UPDATE
25 April 2017
Page 1
Investment
Institute arbitration cases
(finished plus pending)
3 No institution 67
What Are the Pros and Cons of ICSID Arbitration for Myanmar Compared to As a member of ICSID, Myanmar can
Non-ICSID Arbitration? appoint arbitrators and influence
administration of investment
Each arbitration institution and framework, such as ICSID, UNCITRAL/PCA and ICC
arbitration in general
has its merits in terms of the enforcement of the award, the process, the way to
challenge it, even the costs. But, ICSID is much more than an institution only. It is Under the ICSID Convention, the
the only one which comes with its proper international legal framework in the ICSID Panel of Arbitrators is only selected
Convention. That sets it apart from any other, non-ICSID form of arbitration. by Contracting States, except for
ten arbitrators who are chosen by
A good part of deciding whether joining ICSID is a good idea for Myanmar is to the Secretary-General. After joining,
compare ICSID arbitration with non-ICSID arbitration from a Myanmar perspective. Myanmar would have the right to
That is the purpose of this section. appoint four arbitrators and four
conciliators. In any cases facing
It is much harder for Myanmar to refuse enforcement of ICSID arbitration Myanmar, arbitrators are nearly entirely
derived from the lists chosen by states,
When an investor wins a non-ICSID award against Myanmar, this is a foreign
potentially with consideration for state
arbitration award which may require recognition and enforcement in Myanmar
interests. However, on any particular
or elsewhere, most likely under the New York Convention. Local courts, most
dispute, arbitrators of the same
importantly Myanmar courts, could use one of several grounds, even under the
nationality of the parties are strongly
New York Convention, such as public policy, to refuse recognition or enforcement.
discouraged [Only allowed if the arbitrator
That is not possible with ICSID awards. They are already considered final and as is in the minority or if both parties agree; art.
having final national court decisions as per the ICSID Convention. 39 ICSID Convention].
This is perhaps the most important difference between ICSID and non-ICSID Furthermore, as a member, Myanmar
arbitration. It is, we believe, probably the most important reason why some can influence the way ICSID is
countries do not join ICSID. organized through its representation
in the Administrative Council.
China BIT After negotiations, a dispute may be submitted to: After negotiations, an investor may choose between
1. Competent court of the contracting party, party three mechanisms of dispute settlement: national
to the dispute courts or international arbitration.
2. Arbitration under: For arbitration: choice is given among either ICSID or
a. ICSID Convention; or an ad hoc tribunal.
b. Ad hoc tribunal.
Korea BIT After negotiations or consultations, a dispute may be Typical ASEAN dispute settlement clause
submitted to: After negotiations or consultations, an investor
ASEAN Comprehensive 1. Competent court of the contracting party, party may choose between two mechanisms of dispute
Investment Agreement to the dispute; settlement: national courts or arbitration.
2. Arbitration under: For Arbitration: choice of various arbitration
ASEAN-India
a. ICSID Convention if it is available; proceedings, including ICSID and ICSID Additional
Comprehensive
b. ICSID Additional Facility if it is available; Facility.
Investment Agreement
c. UNCITRAL; or Currently, only ICSID Additional Facility is available in
ASEAN-China d. Any other arbitration institution. practice under this BIT.
Comprehensive
investment Agreement
ASEAN-Korea
Comprehensive
investment Agreement
Japan BIT After consultations, a dispute may be submitted to: Only Myanmar BIT that does not mention national
1. Arbitration under: courts - if consultations fail, only international
a. ICSID Convention if it is available; arbitration is mentioned.
b. ICSID Additional Facility if it is available; Mention of two possible set of possible arbitration
c. UNCITRAL; or (including ICSID and ICSID Additional Facility) in
d. Any other arbitration institution. addition to ad hoc arbitration.
ICSID arbitration or ICSID Additional Facility
arbitration is not a choice and depends on ICSID
membership of the parties.
Currently, only ICSID Additional Facility is available in
practice under this BIT.
India BIT After negotiations, a dispute may be submitted to: After negotiations or consultations, an investor
1. Competent court of the contracting party, party may choose between three mechanisms of dispute
Israel BIT to the dispute; settlement: conciliation, national courts or arbitration.
2. Conciliation; For Arbitration: choice of various arbitration
3. Arbitration under: proceedings, including ICSID and ICSID Additional
a. ICSID Convention, if it is available; Facility.
b. ICSID Additional Facility, if it is available; or ICSID arbitration or ICSID Additional Facility
c. UNCITRAL. arbitration is not a choice and depends on ICSID
membership of the parties, neither of which are
available currently under this BIT.
Lao PDR BIT After negotiations, a dispute may be submitted to: After negotiations or consultations, an investor
1. Competent court of the contracting party, party may choose between three mechanisms of dispute
Thailand BIT to the dispute; or settlement: conciliation, national courts or arbitration.
2. Arbitration under: For Arbitration: choice of various arbitration
a. ICSID Convention, if both parties are members; proceedings, including ICSID and ICSID Additional
or Facility.
b. UNCITRAL.
