This post has been written by Rayan Bhattacharya, who is a student of law at the University of Durham, United Kingdom. He is currently a council representative of the Durham European Law Institute (DELI).
Among other major regions in the global legal sphere, the Asia-Pacific (APAC) has demonstrated promising strides in the increased use of arbitration as a forum for dispute resolution in the past few years. While it would be erroneous to make generalizations about a region that is extremely diverse, both geographically and in terms of legal systems, it is not an exaggeration to say that the inclination of businesses towards arbitration as a medium of resolving legal dispute has been on the rise, and currently shows no signs of declining.
Arbitration centres across Asia have been witnessing a spike in the number of cases being registered per year. For instance, the Singapore International Arbitration Centre (SIAC) in 2018 announced that an all-time high of 452 cases had been recorded in 2017 after a 2016 all time high of 343, which was then a 27% spike from 2015’s 271 cases. Similarly, the Chinese International Economic and Trade Arbitration Commission (CIETAC) recorded an all-time high of 1968 cases in 2015.
The Nature of Natural Resource Arbitration
Alongside the increase in arbitration, it is also necessary to consider the sectors and industries most commonly involved in such proceedings. Hence, considering the importance of energy and natural resources to Asian economies, it is not surprising that oil and gas arbitrations have been on a steady rise in the past decade, both in terms of frequency and value. In fact, the very nature of oil and gas arbitrations are ideally suited for practitioners of international arbitration, considering the complex, high value and multi-jurisdictional nature of such disputes.
The source of disputes or the increased requirement of legal regulation can be traced to the nature of the natural resource sector itself in different regions across the APAC. For instance, China, South Korea, and Japan are the largest purchasers and importers of liquefied natural gas (LNG) in the world, with their purchases accounting for more than half of all global imports. On the other hand, countries like Australia, India, and Indonesia automatically need regulation and dispute resolution forums for the natural resource sector as they are some of the largest oil and gas producers in the APAC.
Furthermore, there exist many regions within the APAC where the commercialisation and modernisation of the natural resource sector have been more recent, such as Vietnam and the Philippines. Hence, it is envisaged that the need for international arbitration in these regions will only increase in the coming years.
Evolving trends in APAC arbitration
A variety of trends have become noticeable in multiple jurisdictions across the APAC with regard to arbitration as a medium of dispute resolution. These trends are evidence of the rapid growth of arbitration, and a standing proof of its efficiency and effectiveness.
For instance, a variety of institutional changes can be noticed in many countries across the APAC, where dedicated institutions such as tribunals, special courts, and arbitration centres have been sanctioned to boost not only arbitration as a practice, but also the sectors and industries that rely on it for resolving their disputes, such as the oil and gas sector. This can be evidenced in the launching of multiple centres of arbitration, some dedicated to oil and gas arbitration, across the APAC.
For instance, the Perth Centre for Energy and Resources Arbitration (PCERA) was launched in Australia in November 2014, as a dedicated energy and resource arbitral institution. Furthermore, India launched its very own Mumbai Centre for International Arbitration (MCIA) in 2016, with provisions similar to other major arbitration centres to deal with multi-jurisdictional contracts, expedited procedures, joinder and consolidation among others.
There have also been a series of legislative changes that have been implemented in multiple APAC jurisdictions. Both Hong Kong and Singapore made substantial amendments to their arbitration laws between 2012 and 2013 to ease arbitral proceedings, especially for arbitration-reliant sectors such as oil and gas. For instance, the legalisation of interim reliefs awarded by emergency arbitrators to expedite hasty decision making and dispute resolution was adopted in both jurisdictions, and has been embraced by the oil and gas sector.
The Future of International Arbitration in the APAC
As highlighted at the beginning of this analysis, there does not seem to be a possibility of a decline in the rising reliance on international arbitration in the APAC. However, what course it takes in the future will continue to be heavily reliant on the sectors that rely on it, and the nature of the said sectors. The oil and gas sector has been pivotal in shaping the modern international arbitration practice and it is expected to do so in the coming years. For instance, while price movements are a key agent of change in the oil and gas industry, it also causes a variety of disputes.
Contracts that were probably negotiated by different parties in different price environments often turn out to be not as profitable as anticipated, resulting in disputes. Oil and gas parties also often suffer from disputes in terms of construction contracts, especially if it involves a jurisdictional dispute aspect. In many such instances, cases begin to involve states or their subsidiary corporations as parties, with various other aspects of public international law such as maritime law or jurisdictional claims coming into question.
Taking into consideration that various regions in the APAC still await full commercialisation and resource exploration, these complex legal and regulatory issues will only increase in time, hence creating a crucial demand for the presence of international arbitration in the coming years.