlled.

C. States’ stand on TPF

The participation and investment of third parties in procedural or arbitral claims has for a long time been forbidden both in civil law, where it was reprehensible and punishable by the respective professional associations, and in common law, through the legal doctrine of champerty, barratry and maintenance. Currently, while both stream of legal systems continue to characterize the intervention of a third party as dishonest, in practice there has been a relaxation of these rigid ethical regulations in the context of international arbitration.

Indeed, jurisdictions such as the UK,9 Australia and the US, have moved away from the doctrine of champerty, thereby allowing TPF in international arbitration.

7 See Gavan Griffith QC’s assenting opinion in the ICSID arbitration of RSM Production Corporation v St Lucia. 8 See the English High Court’s 23 October 2014 decision in Excalibur Ventures LLC v Texas Keystone Inc and other [2014] EWHC 3436 (Comm). 9 The UK have not abolished the common law rule on champerty, but it is recognized that TPF is not against public policy.


1. Developments in Singapore

Singapore is currently still in the traditional mould with regard to TPF. Its legislation imposes a general prohibition against providing funding to third-parties in order to conduct litigation. This prohibition has been extended to matters in arbitration.10

There are, however, indications in Singapore that there is some re-thinking. At the end of 2011, the Ministry of Law issued a consultation paper (Consultation Paper of 20 October 2011, the “MinLaw Paper”) seeking views on the review of the International Arbitration Act, a the question on TPF was posed. Then in August 2013, Chief Justice Menon in his speech on “Some Cautionary Notes for an Age of Opportunity” at the Chartered Institute of Arbitrators International Arbitration Conference in Penang spoke of TPF.

The MinLaw Paper, in seeking views as to whether TPF would be appropriate in the context of international arbitration, highlights that other jurisdictions such as the UK, Australia and the US are now allowing TPF in international arbitration. It also sets out the reasons why TPF could be accepted, which include (i) the fact that it promotes access to justice, (ii) that it is better for a successful claimant to be able to recover part of its damages rather than nothing, (iii) that TPF does not impose any financial burden on the opposing party, (iv) and that TPF tends to filter unmeritorious claims as the funders will not be willing to take the risk. The MinLaw Paper also points out the lack of regulation, and sets out some “safeguards” that would minimize potential abuse, if TPF was to be allowed in Singapore.

Chief Justice Menon qualified TPF has being an issue “which [he] believe[s] the community needs to take cognizance of.” He stated that the lucrative business of funding arbitrations is growing rapidly worldwide, and that this trend will surely reach Asia sooner rather than later. He further pointed out that, in the arbitration context, “there is a virtual absence of any form of regulation,” and that such regulations are needed for several reasons:

1. Potential conflicts of interest that are specific to international arbitration:

“[a] potential problem can arise when a funder finances multiple arbitral claims, and where an arbitrator in one of those claims is also the legal representative of the claimant in a separate claim that is being financed by the same funder. In such a case, the funder is essentially the practitioner’s direct paymaster in the case where he is counsel.” […]

and the need for “meaningful guidance […] as to the appropriate obligation on the prospective arbitrator to conduct conflict checks with due diligence and then to make disclosure.”

2. Risk of funders having too much influence over the arbitration proceedings, and becoming, de facto, the party that selects and appoints the claimant’s arbitrator.

10 Singapore Court of Appeal, Otech Pakistan Pvt Ltd v Clough Engineering Ltd and another [2007] 1 SLR(R) 989.


3. In investment arbitration, investors would have nothing to lose by commencing arbitrations against states when they could outsource the costs and risks to a funder. If the investor was to win its claims, then the taxpayers will end-up financing the payout for the successful claim, including the funder’s commission, and if the investor was unsuccessful, the taxpayers would nevertheless end up paying for the costs of a successful defence.

4. Risks emerging from a new market for the sale of the payment obligations that will be owed by the successful claimant to the funder as a chose in action to third party speculator. Such practice would encompass the risk of funders creating “a portfolio of high risk claims, consisting of frivolous and unmeritorious claims, hedged by low risk claims, consisting of claims with a good chance of success,” and sell such portfolio to third party speculators. This would make it possible to benefit from frivolous claims which would not otherwise have a market with speculators if sold individually.

2. Forms of control

If CJ Menon’s prediction that third party funders are likely to move onto the AESAN shores is to be believed, it would mean that ASEAN states too must be ready to meet them before they hit landfall.

ASEAN states should ask themselves what sort of control mechanisms would achieve the equilibrium that will yield the maximum benefit and minimum harm. Control mechanisms could be indirect “light touch” control, or a stronger hand approach by legislation. Indirect control could be in the form of a requirement that TPF players adopt some self-regulation, setting ethical standards, guidelines and best practices. State regulations would then impose indirect control by requiring players to join the membership of such bodies. The downside of such an approach is that it would take longer, with some degree of self-interest, self-preservation and exhortatory statements by interest-based players to be expected. In the UK, TPF players are fast to pre-empt any strong regulatory control, and founded the Association of Litigation Funders of England and Wales which, in 2014, formulated and adopted the “Code of Conduct for Litigation Funders.”11 Though welcomed as an innovative attempt at self-regulating funding practices, it remains a non-binding document and lacks in detail. States should consider whether an indirect soft-control would be sufficiently effective to address the concerns it may have with TPF. Or, should a direct regulatory framework be adopted to address them. The bolder ones may adopt an attitude that perhaps a ‘laissez-faire’ system should be encouraged and hopefully a new balance will evolve with time.

Singapore for one, appears to be conscious but cautious of TPF. Its posture seems to be to consider it for international arbitration (at least for the moment12) but do so with some “safeguards” to minimize potential abuse.

11 A first code was adopted in November 2011 and a second one in January 2014. 12 Within the setting-up of the Singapore International Commercial Court on 5 Jan 2015, the thinking may yet change.


D. ALA’s Role

ALA may assist ASEAN states to study the potential impact of TPF both in international and domestic arbitration. We suggest that considerations be given to the following issues:

Whether there should be limitations or restrictions imposed on the use of TPF e.g.

to certain categories of claims, thereby excluding domestic practice areas such as family law, criminal law etc.?

to certain value claims, setting a threshold based on value of claims, say US$ 10 million

to claims arising from certain sectors of industry disallowed or restricted to e.g. oil and natural resources, investment disputes

to certain funders, thereby limiting the eligibility to TPF and imposing certain standards on the funders.