Philippines BIT After negotiations, a dispute may be submitted to: Narrowest BIT with regards to dispute settlement:
1. Competent court of the contracting party, party after negotiations, only national courts or UNCITRAL
to the dispute; arbitration is mentioned.
2. Arbitration under: Only BIT which does not provide for ICSID arbitration.
a. UNCITRAL.
To the exception of the Myanmar- June 2008 (as well as all ASEAN of them is not a member of ICSID.
Philippines BIT, all BITs executed by investment agreements) provide for These rules are very similar to the rules
Myanmar provide for the possibility the possibility of arbitration under provided under the Convention.
to settle investment dispute via ICSID the ICSID Additional Facility. The
arbitration. This is also the trend in all of ICSID Additional Facility are a set of Dispute settlement mechanisms
the investment agreements executed arbitration rules that are outside the would not need to be amended in
by the ASEAN. ICSID Convention but that enable case Myanmar joins ICSID. Ratifying
parties to a dispute to use the facilities the ICSID Convention will not change
All BITs executed by Myanmar since offered by ICSID when one (or both) Myanmars substantial obligations but
Page 4
will provide an alternative dispute settlement mechanism to both Myanmar and over all cases from investors from a
foreign investors. certain country. For that to happen,
the individual investment contract
Will Myanmar Be Overwhelmed With Claims After Joining ICSID? between the Myanmar Government
and the foreign investor must refer
Most research shows that the highest number of claims against states does not take to ICSID, and presently none of
place immediately after that state joins ICSID, but at least 10 years after that. For such contracts do this. Alternatively,
most countries, there are just a few cases started within the first 5 years of joining the jurisdiction of ICSID must have
ICSID. There is no reason to believe that joining ICSID will lead to an immediate been accepted by Myanmar in the
surge in cases [Larisa Babiy, Adam Czewoja Sheikh, Blerina Xheraj, Should Mexico Join ICSID?, applicable BIT, as is the case with most
CTEI Working Papers, 2012]. of Myanmars existing BITs to date.
(We updated and amended the below table from the similar one made Babiy, Sheikh Why Do India, Thailand and
and Xheraj in 2012 see footnote 7) Vietnam Not Join Icsid, and Why
Did Venezuala, Ecuador and Bolivia
Leave?
ASEAN countries seldom have investment claim cases against them. There have not The Thai Government lost a high
been any nationalization or currency devaluation policies by any ASEAN member, profile arbitration case in 2004 in
which are the main drivers of investment arbitration claims. connection with the construction of a
Rapid Transit facility in metropolitan
ASEAN Known investment Known investment
member arbitration cases since arbitration cases since Member of ICSID since (entry into force)
state 1987 (as defendant) 1987 (as claimant)
Cambodia 0 0 2005
Indonesia 7 0 1968
Malaysia 3 3 1966
Philippines 5 0 1978
Singapore 0 3 1968
We believe that it is very unlikely that Myanmar, with its present foreign investment
friendly laws and policies, has more than average number of cases.
Myanmar has very few BITs in force at this time compared to most other countries.
Joining ICSID alone does not mean ICSID will have jurisdiction over any case, or
Page 5
Bangkok, resulting in damages and of being challenged by Philip Morris on its
loss of face for the Government, and plain packaging rules in Philip Morris Asia
again in 2009, in connection with the Limited (Hong Kong) v. The Commonwealth
Don Muang tollway project. As a result, of Australia.] , is that under a strict
in 2009 the Government decided reading of older investment treaties
that infrastructure contracts were no there was not enough room for a states
longer allowed to provide in foreign good faith and non-discriminatory
arbitration. Thailand never ratified regulatory power. One example is the
ICSID, after joining in 1985. ICSID battle Uruguay, a small and rather
poor developing country, was forced
Vietnam did not lose any high profile to pay for (with a donation from a US
investment cases yet, but it is fair billionaire) to fend off claims by tobacco
to say Government officials were giant Philip Morris in connection with
spooked by the 3.7Billion US$ claim of its anti-smoking regulations, which look more at the domestic legal order
the Mackenzie v Vietnam investment the investor saw as expropriation of its as a whole, stability, clear regulations,
arbitration case in 2010 (even though trademarks [Philip Morris Brands Srl, Philip foreign ownership restrictions, and the
Vietnam later ended up winning). Morris Products S.A. and Abal Hermanos S.A. absence of corruption.
v. Oriental Republic of Uruguay, ICSID Case
Vietnam was later forced to settle
No. ARB/10/7 (formerly FTR Holding SA, Philip And indeed, there is little or no
another case [Nguyen Manh Dzung, Morris Products S.A. and Abal Hermanos
MCIArb & Dang Vu Minh Ha, Vietnam An evidence that ICSID arbitration, or BITs
S.A. v. Oriental Republic of Uruguay).] ( in general, do anything to increase FDI
arbitration-friendly seat in Young Arbitration
Uruguay later won the case). for a developing county. To cite Mary
Review Edition 19 October 2015]. In 2006
it was announced that Vietnam would Hallward-Driemeier of the World Bank:
Conclusions and Recommendations analyzing twenty years of bilateral FDI
join ICSID, but it still has not done so.
