Myanmar’s parliament has enacted the much-anticipated Arbitration Law (Union Parliament Act No. 5 of 2016) ('Arbitration Law') on 5 January 2016, replacing arbitration legislation which was more than 70 years old.
In doing so, Myanmar has given effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ('New York Convention') to which Myanmar acceded on 16 April 2013.
Arbitration Law and Model Law
The Arbitration Law largely follows Myanmar’s draft Arbitration Bill dated 25 May 2014, with both based on the UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended in 2006) ('Model Law'). This approach is to be welcomed in that the Model Law represents an accepted and familiar international standard.
Unofficial English translation
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Addresses some of the uncertainty about enforcement of foreign awards in Myanmar
The Arbitration Law is obviously a welcome development for international investors in Myanmar, who want to know that ultimately their hard negotiated contracts will be enforced.
Many foreign businesses involved in Myanmar have been using arbitration clauses in favour of Singapore or Hong Kong for Myanmar related disputes. Arbitration in neutral fora like these remains the preferred dispute resolution mechanism for cross-border business because the New York Convention allows for enforcement (albeit sometimes imperfect) of international arbitral awards across most countries in the world.
However in the period following accession to the New York Convention in April 2013 some doubt has arisen as to whether foreign awards can be enforced in Myanmar. Myanmar’s former legislation relied on two treaties which had allowed for some limited reciprocal enforcement of awards - the Geneva Protocol on Arbitration Clauses (1923) and the Geneva Convention on Execution of Foreign Arbitral Awards (1927).
The concern was that pursuant to the express terms of article VII(2) of the New York Convention, these effectively fell away on Myanmar’s accession to the New York Convention in April 2013. Arguably, this left a vacuum in relation to foreign awards in that the legislation required to give effect to the New York Convention which was intended to replace those conventions was not yet in force.
Resolution of this uncertainty is undoubtedly welcome and foreign arbitration clauses remain the best course for most investors. That said, the Arbitration Law does not eliminate all risks. There is still no track record of enforcing foreign awards in Myanmar and inherent jurisdictional risks remain in any recourse to the local legal system. Of course these challenges are not confined to Myanmar and will be familiar to investors in many emerging jurisdictions.
The Arbitration Law is not merely a positive step which will benefit solely international investors. Greater certainty for investors arising from the enactment of the Arbitration Law is likely to benefit Myanmar by encouraging a greater flow of foreign investment on better terms and from a broader range of sources than seen to date.
Arbitration Law as part of ongoing development of arbitration in Myanmar
In following the approach of the widely accepted Model Law, Myanmar’s legislation is more closely aligned to internationally accepted standards in arbitration.
However arbitration legislation alone is not enough and the next step is for the judiciary in Myanmar to promote an arbitration-friendly culture at an early opportunity. It would add to confidence to see some early precedents in the local courts applying the new law, particularly in terms of respecting agreements to arbitrate with a stay of local court proceedings and enforcing foreign arbitral awards.
The Arbitration Law is also likely to encourage further development of arbitration in Myanmar. There are plans to establish an arbitration centre in Myanmar. Leading international arbitral institutions like Singapore International Arbitration Centre and Hong Kong International Arbitration Centre have been sending delegations to Yangon for some years now to raise awareness of international arbitration as an appropriate tool to resolve cross-border disputes.