Netherlands: India And Myanmar Seek To Improve Arbitration Framework

India and Myanmar have passed new laws regulating arbitration. These laws seek to fix the deficient framework for arbitration in the two countries. While the laws are certainly a step in the right direction, the situation remains uncertain. Even so, the alternatives to arbitration are not free from problems either. As a result, arbitration in many situations is the most preferable option. If parties agree on arbitration in contracts involving India and Myanmar, it is safest to agree on arbitration seated outside of these jurisdictions, for instance in Singapore or Hong Kong, until there is positive experience with the new legislations. This may be different for cases where both parties are Indian (including, for instance, a local subsidiary of a foreign company) as there is discussion on whether parties in those cases may choose a seat outside of India. This discussion could also arise in relation to Myanmar.

India's law is an amendment to its existing Arbitration and Conciliation Act, while Myanmar has introduced a completely new law replacing its Arbitration Act from 1944.

One of the most important improvements to the Indian arbitration law relates to enforcement of awards. Despite India's status as a signatory to the New York Convention, enforcing awards in India has often proven problematic. Indian courts have been known to scrutinise the contents of awards and to refuse to enforce them based on broad notions of public policy. The new law seeks to limit intervention by the Indian courts by explaining that an award is only in conflict with the public policy of India in the case of – in short – (i) fraud or corruption, (ii) contravention with the fundamental policy of Indian law, or (iii) a conflict with the most basic notions of morality or justice. The law also explains that this test may not entail a review of the merits of the dispute. It will be interesting to see whether the Indian courts will take this guidance to heart and limit their scrutiny of arbitral awards on the basis of public policy.

Another important improvement is that Indian courts may now order interim relief in relation to arbitrations that are seated outside of India. This used to be impossible, causing problems where a party needed interim relief that was effective in India.

While these changes should be welcomed, the new Indian law also creates new problems. For instance, a significant issue is that the law now states that arbitral tribunals should issue their award within 12 months of the constitution of the arbitral tribunal, which period may be extended by the parties to 18 months. After that, this deadline may only be extended by the Indian courts if there is "sufficient cause" to do so. When granting this extension, the court may reduce the fees of the arbitrators or even replace one or more arbitrators. While it is to be applauded that the Indian legislature seeks to reduce delay in arbitral proceedings, this arrangement may do more harm than good. Considering that international arbitrations vary greatly in length and on average take 18 months, parties will in many cases have to apply to the Indian courts to extend deadlines, creating the risk that the court will interfere with the fees or the composition of the arbitral tribunal. This will also make it less attractive for arbitrators to accept appointments to tribunals in arbitrations seated in India. Issues such as these make clear that the Indian arbitration law still deviates significantly from what international parties expect.

In Myanmar, arbitration was up to now governed by the Arbitration Act 1944, which mirrored the Indian Arbitration Act of 1940. As indicated by its enforcement date, the Arbitration Act was clearly outdated. It gave the courts a wide supervisory role in respect of arbitral proceedings and afforded the courts great discretion in setting aside arbitral awards. There had also been no known case under the Arbitration Act 1944 in which a foreign arbitral award was enforced in Myanmar. In practice, arbitration hardly played any role in Myanmar.

Myanmar acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2013, but had up to now not yet introduced domestic legislation to implement the convention. That has now changed. Myanmar's new arbitration law explicitly allows enforcement of foreign awards on the basis of the New York Convention. The new arbitration law is largely based on the UNCITRAL Model Law and will therefore be familiar to international users. However, there are still a few issues that parties need to be aware of. For instance, if the entities involved are both incorporated in Myanmar, then the parties cannot choose a law that differs from Myanmar law. It is argued that this only means that Myanmar law applies to the contract between the parties, but that parties are still free to choose a seat for the arbitration that lies outside Myanmar. Despite these issues, the new Myanmar arbitration law provides a solid framework for arbitration. It is to be hoped that the Myanmar courts will in practice apply the new law in accordance with its terms and with the case law regarding the UNCITRAL Model Law that already exists around the world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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