For decades, various arguments have been made for an increased uptake in international arbitration as an alternative mechanism for resolving disputes in the English-speaking Caribbean.
In an article written in 1994, Lubic highlighted the limited success of commercial arbitration in the Caribbean region. He highlighted, in particular, the unsuccessful attempts to promote it as a viable alternative to litigation, and the ultimate failure by the Arbitration Project Advisory Committee to facilitate adoption of an adapted version of the UNCITRAL Model Law on International Commercial Arbitration (Model Law).
The causes of these early failures were attributed to a combination of cultural apathy to the concept of arbitration (it appeared as if Caribbean citizens wanted their “day in court”), general resistance to the harmonisation of arbitration legislation and perceived disinterest by the business community. There was also a sense that the region had other priorities and that arbitration was unlikely to be speedier or less expensive than litigation.
The overall result of these factors was that the Caribbean region was left as a relative outlier in growing world of commercial arbitration, in particular. Until recently, the region has, for the most part, ignored the growing trend for businesses and states to use international arbitration as an alternative, and sometimes the preferred, method for resolving disputes, particularly in the energy, construction and financial services industries.
However, recent developments demonstrate that dispute resolution services in the Caribbean region are demanding faster and more flexible mechanisms to resolve their disputes. This blog discusses whether a renaissance for international arbitration in the Caribbean is on its way.
Harmonisation and modernisation of existing legislation and institutions
In international arbitration, the law of the seat (or the law of the territory governing the arbitration procedure), can often be crucial to the process. For example, the law of the seat determines the extent to which the courts can intervene in the arbitral process or re-open awards. Furthermore, certain action taken by parties that fall foul of the law of the seat could lead to an arbitration being declared null and void.
Arbitration legislation in most Caribbean States used to be based on vestiges of either the outdated 1889 English arbitration statute or the English Arbitration Act 1950. One of the most significant disadvantages of these provisions was that they maintained the interventionist powers of the courts, allowing the judiciary to interfere in an arbitration, or to set aside an award because of an error of fact or law. These characteristics carried substantial risks for most business users who did not wish to be drawn back into the courts on interlocutory matters or at the enforcement stage, after spending time and money prosecuting or defending an arbitration.
However, there have been recent efforts by stakeholders to encourage the growth of arbitration in the region. For example, CARICOM (the Caribbean Community and Common Market, a group of 20 developing Caribbean countries), with assistance from the Government of Canada, has been working on a cross-Caribbean initiative focussing on Improved Access to Justice (IMPACT JUSTICE). One of the initiative’s first steps was the creation of a committee to review legislation around CARICOM and then develop and publish a model arbitration law, based on the UNCITRAL Model Law. At a CARICOM meeting held in June 2021, the project’s Model Arbitration Bill received support from regional attorneys general and was approved as a CARICOM Model Bill.
The impact of this cannot be overstated. Although certain countries, like Jamaica and the BVI, had already adopted a version of the Model Law, the approval of the CARICOM Model Bill (Model Bill) has now made it easy for other countries like Guyana, to follow with gusto, on their heels. Recommendations that Guyana should sign and ratify the Model Bill into its domestic legislation have recently been made to the Guyanese Parliament.
If this approach prevails and the Model Law is adopted throughout the region, we are likely to witness a sea change the business community’s perception of arbitration. Parties to arbitration will be able to select the arbitration rules that they wish to apply to their commercial proceedings, but will also have the predictability of a similar arbitration regime in place throughout the region.
The fact that this initiative is spearheaded by CARICOM, the most influential supra-national entity in the Caribbean, improves its prospects of success. If successful, it will also build on the region’s longstanding investment in arbitration infrastructure and expertise. The BVI International Arbitration Centre recently updated and future proofed its rules, and the Chartered Institute of Arbitrators boasts a strong Caribbean regional branch, with well-resourced country chapters who regularly conduct training throughout the Caribbean.
The changing profile of Caribbean States
Another key factor in increased use of arbitration in the English-speaking Caribbean will be the changing economic profile of the region, and the nature of the disputes that will likely arise.
The stereotypical island economy that focused on sugar, banana, rum and coffee, has given way to an open economy, with a focus on financial services, tourism, shipping, mining, oil and gas and construction. State owned businesses are now key participants in foreign direct investment (FDI), which has reportedly increased in emerging economies by 30%, to nearly $870 billion, in 2021.
