REUTERS | Soe Zeya Tun

A new arbitration law for Myanmar

A team at Allen & Overy LLP (including myself) was involved in reviewing the Myanmar Arbitration Bill and suggested revisions and commentaries with the aim of bringing the Bill in line with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985 (as amended in 2006) (the Model Law) and legislation in other arbitration friendly jurisdictions.

On 5 January 2016, the Parliament of the Republic of the Union of Myanmar (Myanmar) passed its new Arbitration Law (Union Law No. 5/2016) (the Arbitration Law), which gives effect to Myanmar’s ratification of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) in April 2013 and, more broadly, brings Myanmar’s arbitration law in line with international practice and with the Model Law.

The Arbitration Law caters to domestic arbitrations, international arbitration (to a limited extent) and the enforcement of foreign arbitration awards. This post will address the aspects that may be of most interest to foreign investors. These include the provision for enforcement of foreign awards and alignment with the Model Law, in particular by limiting the extent to which a Myanmar court may intervene in an international arbitration.

As the Arbitration Law is currently only available in the Myanmar language, this post is based on a review of an unofficial translation. Although Myanmar has indicated that it will release an official English version in time, the Myanmar language version will prevail in case of any inconsistencies in language (as per the Myanmar Constitution).

Increased clarity for enforcement of foreign arbitral awards

The Arbitration Law replaces the previous domestic arbitration legislation, the 1944 Arbitration Act (the 1944 Act), which, of course, pre-dated the 1958 New York Convention.

The 1944 Act applied only to domestic arbitration and provided no framework for recognising and enforcing foreign arbitral awards. Parties seeking to enforce a foreign arbitral award in Myanmar were reliant on the precursor to the New York Convention, the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 and the Geneva Protocol on Arbitration Clauses 1923, through the Myanmar Arbitration (Protocol and Convention) Act 1937 (the Geneva Regime). This presented significant obstacles. It required an entity to contract through a party in the jurisdiction of a signatory state to the Geneva Convention (of which there were a limited number), and reciprocal enforcement provisions to be in place.

Although Myanmar ratified the New York Convention in April 2013, domestic legislation was necessary to give effect to the New York Convention because Myanmar is a dualist state. After Myanmar’s ratification of the New York Convention, and prior to implementation of the Arbitration Law, it was unclear how foreign awards could be enforced in Myanmar. Under Article VII(2) New York Convention, the Geneva Regime ceases to have effect for states bound by the New York Convention. However, no domestic legislation had yet implemented the New York Convention enforcement provisions. Perhaps unsurprisingly, to date no known foreign arbitral award has been enforced in Myanmar.

The Arbitration Law removes this uncertainty and puts enforcement of foreign arbitral awards in Myanmar in line with the New York Convention and the Model Law. The grounds that a Myanmar court may rely on to refuse to recognise foreign arbitral awards (in section 46) are specific and limited. One divergence from the New York Convention and Model Law is that the Arbitration Law provides that recognition or enforcement may be refused where it would be contrary to the “national interest” of Myanmar (in the English translation), rather than for reasons of “public policy” as expressed under the New York Convention and Article 36(1)(b)(ii) Model Law. Only time will tell whether this distinction in terminology means that Myanmar courts take a divergent approach in considering this ground from other jurisdictions who have adopted the Model Law.

The Arbitration Law also provides (at section 31) that the Myanmar courts may enforce interim orders, orders and directives given by arbitral tribunals seated both inside and outside of Myanmar. This is a powerful, arbitration-friendly provision.

While some uncertainties remain, notably the position under Myanmar law with respect to enforcement of foreign awards rendered in non-New York Convention signatory states (as to which the Arbitration Law is silent) and the “national interest” ground for refusing enforcement, the Arbitration Law’s introduction of a regime for enforcing foreign awards should provide comfort for investors seeking to enter into commercial agreements with entities that have significant assets in Myanmar.

Bringing the Myanmar arbitration regime in line with international standards of arbitration procedure

The 1944 Act gave wide scope to the Myanmar courts to interfere with or stay the arbitration process while it was under way, or set aside any arbitral award made. Arguably, this rendered the Myanmar arbitration framework less certain and less attractive to foreign investors as a neutral dispute resolution procedure.

The Arbitration Law, however, adopts the Model Law to a significant degree in respect of the conduct of the arbitration and provides for a less interventionist approach by the Myanmar courts. For example, the default position is that a Myanmar court will not intervene in matters governed by the Arbitration Law, except where the Arbitration Law so provides, and that the Myanmar court shall refer parties to an arbitration agreement to arbitration, unless the agreement is null and void, inoperative or incapable of being performed (sections 7 and 10(a)). The Arbitration Law also distinguishes clearly between the provisions applicable to domestic and international arbitrations, and the distinction between the “place” (equivalent to seat) and location (that is, venue) of an arbitration (sections 3 and 23).

Accordingly, foreign investors may take comfort from Myanmar’s alignment of many provisions of the Arbitration Law to the Model Law, and the possibility that arbitrators, counsel and judges may refer to case law from other Model Law jurisdictions in interpreting these aspects of the Arbitration Law.

Possible effects on foreign investment

The changes introduced by the Arbitration Law may reassure foreign investors by:

  • Giving them the option of enforceable arbitration proceedings in a neutral forum (especially those considering entering into agreements with parties who have substantial assets in Myanmar).
  • Providing for an internationally accepted standard of arbitration procedure and decreasing the scope for judicial interference in arbitration proceedings.

Investors may well take comfort from these developments, especially in light of the other advancements Myanmar has made to attract and govern foreign investment. These include:

Other advancements include:

Reciprocally, the greater certainty for investors may result in the advantage to Myanmar of increased foreign investment.

Allen & Overy Katrina Limond

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