Resolving disputes arising in Myanmar - challenges and opportunities

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Summary: With the newly elected democratic government in Myanmar, investors are keen to investigate the opportunities Myanmar presents at this exciting time in its history. Historically investors have been concerned by the lack of a fair and efficient dispute resolution framework. This concern has been addressed by the enactment a new Arbitration Law which gives effect to the New York Convention and largely follows the UNCITRAL Model Law.

Myanmar elected a new democratic government at the end of March of this year, following a gradual phase of liberalisation since 2010. This has spurred a great deal of recent interest in the country, with a large number of law firms following their clients to investigate the opportunities Myanmar presents at this exciting time in its history.

In recent years, for every company which proceeds to invest, there is another which comes away with reservations, perceiving the undoubted opportunities to be outweighed by risk levels assessed as higher than those faced in other emerging jurisdictions. This is a situation which the current administration in Myanmar looks to be trying to change via a serious programme of legislative reform.

Enactment of new law

One concern often historically cited by investors considering Myanmar was the lack of a fair and efficient dispute resolution framework and the apprehension, often experienced by foreign investors in unfamiliar jurisdictions, that partiality in the local courts could work to their disadvantage and threaten their investment in the event of a dispute arising.  This concern was recently addressed by the enactment of the Union Parliament Act No. 5 of 2016 (‘Arbitration Law’), which now supersedes the previous governing legislation in this area, which was more than 70 years old. This new legislation gives effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’) and largely follows the UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended In 2006) (‘Model Law’), an accepted and familiar international standard.

Prior to this historic enactment, the working assumption was that international arbitral awards would not be enforceable in Myanmar. As a result of this legislation however, international arbitral awards are now, in theory, enforceable in the country (pursuant to the settlement of disputes by means of arbitration).
Despite some concerns about the enforceability of foreign awards in the period between accession to the New York Convention (April 2013) and the enactment of the Arbitration Law (January 2016), the passage of the legislation itself is seen as a positive step in offering foreign investors the comfort they have sought for some time now. However, it is worth noting that there is still no track record of enforcing foreign awards and, much like numerous other developing countries in the region and worldwide, there still remain jurisdictional issues and reliance on local, less experienced courts, both of which carry some degree of risk, particularly in complex or politically sensitive disputes.

Despite these concerns, the following benefits are likely to be experienced increasingly as a result of the enactment of the Arbitration Law:

  •  an increase in the geographical spread of investors, with the resulting diversifying effect decreasing Myanmar’s dependence on a relatively small number of countries in the region currently providing much of the investment;
  •  a widening of the scope of sectors which attract investment beyond extraction and associated industries;
  • a favourable effect on the terms of international investments made, as investors begin to view Myanmar as having risk levels similar to those presented by other, more established emerging jurisdictions with which they are comfortable.

As Myanmar’s development as an attractive destination for foreign capital continues, it has the opportunity to build a framework which reflects international standards and gives investors and counter-parties confidence in their business dealings in the country. The enactment of the Arbitration Law is one of the early building blocks in this process.

What more can be done going forward?

Although Myanmar has enacted the Arbitration Law in line with the Model Law and has acceded to the New York Convention, there remain a number of other items on the agenda for international arbitration related reform:

  • Investor-state treaties.  Myanmar is party to the ASEAN Comprehensive Investment Agreement (ACIA), which provides investors in signatory states (and possibly those outside who invest through vehicles within member states) with some welcome protection.   There are several bi-lateral investment treaties in effect (China, India, Philippines) but this could usefully grow to reach out to a wider pool of investors and open Myanmar to interest from a broader group of jurisdictions.  These should provide for ICSID arbitration, allowing the comfort of neutral arbitration of investor-state disputes.  Signing the Washington (ICSID) Convention 1965 would also assist.
  • Court procedures.  Court rules will need to be amended in light of the new legislation.  As a matter of practice all international arbitration matters would usefully be directed automatically to higher courts, and concentrated in a panel of specialist judges experienced in commercial matters.  Experience from other countries is that local courts are more tempted to intervene in a dispute.  In the longer term wider reform of the Court process in terms of transparency, efficiency and perceived neutrality is vital.  Some early pro-arbitration pronouncements from senior judges - in papers or at conferences - may also assist.
  • Government owned entities using international arbitration in its own contracts. The Foreign Investment Law (2012) already recognises the parties’ freedom to choose their dispute resolution procedure. However, it would be better again to see this reflected in practice by government owned entities accepting international arbitration clauses (particularly institutional ones, if not also foreign law) as a viable method of resolving disputes  rather than insisting on resolution in Myanmar Courts.  We understand that adoption of this approach was starting to be seen in some instances even prior to the enactment of the Arbitration Law. The Arbitration Law coming into force should serve to continue this trend, thus putting Myanmar ahead of some of its rivals in the region where government entities routinely insist on local law/courts to resolves disputes under their contracts.
  • Awareness. Promotion of international arbitration within the profession in Myanmar with seminars and events.  We have noted real interest in setting up an international arbitration centre in Myanmar.   Although it is difficult to see that this will have significant case load in the short term this initiative is to be encouraged.

It is encouraging that Myanmar had begun to take steps in the direction of reform of its arbitration environment. However enactment of the Arbitration Law alone is not enough. The next step as the country moves forward will be for the judiciary to promote an arbitration-friendly culture to instil further confidence in foreign parties contemplating investment in the considerable opportunities available in Myanmar.

If you would like more information on this topic please just get in touch.  Email us at Chris.Hughes@blplaw.com or Roger.Milburn@blplaw.com

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