Whether funders should be deemed a party to the arbitration for purposes of meeting adverse costs/security for costs orders

Code of ethics for funders e.g.

a. Quantum of funding b. Share of return c. Degree of control of arbitration d. Relationship with tribunal members, arbitral institutions, law firms e. Need for transparency and disclosures

Adoption of the IBA Guidelines

Whether securitization of TPF should be permitted (derivative instruments)

The authors would like to point out that whatever the form of national control, its real and perceived effects may not be easily ascertained. Funders and parties may employ choice of law and forum enforcement to void the reach of state regulatory mechanisms. Whether such these issues could be fully addressed is occasion for another paper.

Catering to the consumers – Online Dispute Resolution (“ODR”)

A. What is ODR?

ODR is a category of alternative dispute resolution whereby the process of resolving the dispute is entirely or largely conducted through the Internet. Several modalities fall under the umbrella of ODR, such as e-negotiation, e-mediation and e-arbitration, and these can be deployed in sorting out a wide range of disagreements including business-to-business (“B2B”) and business-to-consumer (“B2C”) as well as, as was more recently added, consumer-to-consumer (“C2C”) disputes, at a cost that is proportionate to the amount in dispute.


The term “ODR” is not subject to universal agreement over its meaning and scope. ODR is described by some as ‘technology-assisted dispute resolution’, by others as ‘technology-facilitated dispute resolution’, and by still others as ‘technology-based dispute resolution schemes’. The metaphor most commonly used to explain ODR is the ‘Fourth Party’,13 a phrase meant to indicate that ODR makes technology a presence, sometimes minor and sometimes major, in dispute resolution processes.

ODR is traceable back to the late 1990’s, when courts were beginning to struggle with jurisdictional questions such as where an event occurred if parties were in different places and were interacting online.

The era of ODR has thereafter mostly paralleled the development and use of the Internet. As such, the range of online interactions as well as the range of disputes began to grow significantly in the mid-90’s, simultaneously with the launch of Amazon and eBay in 1995, the increase to broadband access and the rise of mobile commerce throughout the world. Since then, the number of disputes stemming from online activities never stopped growing, reaching greater numbers than anyone predicted. For example, eBay itself claimed to have handled over sixty million disputes during 2010.

In that context, the future expansion of B2B and B2C electronic commerce depends on the level of confidence of the users when making online transactions, including in the mechanisms available to solve any dispute that may arise from their transactions.

The time-consuming and expensive recourses to courts or to international arbitration established for more complex disputes, are clearly not adapted to the vast majority of these cross-border disputes. ODR has therefore emerged as a desirable and expeditious option for the resolution of small-value, high-volume disputes.

B. How is ODR being administered?

1. Private sector initiatives

Various private entities have tried to launch specific websites for ODR, but these types of efforts usually proved unsuccessful. The reasons behind this lack of success are, on one hand, that customers are still not so familiar with ODR and, on the other hand, that very few rules define the operation and effects of such procedures.

Another way in which ODR has developed is through network transaction platforms which have been able to establish their own internal complaint mechanisms to resolve costumer complaints. Such mechanisms however primarily aim at dispute avoidance, and may not be able to replace appropriate ODR mechanisms which aim at resolving disputes.

For example, the International Centre for Dispute Resolution (“ICDR”) developed a ‘Protocol’ for Manufacturer/Supplier Disputes (for B2B disputes) with General Electric (“GE”) in 2009,

13 E. Katsh and J. Rifkin, Online Dispute Resolution: Resolving Conflicts in Cyberspace, Jossey-Bass, San

Francisco 2001.


which was initially aimed at resolving fairly and quickly GE’s large volume of supplier-manufacturer small claims (“the ICDR Protocol”). The system can be described as follows: the request for resolving a dispute online is initiated via an application called “webFile”, followed by online negotiation; in case of failure to settle, ODR is initiated on the basis of the documents already submitted via “webFile.” Engineers serve as adjudicators. A brief reasoned award is rendered within 30 days from the appointment of the arbitrator. Today, the ICDR Protocol is no longer restricted to online cases related to GE, but is now available as a general protocol to apply to the online resolution of manufacturer/supplier disputes generally.

Another private initiative is the eBayPayPal platform, which includes an ODR centre where parties can attempt to solve problems which might arise during the transactions. It is based on the principles that the system offered to the parties must be fair and predictable, the resolution must be quick, and policies clear. It also insists on the fact that enforcement is essential to success, and that refund should come through the same money transfer channel as the original payment.

2. Arbitration centres

In Asia, the CIETAC adopted Online Arbitration Rules in 2009. This has been one of the major breakthrough in the promotion of ODR. The Rules aim at independently, impartially, efficiently and economically resolve, by means of online arbitration, disputes arising from economic and trade transactions of a contractual or non-contractual nature, and shall apply to the resolution of e-commerce disputes.

The HKIAC has also been involved in promoting ODR, and it has adopted Electronic Transaction Arbitration Rules since 2002. The Rules aim to help parties and arbitrators take maximum advantage of the flexible procedures available in arbitration for the resolution of disputes quickly and economically. There is however no case statistic as to whether such a procedure have in fact been used.

C. Challenges of ODR

The challenges surrounding ODR include finding tools that can deliver trust, convenience and expertise for many different kinds of conflicts.

1. Technical challenges

Such challenges relate to the ability to create (a) a system which is able to continue functioning effectively as the number of cases increases, and (b) a central structure that ensures that all the various endpoints of the network can communicate in real time with each other. Another major challenge to the development of ODR is the absence of the online environment and infrastructure in certain countries.


2. Cultural and linguistic challenges

Cultural and language barriers should be taken into account. Technology and ODR systems should be adapted to local conditions and cultures, and the nature and types of disputes prevailing in a given society should be given consideration.

3. Legal challenges

E-commerce and ODR trigger questions in relation to the applicable law to the dispute, the forum of the dispute, as well as questions as to the enforcement process, and the form of any judicial review. Other issues also stem from the formal requirements contained in national and international arbitration laws and conventions. Legal challenges are more specific to business-to-customer dispute, and to the difficulty of having a global definition of ‘consumer’, and of designing a global dispute resolution system which would be fully compliant with due process requirements of all countries and able to provide fair results to all parties involved.

