China International Commercial Court - A Progressive Legal Trend

Among the unique features of the CICC are Articles 11 and 14 of the CICC constitution. Art 11 provides for the appointment of the International Expert Committee of 32 people who are highly qualified professionals in the international commercial dispute sphere who will be called on for expert advice and opinion based on the nature and jurisdiction of the disputes at hand. Art 14 allows for parties to apply to the court for interim relief protection by reference to an international commercial arbitration, where the CICC may issue interim measures to enforce or set aside an arbitral award.

The CICC's provisions are game-changing. For the first time parties can apply to the courts for interim relief on any contracts which makes reference to international arbitration. This sets a tone of confidence for businesses to enter into deals,” said Paul Teo, partner and head of Greater China arbitration at Baker McKenzie.

The CICC will basically provide a one-stop multi-faceted dispute resolution platform. This shows China's official appreciation and affirmation to acknowledge a diversified dispute resolution,” said Rimsky Yuen, former Secretary for Justice of the Hong Kong government. “The establishment of the CICC is a milestone in the history of Chinese judiciary, it is a milestone for the rule of law in China, it is a milestone in advocating a platform for the belt and road initiatives. It shows China is following international legal trends which is extremely encouraging,”

MITIGATING RISKS IN BRI PROJECTS

The CICC would be an accessible option for parties to settle international commercial disputes, apart from other available dispute resolution options such as litigation, mediation and the various international arbitration. If parties wish to settle disputes at the CICC, it should be clearly established in contractual agreements preceding the business deals, just as an arbitration clause can be included. The key to avoid disputes however, would be to mitigate risks before entering into a contract.

“Multi-party scenarios mean, for contractual reasons you would have to look at the rule of law. The key when advising clients is addressing the risks to avoid disputes before getting into an agreement,” said Teo. “You must have proper mechanisms in place to solve any disputes that may arise, whether it is based on merits or based on contracts, and in a timely and cost-effective manner.”

Teo discussed four potential risks to take into account when advising on BRI project deals. Firstly, businesses need to consider political risks that may arise, as these projects may go on over many years before completion, and in that time, governments may change, as in the case with Malaysia recently. Secondly, there is the factor of civil unrest, especially if it involves clearing of land or transforming borders to implement a particular project in a particular country. Then, there should also be consideration for climate conditions. The fourth and most important risk to consider would be the cost and complexity of the projects and the time-frame for project delivery. This would prove to be where most disputes may arise as it is a matter of management and coordination of work between multiple parties across multiple countries.

“If you're going into a new market, do your due diligence,” said Teo, “know the parties, know the regulatory environment and ensure you know who you are going into business with. Ensure all risk assessment are done and have the key risk areas covered in the contract documentation to achieve a fair allocation of risks between the parties, especially in a commercial sense.”

He also stressed on contract drafting, and ensuring there are valid and enforceable mechanisms in place for settling disputes, so that parties can avail themselves to the options available should a dispute arise or be able to transfer risks.

PLAYING BY THE RULES

As discussed above, law firms especially in the GBA regions will have lots of business opportunities to advise clients on BRI projects. There would be various considerations to take into account when advising clients as to the best possible dispute resolution option, such as the type of project involved, time-frames, the regulations affecting the countries the parties involved are from, deliverables involved, etc. Lawyers would benefit from familiarizing themselves with CICC's policies as well as the various arbitration rules to be able to effectively advise businesses.

Although the CICC presents itself as a possible and viable dispute resolution option for BRI cases, other international arbitration centers such as the HKIAC and SIAC, or CIETAC may also be considered. The outcome of these disputes or the workings of the CICC is yet to be seen, but the policies in place are definitely a step forward in China's opening up initiatives.