Myanmar has signalled its intention to sign up to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention“). This is a highly significant and very positive development for parties contemplating investments with Myanmese parties or into Myanmar. Ratification of the New York Convention will also complete an important piece of the Myanmese Foreign Investment Law promulgated in November 2012.
The Foreign Investment Law provides that disputes will be settled in accordance with the dispute resolution mechanism stipulated in the relevant agreement. However, for as long as Myanmar is not a party to the New York Convention, a foreign investor or commercial party is not guaranteed the usual benefits of (foreign) arbitration i.e. that a foreign arbitral award is final and binding and will be recognised and enforced by the enforcement state save in very limited grounds.
In this respect, the New York Convention would also expand the benefits of arbitration to all commercial parties and not simply foreign investors as contemplated under the Foreign Investment Law.
With 148 state parties to the New York Convention, Myanmar’s absence is very much the outlier in South East Asia, and in fact the wider Asian region.
A reader has helpfully pointed out that Myanmar is however a state party to the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (“Geneva Convention 1927”). This precursor to the New York Convention is still in force between two state parties and is not superseded by the New York Convention until such time both state parties have signed up to the New York Convention (see Article VII, Clause 2 of the New York Convention). However, to the best of our knowledge, we are unaware of any foreign arbitral award that has been recognised and enforced in Myanmar under the Geneva Convention 1927.
Parties should also note that the number of state parties to the Geneva Convention 1929 is a small fraction of the 148 state parties to the New York Convention. Furthermore, the Geneva Convention 1927 is not without its problems and the New York Convention was drafted as a way of simplifying the procedures and processes involved in the recognition and enforcement of foreign arbitral awards. For example, there is the problem of “double exequatur” i.e. the Geneva Convention 1927 required that the award had become final in the place in which the award was made. This required that parties with the benefit of an award get the award recognised by the home state before seeking recognition and enforcement in the foreign state where enforcement is sought (see generally, Julian Lew, Loukas Mistelis and Stefan Kröll, Comparative International Commercial Arbitration (Kluwer Law Internationa:2003) at [26-21]).
Nonetheless, while this signal of intent to accede to the New York Convention is an important first step, there are still notable challenges ahead. As noted by GAR, “it is uncertain how long it will take for Myanmar to complete the accession process“. It should also be noted that the Arbitration Act 1944 only provides for domestic arbitration and does not provide a framework for the recognition and enforcement of foreign arbitral awards. It is anticipated that the Arbitration Act 1944 will either have to be revised or a new international arbitration act enacted in order to make the New York Convention operative. In this regard, it is unclear when such an act would be enacted in Myanmar.
Furthermore, even when all the international and domestic arbitration frameworks have been updated and harmonised, the success and benefits of arbitration as an alternative dispute mechanism are heavily reliant on the support of domestic courts. As we have previously noted elsewhere,
“…the efficiency and workability of the enforcement regime in international arbitration is still patchy, particularly within Asia, because enforcement requires the involvement of the local courts. While certain states like Singapore have developed a deserved reputation for having a robust judiciary with a pro-arbitration and pro-enforcement regime, the judicial attitudes of other countries can be more unpredictable.”
We welcome this new development and hope that Myanmar will become the 149th state party to the New York Convention in the near future.