Indeed, the regulatory frameworks for e-commerce vary among countries. Some countries use generic regulation on consumer protection to address e-commerce issues, while others have adopted regulation dealing specifically with e-commerce and consumers, and consumer rights and obligations may vary considerably from one jurisdiction to another.

D. The UNCITRAL Initiative

The UNCITRAL Working Group III (Online Dispute Resolution) (“the UNCITRAL Working Group”) recommended in 2010 that ODR in cross-border e-commerce transactions be the subject of future work, including on

(1) the drafting of procedural rules for ODR, (2) the possibility or desirability to have a single database of certified ODR providers, and (3) the issue of enforcement of awards made through ODR process.

When the UNCITRAL Working Group submitted its proposals, it highlighted that, inter alia, proposals for regional ODR systems were in the process of being developed and that it was therefore timely to deal with the matter at an international level from the outset in order to avoid inconsistent regional developments.

Today, there are two well advanced sets of draft rules (Track I and Track II, as we will see below) (“the Rules”), which were drafted on the basis of some guiding principles.

1. Guiding principles for the establishment of rules or principles to support a global ODR mechanism

The UNCITRAL Working Group has been working on the draft Rules on the basis of the following principles:


a. Rules of procedure

Buyers should be able to choose to attempt resolution of the dispute directly with sellers before resorting to any formal redress systems. As such, sellers should provide access to buyers through a customer satisfaction systems or any other means.

The adoption of uniform rules to remove obstacles to the use of electronic communications in international contracts would enhance legal certainty and commercial predictability.

ODR personnel and decision makers should be impartial, and should possess sufficient skills and training. Decision makers must disclose any potential conflicts and parties must have the opportunity to object to a decision maker within a reasonable time after the appointment.

The ODR system should offer dispute resolution methods and remedies that are suitable to the nature of the disputes.

ODR systems should be easily accessible, user-friendly, efficient, timely, transparent and low-cost to the consumer in case of B2C or C2C disputes.

With regard to B2C disputes, ADR dispute resolution officers may decide in equity and/or on the basis of codes of conduct, also taking into account the general principles common to the laws of the member State of the United Nations and usages which are widely known to, and regularly observed by, parties to contracts of the type involved in the particular transaction concerned. Such flexibility as regards to the grounds for the decisions would provide an opportunity for the development of high standards of consumer protection worldwide.

ODR providers should refer disputes to the relevant law enforcement authorities when they have reason to believe that there may be fraud, deceit or patterns of abuse on the part of the Internet merchant.

b. Information to be provided

Potential buyers should be fully informed about the conditions of access to the ODR system at the time the transaction is concluded (including, costs, type of ODR etc.).

Sellers should provide buyers with information regarding ODR providers with which a claim can be filed. Such information could for example be provided by reference to a code of conduct or in the general sales conditions.

c. ODR providers

ODR providers should be accredited by third party accreditation associations or national consumer agencies applying a universal set of criteria.


There should be close cooperation between the public and private sector to achieve a satisfactory global ODR system, particularly with regard to enforcement.

ODR providers should provide sellers and buyers with sufficient information to allow an informed choice about participating in ODR, including methods of dispute resolution used, fees, available remedies, expected time frames etc.

2. The UNCITRAL Draft Rules

The UNCITRAL Working Group has since drafted two sets of generic procedural rules for ODR, which are aimed to address B2B and B2C, cross-border, low-value, high-volume transactions. The two sets of rules are presented as two-track system, as follows:

- Track I, which was designed to apply to jurisdictions in which agreements to arbitrate concluded prior to a dispute are considered binding on consumers, would end in a binding arbitration phase (“Track I”), and

- Track II, which was designed to apply to jurisdictions where pre-dispute arbitration agreements are not considered binding on consumers, would not end in a binding arbitration, but rather with a ‘recommendation’ by the neutral (“Track II”).

Both drafts of Track I14 and Track II15 although at an advanced stage of drafting are still under consideration in UNCITRAL. They thus remain as drafts.

Some of the points that are being currently considered by the UNCITRAL Working Group are, for example:

- Technological neutrality: in terms of communications, for example, it is being considered that all communication – except perhaps from the notice – be made over a platform rather than by email.

- Including definitions of the entities involved, i.e. ‘the ODR platform’ and ‘the ODR administrator’. In relation to these entities, it is also considered whether it would be appropriate to set out their respective roles in the Rules or if the Rules rather ought to create a clear procedure addressed to the end-users.

- Timelines: the UNCITRAL Working Group is considering having a generic provision that would ensure that the proceedings would conclude within a certain time, but the Rules would leave it to the administrator to set the timelines for the different stages of the procedure.

- Drafting of a model dispute resolution clause: in the current draft, the UNCITRAL Working Group states that the model clause ought to specify (1) both the ODR administrator and the ODR platform, (2) whether the proceedings are under Track I and Track II, (3) the electronic address of the ODR platform, and (4) the language of

14 A/CN.9/WG.III/WP.133. 15 A/CN.9/WG.III/WP.130.


the proceedings. The model clause is still under consideration as to whether any other information ought to be included.

One of the major differences between Track I and Track II is obviously that Track II is intended to have a non-binding effect. In that regard, two points have been made: (i) it is being considered that the parties may opt for the neutral’s ‘recommendation’ to be binding, and (ii) nothing prevents the disputing parties from pursuing additional or concurrent judicial remedies alongside an ODR claim under Track II proceedings.

E. Regional Initiatives

1. OECD initiative

The Organization for Economic Cooperation and Development OECD has adopted, inter alia, a “Recommendation on Consumer Dispute Resolution and Redress”16 in 2007 (“the Recommendation”) which covers mechanisms for (i) resolving consumer disputes and (ii) facilitating redress for economic harm resulting from B2C transactions (online and offline) for goods and services. The Recommendation identifies the different categories of mechanisms which should be made available to consumers at domestic and cross-border levels such as individual actions, collective actions, and government obtained monetary redress.

In addition, in 2009, the OECD Committee on Consumer Policy launched a review of the 1999 E-commerce Guidelines with the intent to update the Guidelines, which may entail the review of related instruments.

2. EU initiative

The European Commission maintains a central database of alternative dispute resolution bodies for consumer complaints, which were considered to be in conformity with the European Commission’s Recommendations on Dispute Resolution.

