Saturday 28 December 2013

CIArb chief hopes to see Malaysia with a bigger role in arbitration

Chief Justice Tun Arifin Zakaria (right, forefront) and Vinayak (second left, forefront) officiating at the launch of the
CIArb International Arbitration Conference 2013 in Penang recently. Looking on is conference organising chairman
Ashok Kumar Mahadev Ranai (left).

It was appropriate that when the first Malaysian was elected president of the Chartered Institute of Arbitrators (CIArb), it should have been Vinayak Pradhan.

The man, who has been referred to as an "unsung hero" took office as president of the 98-year-old international institution on Jan 1.

Vinayak's integrity is so well-known he has been appointed to several international bodies. From 1998 to 2003, he was commissioner with the United Nations Compensation Commission dealing with construction and civil engineering claims arising from Iraq's invasion and occupation of Kuwait; and in 2008, he was appointed vice-chair of the International Chamber of Commerce's (ICC) Commission on Arbitration and on the International Centre for the Settlement of Investment Disputes' panel of arbitrators.

Vinayak, 63, has had some interesting appointments in Malaysia too.

In 2009, he headed the Transport Ministry's Task Force to inquire into and report on cost overruns in respect of the Port Klang Free Zone project.

Later in 2011, he was appointed a commissioner of the Enforcement Agency Integrity Commission and a member of Pemudah in 2012.

Back in 1988, after some 14 years in practice as a lawyer, it was unsurprising Vinayak was on the legal team for the five Supreme Court judges facing allegations of misconduct.

Vinayak's name in the last two decades has been synonymous with arbitration.

He joined CIArb in 1990 and was chair of the Malaysian branch between 1995 and 1996. His term as CIArb president comes to an end on Dec 31.

According to a 2012 survey, London was the most preferred and widely used seat of arbitration, followed by Paris, New York and Geneva. Fifth was Singapore, which has emerged as a regional leader in Asia, followed by Hong Kong.

Is Kuala Lumpur getting a fair slice of the pie, or are we still picking from the leftovers of Singapore and Hong Kong?

Vinayak says that while the Kuala Lumpur Regional Centre for Arbitration (KLRCA) formed in 1978 was intended to be a centre for arbitration for the whole region it didn't take off then.

"What's happened recently since Prof Datuk Sundra Rajoo took over as director is that KLRCA is much better known than it was before."

By appointing very well known international arbitrators on his panel, he says Sundra has provided a core of experienced arbitrators who can be appointed for arbitration.

However, while Malaysia has some very good local arbitrators, the chartered arbitrator admits, "we still do not have a fair share of the pie."

When KLRCA didn't make its mark, the Hong Kong International Arbitration Centre and Singapore International Arbitration Centre, set up in 1985 and 1991 respectively, stepped into the gap, says Vinayak.

The disadvantage Malaysia had earlier was a lack of confidence in the judiciary, says Vinayak.

"For arbitrations to proceed you must really have a non-interfering judiciary. They must allow the process to go on and they should also enforce awards and encourage arbitrations.

"The 1988 judicial crisis had an impact - there was a complete lack of confidence in the judiciary; subsequently two chief justices who were appointed were also criticised for many reasons."

He notes, however, all that has changed: "You find a new drive in the judiciary and greater understanding of arbitration processes."

Linked with this is the fact that the Arbitration Act 2005 is based on the UNCITRAL Model Law, which is a template for arbitration Acts all over the world.

With this new statutory framework and improved judiciary, together with the panel Sundra has created, Vinayak says there's no reason why arbitration here shouldn't grow.

"We have a distinct cost advantage ... It's cheaper to arbitrate and stay in hotels in Malaysia than it is in say Singapore or in Hong Kong."

Going international

For a Malaysian arbitrator to get called to arbitrate international cases, getting on the panels of international arbitration centres helps, Vinayak says. "There are some minimum qualifications you must have."

"If you're a Fellow of the Chartered Institute of Arbitrators, it gets you on panels without much fuss.

"So CIArb helps, not so much by appointing them, but by training them; CIArb courses are regarded as the gold standard for training arbitrators in the world."

Previously, even if one party were a government agency, the seat for arbitration would be overseas.

Sadly that still happens, says Vinayak, adding it is not just in appointing arbitrators.

"It's not an unknown phenomenon for Malaysian companies, including GLCs who have a dispute to have lawyers from Singapore acting for them even when it is a Malaysian dispute with a Malaysian party and there are competent local lawyers of the same stature."