flows from the OECD to developing
Will Myanmar attract more foreign
Indonesia did not renounce ICSID countries finds little evidence that BITs
investment if it would join ICSID?
but in the wake of one ICSID decision have stimulated additional investment
on jurisdiction which did not go If Myanmar concludes more BITs and [ Mary Hallward-Driemeier, Do Bilateral
joins ICSID, which provides the highest Investment Treaties Attract FDI? Only a bit
Indonesias way, it did announce it
standard in enforcement of investment and they could bite, available at http://
would renegotiate all its BITs to exclude documents.worldbank.org/curated/en/1135
access to all arbitration for foreign arbitration awards, it sends a signal to
41468761706209/105505322_20041117160
investors [Churchill Mining Plc v Indonesia the international business community
010/additional/ multi0page.pdf.].
- (Indonesia ended up winning this case in that Myanmar is not afraid to commit
December 2016)]. itself to respecting international
arbitration decisions and international Joining ICSID fits very well in
law. That certainly has a positive effect Myanmars new openness to foreign
Venezuela, Ecuador and Bolivia, investment, and it will enhance
embarked on a nationalization program on the way investors regard Myanmar,
and on the reputation of Myanmar. Myanmars reputation as a country that
from 2004 onwards. As a result, they will respect international law, but few
received a long list of investment additional foreign investors will come
claims from their investors. As a result But the number of BITs in force, or
ICSID membership are not the most to Myanmar just because it joins ICSID.
they have left the ICSID framework in Some countries, also in Asia, do very
2009 and 2012 stating that the ICSID important considerations when
investors make investment location well in terms of FDI without joining
system favors investors and wealthy ICSID.
countries, and erodes the sovereignty decisions. Economic factors are the
of developing countries. most important factors, the size of the
market, availability of infrastructure, What are the pros and cons for
cost of production inputs, labor costs. Myanmar joining ICSID?
Another often heard complaint, and
not only by developing countries The largest factor driving FDI in ASEAN We made this table to give an overview
[Australia announced measures to curtail has for decades been cost reduction. For of what we consider to be the most
access to investment arbitration in the wake legal and regulatory issues, investors important pros and cons:
Game Change: DICA Now Allows Transfer of Shares in Myanmar Company to 2. All Myanmar BITs and FTAs should
Foreigners Impact on M&A and Finance, exclude bona fide regulatory
07 March 2017, Yangon. action from the provisions on
Page 7
expropriation (as the Myanmar a certain reasonable period, such Related vDB LOI Publications
BIT with Korea already has) or fair as 18 months to give a chance for Labor Disputes in Myanmar:
and equitable treatment. This authorities to settle the dispute; A Review of Some Interesting
is to ensure Myanmar can take and Labor Arbitration Council
regulatory measures on a non- Other measures. Decisions
discriminatory basis within reason
without having to compensate 4. Myanmar should consider excluding Land Disputes: Court Decision
foreign investors; certain territories (for example Curtails Rights of Farmland
territories where there is strife in Users without a Form-7
3. In its future BITs and FTAs, Myanmar Myanmar) from arbitration under
should consider adopting a long ICSID, as is allowed under art. 70 of the Download our Regional
list of restrictive clauses, such as: ICSID Convention; Brochure here
(such as construction contracts) offices in Cambodia, Indonesia, Laos, Myanmar and Vietnam.
Limiting the protection to states and regions are also within the There are three things you need to know about our approach:
approved investment projects jurisdiction of the ICSID Convention 1. We deliver the ultimate in ground connectivity.
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https://goo.gl/EHPmR4
Edwin is a prominent foreign legal advisor living and working U Aye Kyaw is a Myanmar qualified lawyer and the principal of U
in Myanmar since 2012. He frequently advises the Government Aye Kyaw & Associates VDB Loi, a specialized litigation firm which
on privatizations and transactions in the energy, transport and joined VDB Loi in 2014. He is a former judge, magistrate and law
telecommunications areas. He and our Banking team act for lecturer with nearly 25 year experience in civil and commercial
international financial institutions and DFIs, including on their litigation and arbitration. He and his team of litigators have served
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approved FDI in Myanmar, and helped establish a foreign bank. lawyers, litigators and foreign arbitration specialists (resident
With our firms Energy team, Edwin worked on 5 out of 7 power in Myanmar) who exclusively work on litigation and arbitration
projects signed in 2016, and advised 4 of the supermajors. matters. We focus on a broad range of commercial disputes, labour
Supported by an exclusively dedicated telecom team, he helped cases, construction disputes, insolvency and debt enforcement. In
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IGW licenses this year. to secure the release and clear the employee of a foreign state
agency from criminal charges in connection with a fatal accident.