In addition, the EU has been considering an optional instrument for resolution of B2C transactions referred to as the “Blue Button”. The proposed “Blue Button” ODR system would not be applicable automatically. Adoption of this procedure would be made by party agreement. For instance, a seller could display on the e-shop website an icon indicating that the client could agree by clicking on the “Blue Button” to make the substantive and procedural legal principles contained in the optional instrument applicable to the transaction concluded between the parties. Such online procedure would facilitate expeditious and economical resolution of disputes based on the agreement of the parties and thereby eliminate the need to resolve difficult problems such as those pertaining to jurisdiction and applicable law.

Another option, which the EU considers as an alternative to ODR, would be the adoption of a simplified fast-track procedure, similar to the “European Small Claims Procedure.”

16 OECD Recommendation on Consumer Dispute Resolution and Redress adopted by the OECD Council on 12 July 2007. Recommendation developed by the OECD Committee on Consumer Policy (CCP).


3. Organization of American States (OAS)

An option considered by the OAS was to create a multi-state electronic system to provide negotiation, facilitated settlement, and arbitration for certain cross-border consumer e-contract claims on the basis of a cooperative framework agreement and model rules. Under this system, a consumer/buyer would be able to file a cross-border complaint online against a registered vendor in another participating State. During the negotiation phase, the buyer and vendor would be allowed to exchange information and proposals and negotiate a binding settlement through electronic means. If an amicable settlement cannot be reached, the case could then be brought to the arbitration phase and a qualified online arbitrator would be appointed by a government-approved authority where the vendor is located. The decision would be rendered by the online arbitrator based on the parties’ submissions and the decision would be final and binding.

F. National initiatives

States have also embarked on various initiative to encourage the use of ODR.

In China, where electronic commerce has been one of the fastest growing industries, the ODR system, apart from those one dealing with domain names, include:

1. the Online Dispute Resolution Centre, set up by China’s E-commerce Laws Nets and Beijing Deofar Consulting Ltd., which offers information exchange platform and solving disputes related to electronic commerce;

2. the Internal Complaint Mechanism, which refers to the system established by the provider of the network transaction platform and used to accept consumer complaints and settle disputes through consultation; and

3. the Online petitions, which are adopted by many non-profit organizations such as China’s Electronic chamber, electronic Commerce Association of Beijing and e-commerce Industry Association of Shanghai.

Some State courts also offer litigant the possibility to resolve, through mediation, their disputes arising in the context of Internet transactions e.g. in France, the “forum des droits sur Internet”, an entity set up with the assistance of the French public authorities, signed a protocol with the Court of Appeal of Paris in 2009 for the settlement of disputes arising in the context of Internet transactions. That Protocol applies to consumer disputes, and provides for mediation. Parties may at any time refer the matter back to the competent court of first instance.

G. ALA’s Role

As we have seen above, private initiative – except by the largest network transaction platforms – do not seem as successful as government-supported ones. State support appears to be the key to implementing effective and ODR mechanisms.


Due to the underlying cultural, political and legal complexity of online disputes, a global ODR system based on general principles and generic rules of fairness and commercial practices, may need to be formulated and then be adapted to specific local needs.

Towards this end, UNCITRAL recommends that in developing the policy for promoting online dispute resolution, account should be taken of the following:

treat as a priority education and awareness raising among merchants and consumers regarding the impact and increasing importance of online dispute resolution in resolving commercial disputes;

ensure that national legislation recognizes the validity and enforceability of electronic transactions and facilitates the use of out-of-court dispute settlement schemes;

enhance cooperation and exchange among ODR providers; promote voluntary adherence by e-business to reliability programs; and

give sufficient attention to cultural and linguistic differences.

As a first step, ALA members should undertake a study of each of our home and consider:

Adopting the UNCITRAL Model Laws on Electronic Commerce and Electronic Signatures as domestic legislation. This contains provisions on electronic payments, electronic contracts (including consumer protection) and matters relating to applicable laws and jurisdiction. As more states do so, the legal framework on electronic commerce among member States would be largely harmonized; and

Adopting the UN Convention on the Use of Electronic Communications in International Contracts 2005 which came into force on 1 March 2013. The provisions of this Convention has direct cross-referenced provisions to the New York Convention 1958 (“NY Convention”). Singapore and the Philippines are both signatories to this Convention. Singapore has ratified it and the Philippines have yet to do so.

With a common baseplate for electronic transactions, cultural and linguistic differences are minimized which itself lead to less disputes, and where disputes arise a common platform is then available for their resolution.

As the next step ALA members could initiate within each of our home states, a study of the current ODR legal framework and consider the initiatives currently being implemented elsewhere. Particular attention should be given to the UNCITRAL Initiatives including the draft UNCITRAL Online Dispute Resolution Rules, and actively give feedback through ASEAN member representatives to UNCITRAL so that in the finalization of these rules, the concerns and experience of ASEAN would also be considered.


Role of courts in strengthening enforcement regimes for arbitral awards made within ASEAN

ALA members and ASEAN state courts have always been keen supporters of the international arbitral process. Yet the degree of national court support could vary not just from state to state but also within each state, where courts at different levels and regions could still act without the benefit or knowledge of the treaty obligations of the state.

National courts have many opportunities to intervene at different stages of arbitration proceedings. Curial intervention in support of the arbitral process is often welcome but interference with the arbitration displays a lack of confidence the arbitral process, reflecting a tension between the courts and the tribunal.

A. Enforcement of agreements to arbitrate and applications for stay of proceedings

This is one of the most common remedy sought by parties during the initial stages or before the commencement of an arbitral proceeding. It usually happens when a party to an arbitration agreement files suit in court in relation to a dispute within the scope of such arbitration agreement. The other party to the arbitration agreement will then apply for a stay of the court proceedings on the basis that there is a valid arbitration agreement and that the dispute should therefore be resolved by arbitration.