"It's strange that they do this because appointing foreigners is a drain of Malaysia's resources; they should be encouraging the industry in the country."

Malaysia at the helm

While Malaysia is on the right track with the updating of the Arbitration Act, the re-branding of KLCRA and the setting of new rules, he points out one has to "get in at the transactional stage, before the contracts are entered into". This will help Kuala Lumpur to draw more arbitrations.

"That's when the agreements are drafted to say 'Malaysia is the seat' or 'arbitrate according to KLRCA rules'".

Referring to the Trans Pacific Partnership Agreement that's being negotiated, Vinayak says it would be interesting to see whether the Malaysian Government would ensure disputes are arbitrated here with KLRCA as the appointing authority and arbitrations conducted under KLRCA rules.

"The Government would be doing itself a favour."

Having a Malaysian as president has brought a certain degree of recognition for the country. Vinayak points out that the presidency of CIArb is an ambassadorial position, not executive.

And while he's fulfilled his role by talking about CIArb in Austria, Hong Kong, England, Turkey and Mauritius, he says he made it a point to let them know about KLRCA and how Malaysia was a good place to come to arbitrate.

Vinayak is the first Malaysian president of CIArb but he is not the first Asian. Teresa Cheng of Hong Kong had that honour in 2008.

He notes that CIArb had started of in 1915 purely as a British institute and it now has 13,000-odd members, 63% of whom are resident outside the United Kingdom.

"Which is why, in my speeches, I have often said 'a brown Malaysian like me can lend a little colour to proceedings in England'," he says, chuckling.

"In CIArb, there's a lot of respect for Malaysia and the Malaysian branch is one of the best in the institute."

Corruption and arbitration

While there is talk of corruption in the courts, Vinayak says "one would hear rumours of one kind or the other but I haven't heard that about arbitrators."

It seems ironical the year he became CIArb president, a much sought-after arbitrator here should be charged in court for allegedly soliciting a bribe.

The person in question may be acquitted of all charges. "When they charged him, it was a great shock that this allegation had been made.

"The individual is innocent until proven guilty. One hopes that the case will be disposed off as quickly as possible so there will be a definite finding.

"I do not believe that this has had a negative impact globally. Although a few people whom I have met during my travels as president showed some curiosity, they regarded the case as an aberration and not reflective of the Malaysian arbitral community."

To the contrary, he says, it shows Malaysia will not be tolerant of misconduct of this nature.

On whether KLRCA's Code of Conduct is strong enough to ensure arbitrators are ethical, Vinayak says CIArb has a professional standards committee which receives complaints and takes disciplinary action against arbitrators who may have misbehaved themselves or conducted themselves in a inappropriate fashion.

"The KLRCA Code goes beyond ethical conduct. In terms of disclosure requirements for apparent bias it incorporates as a point of reference the IBA (International Bar Association) guidelines on conflicts of interest in international commercial arbitrations."

He reckons the global community will welcome this code because it gives everyone, not just arbitrators, notice of the ethical requirement on disclosure.

Arbitration vs litigation

As cross boundary arbitrations increase it is inevitable there will be "clashes" between those coming from the common law and civil law traditions. But over the last few years, concerns have been expressed about some disquieting practices - guerilla tactics by counsel, unethical conduct, third party funding and the rising costs in international commercial arbitration.

While engaging in guerilla tactics is not a common practice here, Vinayak says a number of institutions are developing guidelines for conduct of counsel in arbitrations, adding the IBA has already done that.

Of concern also is the ethical behaviour of other participants in the process, for example, those who give expert evidence, says Vinayak.

On third-party funding, he reiterates Singapore Chief Justice's caution to delegates at the CIArb conference here in August that the "emergence of a market for the sale of payment obligation that will be owned by the claimant in the event of success" has "the potential to replicate the vulture funds that were prevalent in the 1990s".

As for rising costs, Vinayak says an ICC survey some years ago found only 18% of costs were the arbitrator's fees and 82% were counsel's fees.

He reckons the criticism is not about arbitrator's fees but that there are large legal teams charging hourly rates in big cases.

A way to deal with that is for tribunals to take a closer look when determining the amount of costs the losing party should pay, says Vinayak.

He says it could determine that "20 lawyers was too much, five would have been reasonable, and so cut the costs down appropriately."

"If lawyers and parties know that recoverable costs may be cut down substantially, they might exercise a greater degree of control during the process and ensure that there is no duplication of lawyers."

Vinayak's passing the presidency back to the UK but you can be sure he will be actively involved in helping to make Malaysia the preferred arbitral seat.

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