The BVI, the Cayman Islands and Nevis have evolved over the years into stable centres offering sophisticated financial and wealth management services. At present, many disputes arising out of these services are treated as relating to “offshore” matters and tend to unravel in the local courts, but the confidential nature of arbitration sits very easily with disputes centred around offshore financial confidentiality
The Caribbean is also experiencing an influx of outward-bound investment and trade services from China. Many countries in the CARICOM region, including Grenada, Barbados and Jamaica, have signed up to the Belt and Road Initiative and have entered into long term contracts for the provision of roads, essential services and other infrastructure. A number of Belt and Road contracts are governed by English law and with the enaction of the Model Law throughout the region, it will only be a matter of time before international arbitration, as a neutral alternative to litigation, is selected more commonly by the parties.
Recent changes and potential transformations in the energy sector are also likely to have an impact on the choice of dispute resolution. The Caribbean has already seen a spate of international investment disputes, notably in the energy sector and we are likely to see more. Guyana is now the scene of the world’s biggest offshore discoveries in years, with 10 billion barrels of recoverable oil and gas confirmed since it began production in 2019 and the announcement of further reserves in January 2022. Also, the impact of alternative energy transitions should not be understated. The Caribbean is heavily impacted by climate change, and is poised to be the beneficiary of climate mitigation funding. If disputes arise in relation to the implementation of any transactions relating to climate or alternative energy, parties will look for a dispute resolution process that is efficient, location-neutral and where parties have influence over the composition of the tribunal.
A further factor is the impact that COVID-19 has had on creating backlogs in cases in the court system. Always a problem in the region, the pandemic has exacerbated matters. This has, in part, been attenuated by the introduction of virtual hearings, but parties embroiled in disputes are now actively looking for alternative ways to resolve them. Arbitration is likely to be the most immediate beneficiary.
Renewed support for arbitration by national and regional courts
The success of international arbitration will necessarily depend on a lack of judicial interference. Judges and the judiciary must be seen to respect the arbitration process and, if necessary, to come to its aid in a supportive rather than interventionist way.
In the past, this attitude has been lacking. The Caribbean had a tradition of litigation in municipal courts, rather than by arbitration. Even where there was arbitration, the decision of the tribunal was invariably appealed to a municipal court. Judges were also known to ignore arbitration provisions and to assume jurisdiction over a matter falling within the scope of an arbitration agreement. This approach is starkly at odds with that of more arbitration-friendly jurisdictions.
However, the tide has shifted. Since 1995, national courts in the Caribbean have appeared willing to support international arbitration. For example, in the case of AG v Cable Television of Nevis (Misc Suit No 156 High Court of St Kitts and Nevis), an injunction was granted to the Nevis Island Administration in order to allow a dispute to be taken to arbitration. This approach has been consistently followed in other Caribbean courts. In Barbados, for example, the Court of Appeal in Needham’s Point Holdings Ltd v Johnston International Ltd, noted that “arbitration is a consensual process…national courts should within very broad limits recognise and give effect to any agreement between the parties…as to the way in which the arbitration should be conducted“.
The same trend exists in the Caribbean’s regional courts. In the seminal judgment of BCB v Belize, the Caribbean Court of Justice found that a BIT was binding on the government (despite it not being incorporated into its domestic laws) and that this afforded BCB a right to arbitrate. The CCJ accepted BCB’s arguments that private investors had the right to international arbitration in the case of a dispute and that this right was not contingent on any preconditions or required any consent or permissions from the State.
These decisions demonstrate consistent judicial willingness to enforce validly made arbitration agreements and awards.
Signing up to the New York Convention and ICSID Convention
One of the widely accepted advantages of international arbitration in comparison with litigation, is the ease of enforcing a valid international arbitration award. Under the New York Convention 1958 (NYC), courts of contracting states are obligated to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made in other contracting states.
At the moment, 16 of the 168 contracting states to the NYC are from the Caribbean region. Until 2000 (that is, for 42 years), only ten countries in the region had ratified the NYC. However, between 2000 and 2014 (some 14 years), six further Caribbean countries ratified, suggesting an increased awareness of the benefits of international arbitration for the region. Similarly, a number of countries in the region are already signatories to the International Centre for Settlement of Investment Disputes Convention 1965 (ICSID Convention), suggesting an intent by states in the region to attract investment, and to reassure investors that their investments are protected under the umbrella of the ICSID Convention.
In 700 BC, Hesiod said “observe due measure, for right timing in all things [is] the most important factor”. This is correct today, and becoming increasingly true in relation to the Caribbean and international arbitration.