Multiple reasons may be cited to seek such a stay including the non-existence of an agreement to arbitrate, the uncertain intention of the parties, the conflicting references to institutions, rules, choice of jurisdiction, choice of laws, seat; conditions-precedent not having been accomplished; illegality and public policy reasons. Whatever may be the reasons, the court is asked to rule that the arbitration agreement is “null and void, inoperative or incapable of being performed” under Article 8 of the UNCITRAL Model Law or Article II(3) of the NY Convention.

he positive imperative under both Article 8 of the UNCITRAL Model Law and Article II(3) of the NY Convention is for the court to “refer parties to arbitration”. This is the baseline. It is only in a situation where the party (who is seeking to resist going to arbitration and insist on continuing with the court proceedings) shows that the arbitration agreement is “null and void, inoperative or incapable of being performed” that the court should consider continuing with the court process. Often, however, this could be overlooked and the courts allow themselves to require the applicant for stay to prove, like in a trial, that the agreement is NOT “null and void, inoperative or incapable of being performed”.

The English Court of Appeal in Albon v Naza [2007] EWCA Civ 1124 (lower court decision in Albon v Naza Motor Trading Sdn Bhd (No 3) [2007] 2 Lloyd's Rep. 1 and 420 – Lightman J) is one example where the court of appeal affirmed the decision of the lower court in not only refusing a stay but in also granting an injunction against the KLRCA arbitral tribunal from proceeding with the arbitration, on the basis that it was the English court that would be the


final judge to determine the validity of the arbitration agreement because a stay of the English action was applied for by Naza. The court’s ruling that the JVA was forged was affirmed by the court of appeal, which declared it null and void and decided that the English court had jurisdiction.

Serious questions arise for some thinking through in this decision: who should ultimately decide the validity of the arbitration agreement?

- The court of the place where the stay application is made? Like in Albon v Naza – the English court? If so, this would lead to anomalous situations where a party who wants to resist the arbitration simply chooses to commence action in a court of its choice, like Albon in this case – England.

- The Tribunal? - The court of the putative seat? (where the award, if any, is to be made? - Is the decision of the English court binding on the KLRCA Tribunal and, subsequently,

on the Kuala Lumpur Court?

These questions bring about issues of res judicata and issue estoppel. It also challenges us to consider whether the role of the court before which an application for stay of that court’s action is pending has a right to conduct a full-review of the validity of the arbitration agreement or a mere prima facie approach. If they adopt of full-review approach, the existence or validity of the arbitration agreement will be determined by the court based on its own finding of facts, and the court’s decision will therefore have a res judicata effect. If the court rules that the arbitration clause is valid, such ruling will be binding on the tribunal, and the tribunal will not be able to decide otherwise.

Most jurisdiction which are genuinely supportive of international arbitration (as opposed to those that supports arbitration only within its own territory) would adopt a prima facie approach to review the validity of arbitration agreements when acting under Art 8 of the UNCITRAL Model Law (“MAL”) or Art II(3) of the NY Convention. Such an approach also comports with Article 16 of the MAL, which empowers the tribunal to make its own finding of jurisdiction including on the validity of the arbitration agreement.17

It will indeed be desirable that there is a common understanding among state courts within ASEAN states on this issue for despite the different roots of legal system, we are united by the NY Convention.

B. National courts and Interim measures

The power of ordering interim measures is dependent on the domestic constitution and legislation in each jurisdiction. Some state courts have in respect of international arbitration, specific powers to grant such interim relief. Such powers may or may not also be given to

17 This is the approach that has been adopted in Singapore in Piallo GmbH v Yafriro International Pte Ltd [2014] 1 SLR 1028.


arbitral tribunals concurrently. The MAL supports such an approach – see Chapter IV, (2006 Rev), Article 17J.

Interim measures, if available, could cover injunctive relief prohibiting a party from dissipating assets, destruction of evidence, or destruction of subject matter, security for costs, securing amounts in dispute, and to enforce pre-arbitration disclosure.

Within ASEAN, several states have adopted the MAL but not all have adopted the 2006 version. Singapore too has yet not done so. That, however, is not because it did not believe in giving tribunals the power to grant interim measures, but because it already (before the 2006 MAL amendments) had given the tribunal wide powers to do so. The 2006 MAL Chapter IV is narrower than that provided for in Singapore.

Within ASEAN, there is currently no mechanism for the enforcement of interim measures made by courts or by an arbitral tribunal. This is because an interim measure, however labeled, is not an award and thus not capable of enforcement under the NY Convention. It is highly desirable that a mechanism be put in place to address this.

An ASEAN convention would be ideal, but a simple protocol or agreement of cooperation on this specific issue amongst ASEAN State courts could do just as well. ALA, on its part, could also formulate a set of guidelines along the terms of Art 17(H) and (I) of the MAL 2006 to facilitate the enforcement of orders for interim measures made within ASEAN.

Article 17(H)(1) of the UNCITRAL Model Law which provides that:

“(1) An interim measure issued by an arbitral tribunal shall be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court, irrespective of the country in which it was issued, subject to the provisions of article 17 I.”

The grounds for refusing recognition or enforcement of interim measures ordered by an arbitral tribunal are thereafter strictly limited under Article 17(I) of the UNCITRAL Model Law, which reflects the NY Convention’s grounds for refusing enforcement of awards.

C. National courts and arbitral Awards

State courts have the power to enforce and refuse enforcement of arbitral awards. Within ASEAN this is primarily governed by the NY Convention. There is sometime a confusion between the power to refuse enforcement and the power to vacate or nullify an award under a state’s domestic laws.18

While a state court may have power to vacate or nullify an award made within its state’s jurisdiction, it does not have the power to do so in relation to an award made out its state.

18 See CLOUT Case 817: Philippines: Supreme Court, Special Second Division KOREA TECHNOLOGIES CO. LTD, Petitioner, v. HON. ALBERTO A. LERMA et al. “Foreign arbitral award is subject to judicial review by the RTC, which can set aside, reject or vacate it under sec. 42 in relation to sec. 45 of RA 9285 on grounds provided under article MAL 34 (2).”


The court’s power under the NY Convention is limited to refusing enforcement of that award and not nullifying it (see Article V(1)). This difference defines the relationship between the court of the seat and the court of enforcement: an award can be set aside where it was made.

Under the NY Convention, a party seeking the enforcement of an arbitral award no longer has to prove compliance with various conditions. It only has to satisfy the requirements of Article IV of the NY Convention, which constitute prima facie evidence that it is entitled to obtain enforcement of its award. It is then for the resisting party to prove that enforcement should not be granted.

It is worth noting that under the NY Convention, even if the grounds for refusal of recognition and enforcement are proved to exist, the court of the enforcement State is not obliged to refuse enforcement, and still has the discretion to enforce the award. This is reflected by the permissive rather than mandatory language used in Articles V(1) and V(2).

