ReSolution:In Brief
Delegation from the Korean Ministry of Justice Visit NZIAC
In December, the New Zealand International Arbitration Centre received a delegation from the Korean Ministry of Justice. They met with Ms Catherine Green and Mr John Green, Directors of NZIAC, and Mr Royden Hindle, President of AMINZ. NZIAC was grateful for the group’s insightful consideration of Arbitration practices in New Zealand, and equally was interested to gain a greater understanding of the the significance of arbitration in the Korean legal context. NZIAC hopes to further strengthen the ties between the two nations in the field of arbitration and continue the cooperative and informative relationship established.
Farm Debt Mediation Bill (No 2) Select Committee Report Released
The Farm Debt Mediation Bill was introduced in June 2019. On Wednesday, 30 October, the Select Committee released its report recommending the Bill be passed with amendments.
The Bill would establish a mediation scheme for resolving farm debt disputes. If the Bill is passed, creditors with security interests in farm property will not be able to take enforcement action in relation to farm debt without first offering mediation to farmers.
Mediation should provide a more fair, equitable and timely resolution of farm debt disputes. The discussion it facilitates may reveal numerous options to resolving debt disputes and so prevent enforcement action in situations where it is avoidable.
The New Zealand Bankers’ Association supports the legislation, which is in line with the “pro-active and cooperative approach” they say their banks take in dealing with distressed agribusiness customers.
A similar scheme which has been implemented in Australia has already proved very effective.
China’s International Commercial Court: on Arbitration
The First International Commercial Court of the Supreme People’s Court of China (CICC) – established in June 2018 – issued its first rulings in September. The decisions have implications for arbitration, namely in that they uphold the principle of severability for arbitration agreements, under People’s Republic of China (PRC) law at least.
The dispute
The parties to the dispute were negotiating a sale of shares where Luck Treat Limited (the Seller) was to sell shares in Newpower Enterprise Inc. (the Target) to Zhongyuan Cheng Commercial Investment Holdings Co Ltd (the Purchaser).
In 2017, the parties negotiated by email correspondence the terms of the sale-purchase agreement and an additional debt settlement agreement they intended to enter into (under this debt settlement agreement, the purchaser was to pay certain debts owed by the target and the seller’s affiliates). While the Seller and the Target were incorporated in the British Virgin Islands, the Purchaser was a PRC company. The draft agreements stated that PRC law would govern the sale. In May 2017, the Seller indicated to the Purchaser that they would be required to apply for certain governmental approval, as the purchase of the shares would constitute an overseas investment under the applicable PRC laws. Subsequently, the parties did not proceed to sign the agreements.
When the Purchaser commenced an arbitration proceeding against the Seller and its affiliates in April 2018, the latter sought a confirmation from the Intermediate People’s Court of Shenzhen that the arbitration agreements were not valid, because the underlying contract was not formed.
The decision
The CICC – who took the case over – determined in line with PRC law that the arbitration agreement was, in fact, valid. Article 19(1) of the relevant PRC Arbitration Law provides that an arbitration agreement shall exist independently, and that any invalidity of the underlying contract shall not affect the validity of the arbitration agreement. Further, the Interpretation of the Supreme People’s Court specifies at section 10(2) that if parties reach an agreement for arbitration when entering into a contract, the validity of the agreement shall not be impacted even where the underlying contract is not formed.Law provides that an arbitration agreement shall exist independently, and any invalidity of the contract shall not affect the validity of the arbitration agreement. Further, the Interpretation of the Supreme People’s Court specifies at section 10(2)that if parties reach an agreement for arbitration when entering into a contract, the validity of the agreement shall not be impacted even where the underlying contract is not formed.
Having regard to email communications between the Seller and Purchaser, the CICC determined that an arbitration agreement had been reached. Accordingly, it was held to be valid despite that the underlying contracts had not been signed. These first rulings will interest many who wish to see how the CICC deals with its cases.
Arbitration to be Raised to Global Standards
Papua New Guinea will take mediation and arbitration to the next level according to the Prime Minister Peter O'Neill. When addressing the International Arbitration and Mediation Conference in Port Moresby, Prime Minsiter O'Neill said, "[PNG judiciary was in a position to provide leadership and facilitate processes that is empowering communities.
This process of mediation is important for our business both high and small for people in our communities who are aggrieved and want to be heard.
The Prime Minister is inspired by the United Nations Convention by aiming to take the international and domestic arbitration to the next level. in order to do so, an Arbitration Bill is being drafted and once consulted the process will be completed]".
The Prime Minister also highlighted the committee includes PNG judiciary with the support and input from Asian Development Bank, UN Commission on International Trade Law and other international bodies are included in the process and off course after the conclusion of the consultation process we will take it to parliament and enacted well before the end of this year.”
Mr O’Neill said the PNG judiciary had also taken steps to make sure that the arbitration process continued to work in the country by making the necessary facilities available and as an annex to the courts.
“This is to ensure that there are appropriate practices taking place in the arbitration process and also in identifying in the court list an arbitration clause that these court cases be removed from the court list and place on the courts arbitration list.
“Our Judiciary will also approve the list of persons to conduct both international and domestic arbitration and this will include some of the most eminent individuals who are attending this conference today,” Mr O’Neill said.
Singapore Convention adopted by General Assembly
On 20 December 2018, the UN General Assembly adopted the UN Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention).
The Singapore Convention is open for signature in August 2019 and will likely enter into force in early 2020 (so long as at least three states ratify the Convention).
The Singapore Convention provides for the enforcement of agreements “resulting from mediation and concluded in writing by parties to resolve a commercial dispute” save for in specific and limited circumstances. The Singapore Convention essentially provides parties to a mediated settlement with the same enforceability protections that parties to an arbitral award have under the New York Convention.
The Singapore Convention is not UNCITRAL’s first attempt at formulating comprehensive rules to govern the delivery of mediation or conciliation processes and enforcement of agreed outcomes arising out of those processes. Work in this area can be traced back to 1980 with the promulgation and adoption of the UNCITRAL Conciliation Rules.
The Conciliation Rules set out a framework for the conciliation process. However, they did not provide any enforcement mechanism which left settling parties to rely on general principles of contract, in the context of the applicable law, to enforce any settlement agreement resulting from such a conciliation process.
In 2002, a Model Law on International Commercial Conciliation developed by UNCITRAL followed. However, there was still no concrete resolution to the question of enforceability.
By concluding the Singapore Convention, UNCITRAL has now given states the opportunity to sign up to a regime which would obviate the need for parties to rely on principles of domestic contract law to enforce any rights they might have arising under a mediated settlement agreement.
3 www.nzdrc.co.nz
Members of the delegation from the Korean Ministry of Justice; Taeyeop Kim, Hyung Tak and KyuHyun Monica Cho pictured with John Green, Catherine Green and Royden Hindle