Each and every State must also interpret properly the basic principles of the NY Convention, and implement them in its domestic legislation in order to establish a solid base for the enforcement of arbitral awards in its country and, thereby, throughout ASEAN.

Undergirding the NY Convention is the pro-enforcement policy of upholding the award made by a tribunal of adjudicators agreed to by the parties rather than refusing to do so. This would require a mind-set change for most judges who often see arbitral tribunals as subordinate courts whose decision it is duty-bound to scrutinize. There is no need for the court to align its views with that of a tribunal chosen by or on behalf of the parties. In enforcing the awards made, the court is doing no more than enforcing the parties bargain. It could, of course, check for and ensure the agreed process has been adhered to and each party was given the right to be heard and due process ensured. Beyond that, the court’s judgment must not be seen to be superior to that of the tribunal. In any event, justice is never an exact science and if fault-finding is the object or role of an enforcement court, many awards could be refused enforcement for arbitrators, as humans do fail.

Some underlying principles to be borne in mind by enforcement courts are:

- The burden of proof lies with the party resisting enforcement. Under Article V(1) of the NY Convention, it is for the respondent to prove the existence of the grounds for refusal as set out in Article V(1), and not for the party applying for enforcement to prove some kind of compliance.

- There should be no review of the award on the merits. Both the NY Convention and the MAL discourage any form of judicial review of arbitral awards on the substance of the case. On this point, there may be argument that the review of arbitral awards on the merits could be necessary in order to protect the parties against any glaring mistake of law, but the decision of the court would then override the decision of an arbitral tribunal that was specifically chosen by the parties, thereby violating the principle of party autonomy. It is for that reason that both the NY Convention and the MAL came down strongly on the side of the finality of the arbitral process, thereby excluding appeals on the merits of the case.


- Construe the grounds of refusal narrowly. Indeed, the existence of the grounds enumerated under Article V(1) and (2) of the NY Convention should only be accepted in serious cases, and respondents should not be allowed to resist enforcement on trivial grounds.

D. The ALA 2011 Guidelines on Best Practices on the Enforcement of Arbitral Awards in ASEAN (“the ALA 2011 Guidelines”)

In terms of form requirement under the NY Convention, ALA had done well to have instituted the “ALA 2011 Guidelines on Best Practices on the Enforcement of Arbitral Awards in ASEAN” in Hanoi, Vietnam (“the ALA 2011 Guidelines”).

The ALA 2011 Guidelines set out the principles that ASEAN countries agreed to try to implement in their own domestic legislations in 2011, and encourage all ASEAN States to try to use, adopt or implement them as soon as practicable if this has not already be done.

The ALA 2011 Guidelines set out three principles, which may be superseded by any more favorable provisions under any ALA country’s national legislation or under bilateral or multi-lateral treaties entered into by ALA member States in relation to the recognition and enforcement of arbitral awards (Section IV). As many may not be familiar, we describe them here with some length.

1. The ‘agreement in writing’

Section I is about the recognition and enforcement of arbitration agreements, with a focus on the definition of ‘agreement in writing’. The ASEAN 2011 Guidelines encourages the member States to recognize that Article II(2) of the NY Convention shall not be interpreted literally, but in a rather expansive and purposive way, including to mean an agreement to arbitrate made via electronic communications. This recommendation reflects the change made to the MAL in 2006.

2. ‘Authentication’ or ‘certification’ of the award

Section II refers to Article IV of the NY Convention, and more particularly to the terms employed therein, i.e. a ‘duly authenticated’ or ‘duly certified’ award. Article IV does not prescribe the method or standard of authentication or certification, which has therefore resulted in differing practices and different requirements imposed by the enforcement courts.

In that context, the ALA 2011 Guidelines encourages each state to appoint one or more competent body for the purpose of such authentication. A list of such bodies shall then be maintained by the ALA Secretariat and published on the ALA website, and any authentication by a competent body as listed on the website shall be deemed to satisfy the requirements of Article IV.


3. The ‘certified translation’ of the award and accompanying documents

Article IV of the NY Convention also requires that the award be translated into the language of the enforcement court. The ALA 2011 Guidelines recommends that, taking into account the international nature of commercial arbitration, and to ensure consistency amongst ASEAN States, documents and other materials be, where practicable under the applicable law, in English or, if in another language, accompanied by a certified English translation.

The ALA 2011 Guidelines further states that ‘certified translation’ shall mean translation by a competent translator normally accepted by the enforcement court or, if such translation cannot be obtained, a translation obtained under the auspices of the ALA Secretariat upon payment of a fee.

The ALA 2011 Guidelines serves an example of how ALA could play an important role in improving the atmosphere of dispute resolution within ASEAN. It was a first baby step to contribute to the healthy harmonization of law and practice. It is hope that with time the ALA 2011 Guidelines will be implemented by ASEAN states into their domestic legislation.

E. ALA Role

Taking the cue from the ALA 2011 Guidelines, ALA could also consider initiating yet another protocol to identify the areas in which ASEAN state courts could access best practices in exercising the power of enforcement of arbitral awards under the NY Convention. This could be a separate protocol or be merged with the recommendation for a protocol on enforcement of interim measures setting out the principles for:

- Granting stay of court proceedings in favour of arbitration – whether courts should conduct a trial and examine grounds fully; whether in doing so, court should adopt a full review or a prima facie review

- A regime for the enforcement of interim measures orders made by courts and arbitral tribunals

- Guidelines and best practices in exercising power to enforce or refuse enforcement under the NY Convention

Enforcement of Mediated Settlement Agreements

The use of mediation (or conciliation which term is preferred) to resolve disputes is growing throughout the world. Within ASEAN, many member states have court-annexed schemes as well as independent mediation systems. Most of these19 are however aimed at tackling domestic rather than being concerned with matters involving parties outside their state. There are good reasons for this divide and for the relative lack of following when matters are

19 The Singapore International Mediation Centre was launched recently in November 2014 with the aim of addressing such disputes.


of an international nature. This is primarily due to the ambiguity and uncertainty of the enforcement of the successful outcome of mediation.

The existing insecurity in relation to the enforcement of mediated settlements is a major impediment to the globalization of mediation, and it is only natural that parties are reluctant to put their trust in a process when there is no guarantee in relation to the end result.

With those concerns in mind, the UNCITRAL Working Group II (Arbitration and Conciliation) (“the UNCITRAL Working Group”) recently proposed that work be undertaken towards drafting a multilateral convention on the recognition and enforcement of international settlement agreements achieved through mediation (no draft of the proposed convention is available as of January 2015).

Interestingly, another group of academics in Australia20 who have been studying this weak link in mediation since 2012 and have met on occasions to consider possible solutions. This pique the interest of Taiwan Supreme Court Justice (Prof) Lo Chang-fa who presented a draft “Convention on Cross-Border Enforcement of International Mediated Settlement Agreements” at the 2014 Taipei International Arbitration and Mediation Conference (“the Taipei draft”)21.

Meanwhile, the International Mediation Institute conducted a survey22 in October and November 2014 to assess the extent to which a convention on the enforcement of mediated settlement agreement would be desired. The survey’s results showed an overwhelming enthusiasm. Those results were further corroborated by a vote23 that took place amongst over 150 delegates from over 20 countries in October 2014, where 73% of the delegates voted in favor of having an international convention that would ensure that any mediated settlement agreement could be automatically recognized and enforced in all signatory countries, whilst 13% remained neutral and 14% disagreed.

These are all indications that there is an enhanced recognition of a need for a specific instrument dedicated to the enforcement of cross-border settlement agreements. It would be timely that ASEAN states consider the steps that could be taken to flow alongside.

A. Existing mechanisms for enforcement of settlement agreements

1. UNCITRAL MLICC

The UNCITRAL MLICC contains a provision (Article 14) which explicitly deals with the enforcement of settlement agreements obtained through mediation:

20 Led by Prof Laurence Boulle and Asst Prof Winnie-Ma, Bond University, Queensland, Australia. 21 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535497 22 https://imimediation.org/cache/downloads/axdwvrp2rp4www0sgc48c0wk0/IMI%20UN%20Convention%20on%20Enforcement%20Survey%20Summary%20(final)%2027.11.14.pdf 23 The vote took place during the Convention on Shaping the Future of International Dispute Resolution held in London on 29 October 2014.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535497

https://imimediation.org/cache/downloads/axdwvrp2rp4www0sgc48c0wk0/IMI%20UN%20Convention%20on%20Enforcement%20Survey%20Summary%20(final)%2027.11.14.pdf

https://imimediation.org/cache/downloads/axdwvrp2rp4www0sgc48c0wk0/IMI%20UN%20Convention%20on%20Enforcement%20Survey%20Summary%20(final)%2027.11.14.pdf


“If the parties conclude an agreement settling a dispute, that settlement agreement is binding and enforceable… [the enacting State may insert a description of the method of enforcing settlement agreements or refer to provisions governing such enforcements].”

Whilst the MLICC provides for a principle of enforceability of mediated settlement agreements, its impact is nevertheless limited because:

(a) it does not provide for any method of enforcement and rather leaves it to the Member States;

(b) it will only apply to Member States that explicitly provide for such a possibility in their domestic law;

(c) the vast majority of states have not yet enacted special provisions on the enforceability of mediated settlement agreements.

Article 14 of the MLICC thereby only reflects “the smallest common denominator between the various legal systems”,24 i.e. the general aim towards enforcement, but it stops there, probably at the realization that the methods for achieving such enforcement varied greatly between legal systems and that harmonization may not be an easy task.

2. EU DIRECTIVE 2008/52/EC

On 23 April 2008, the EU Directive 2008/52/EC,25 which is exclusively applicable to cross-border disputes, was approved by the EU in order to try to overcome the lack of consistent legal framework for mediation among the Member States. Articles 6(1) and 6(2) deal with enforcement, and state as follows:

6(1) “Members States shall ensure that it is possible for the parties, or for one of them with the explicit consent of the others, to request that the content of a written agreement resulting from mediation be made enforceable. The content of such an agreement shall be made enforceable unless, in the case in question, either the content of that agreement is contrary to the law of the Member State where the request is made or the law of that Member State does not provide for its enforceability.”

6(2) “The content of the agreement may be made enforceable by a court or other competent authority in a judgment or decision or in an authentic instrument in accordance with the law of the Member State where the request is made.”

Whilst the Directive is a great step towards harmonization, it is however disappointing that:

(a) the first sentence of Article 6(1) subjects the enforcement to the consent of all parties; and

(b) Article 6(2) uses the term “may” rather than “shall.”

24 Para. 88 of the Guide to Enactment and Use of the MLICC. 25 EU Directive on Certain Aspects of Mediation in Civil and Commercial Matters by the European Parliament.


The proposed enforcement mechanism of mediated settlement agreements as court judgments also presents some disadvantages.

3. National legislation

In the absence of any specific statutory framework for the enforcement of mediated settlement agreements, parties are left only with the right to sue for a breach of the contract (viz. the settlement agreement). Such a course may be burdensome and time consuming and at times involve trials if defences such as duress, mistake, incapacity, lack of authority, fraud etc. were to be raised.

a. As court judgments

Legislation may also allow for the enforcement of a mediated settlement agreement as a judgment of the court (as a consent judgment). This is the method contemplated by the EU Directive. This then creates lingering difficulties in the enforcing of judgments in a foreign jurisdiction, which invariably requires reciprocal recognitions of judgments.

b. As an arbitral award

A mediated settlement agreement converted into an arbitral award has the great advantage of enforcement under the NY Convention. Many institutions have a Med-Arb process where a mediation precedes the arbitral process such that when a settlement is reached, the agreement is then couched in the form of a consent award with either the mediator sitting as arbitrator or to another person to act as arbitrator.

Apart from practical difficulties like if there be no arbitration on foot, and the parties then have to start one and appoint an arbitrator in order to have their settlement embodied into an award, there is doubt as to whether a ‘consent award’ so made is indeed an award that could be given recognition and enforcement under the NY Convention. There are indeed sounds reasons why such an approach, although well-meaning, is flawed and fraught with danger. For one, how could arbitration be properly commenced when there is no longer any dispute as the same has been settled?26 Then there is the question of how an arbitrator could be appointed merely to “rubber-stamp” the award. Would that not offend the principle that the arbitrator must exercise his own mind on all matters entrusted to him?

c. Arb-Med-Arb and the ‘Singapore Clause’

A solution which seems to have answered all of these questions has recently been implemented by the Singapore International Mediation Centre (“SIMC”) which introduced a “Singapore Clause” which proposes the ARB-MED-ARB process (“AMA Protocol”).

Under this process, before the mediation process begins, the parties are to formally file an arbitration claim, have an arbitrator appointed, preferably prepare outline pleadings, and

26 Bermuda, India, or Texas and California which have statutes providing for settlement agreements to have the same legal effect as arbitral awards. There is of course no question that such laws enable the enforcement of the “awards’ within that jurisdiction. That is not the issue under discussion here.


then apply to the arbitral tribunal for a formal stay of the arbitral proceedings to allow for a mediation to take place. There could then be no doubt that arbitration proceedings have formally begun before the mediation process is initiated. If the mediation results in a full settlement, the parties may then apply to the tribunal to reflect the settlement in the form of a consent award to comply fully with the enforcement provision of the NY Convention. If the mediation does not result in a full settlement, then the parties may proceed with the arbitration of the dispute (or such elements of the dispute that are not covered by a partial mediated settlement).

By this AMA Protocol, the parties are already in the arbitral process and any settlement reached being then referred back to the arbitrator addresses both the questions of the constitution of the tribunal and of the pre-existence of the dispute prior to the commencement of arbitration. The arbitrator under this process remains empowered to decide whether to sanction the agreed terms as an award. An award by consent thereby satisfies all the requirements under Art 30 of UNCITRAL MAL. Admittedly this process remains untested before any court of law. It has thus far been received very positive and encouraging responses from practitioners from many fronts.27

There remains however the need to have a longer term solution that addresses the enforceability issue more squarely. This prompted UNCITRAL to consider the possibility of a multi-lateral convention on enforcement of mediated settlement agreements. This was the same sentiment that prompted the drafters of the Taipei d Draft28.

d. International convention

The NY Convention’s success in facilitating the growth of international arbitration is in part due to its relative brevity and simplicity, and the UNCITRAL Working Group suggested that the same approach should be adopted in relation to a multilateral convention for the enforcement of mediated settlement agreements. That way, the convention would set out the result that the Member States need to achieve through their domestic legal systems, without trying to harmonize the specific procedures for reaching that goal.

In the same manner, the convention should not seek to develop harmonized rules for the mediation process itself, just like the NY Convention does not provide for mandatory rules for conducting arbitral proceedings. While still at its infancy stage, the UNCITRAL Working Group has also made some propositions as to the scope of the convention, inter alia, as follows:

27See e.g. comments in Schellenberg Witmer, Jan 2015 Newsletter – “seamless transition between arbitration and mediations is an innovative product designed to provide maximum value…”; Herbert Smith, 14 Jan 2015 - “AMA Protocol will mature into a dispute resolution option of choice will significantly depend on the awareness of parties of the benefits of mediation…”; Addleshaw Goddard, Dec 2014 – “…process combines cost-effectiveness, flexibility and party-autonomy of mediation with the finality and enforceability of arbitration.”

28 See Foreword - “a genuine mechanism to ensure the implementation of the results reflected in the mediated settlement agreements, instead of relying on certain kinds of ‘arbitral award of convenience.’”


The convention shall apply to “international” settlement agreements only, i.e. settlements between parties residing in different countries.29

It shall be applicable to “commercial” settlement agreements only, and not to other types of disputes such as employment or family law, and exclude agreements involving consumers.30

It shall provide for certainty as to the form of the settlement agreements is it applicable to: for example, agreement in writing, signed by all parties and by the mediator.31

It shall provide for flexibility in relation to the application of the convention to settlement agreements involving governments.

Mediated settlement agreements falling in that scope shall then be binding and enforceable (equivalent provision as Article III of the NY Convention), subject to certain limited exceptions. The exceptions should be similar but not identical to the ones set out in the NY Convention. They should of course be more specific to mediation. As such, an exception like the one of Article V(1)(d) of the NY Convention regarding the composition of the arbitral tribunal or the arbitral procedure, would not be necessary, but an exception related to the demonstration by a party that it was coerced into signing the settlement agreement could be considered.32

The UNCITRAL Working Group proposed that the convention also includes limitations to enforcement. The UNCITRAL Working Group thereby considered the possibility of having a provision equivalent to the procedure for setting aside arbitral awards under the NY Convention, or provisions to avoid duplicative litigation caused by simultaneous attempts to enforce a settlement under the convention as well as under contract law.

Parties could also opt out of the convention’s framework entirely by specifying it in their settlement agreement. By including limitations of this nature, the convention would respect the voluntary nature of mediation and would not diminish the ability of the conciliation process to bring disputing parties to mutually agreeable resolutions.

29 See Taipei draft, Article 1, “Scope.” 30 See Taipei draft, Article 1, “Scope” which states (under Article 1.1) that the convention shall be applicable to disputes concerning commercial matters and, (under Article 1.2) gives examples of what “commercial matters” may include. 31 The Taipei draft deals with the form of the mediated settlement agreements under Article 4, “Requirements for Enforcement of iMSA”, which includes such requirements as having an agreement in writing, signed by the parties and the mediator, translated into the language of the enforcing state, etc. 32 The Taipei draft provides for the exceptions to enforcement under Article 6 which, to some extent, reflects the exceptions stated under Article V of the NY Convention. They include (i) if the formal requirements under Article 4 are not met; (ii) incapacity of a party; (iii) if the settlement agreement has not yet become binding or enforceable; (iv) if the settlement agreement has been duly rescinded; as well as (v) if the matter in dispute is not capable of settlement by mediation under the laws of the enforcing state; and (vi) if the enforcement of the settlement agreement would be contrary to the public policy of the enforcing state.


B. ALA’s Role

ALA has the unique opportunity to take some lead in engaging our state governments to actively walk with UNCITRAL to pursue the route that will lead to the eventual recognition and enforcement of mediated settlement agreements. Meanwhile ALA members need not wait for the finalization of the draft Convention. Realistically, it will be years before the Convention will be anywhere near ready for signing and coming into force. ALA members could initiate steps to formulate policies that would encourage our state governments to implement a legal framework to recognize mediated settlement agreements. The more states adopt steps in this direction, the more efficacious would international mediation be for ASEAN.

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