International Commercial Litigation: An Asian Perspective
INTERNATIONAL COMMERCIAL LITIGATION:
AN ASIAN PERSPECTIVE
KEY NOTE ADDRESS
BY THE HONOURABLE J J SPIGELMAN AC
CHIEF JUSTICE OF NEW SOUTH WALES
20TH BIENNIAL LAWASIA CONFERENCE
HONG KONG, 7 JUNE 2007
We live in the most dynamic economic region in the world. As a result of the multifaceted process called globalisation there is a general recognition that the economic welfare of citizens of all nations can be substantially enhanced by reducing the barriers to mutually advantageous exchange by trade and investment. One such barrier arises from the complexities of resolving the disputes that inevitably arise in international commerce.
Throughout Asia, every government, except North Korea and Myanmar, actively encourages and supports co-operation between its own citizens and corporations and those of other nations. The benefits of globalisation in this respect are widely accepted. For that reason, restraints previously imposed on the grounds of national sovereignty have often been reduced or abolished. However, with respect to co-operation relating to the administration of civil justice, the perspective of national sovereignty continues to dominate. Accordingly, significant progress to reduce the legal transaction costs involved in international commerce and investment has been difficult. Compared to what has been achieved in reducing other barriers to trade and investment over recent decades, the changes in non-tariff barriers associated with the dispute resolution process have been modest.
In an address I gave last year, [1] I put forward a case for the recognition of the costs and uncertainties associated with international litigation as a significant barrier to mutually beneficial exchange in trade or investment. Legal transaction costs can be reduced. That, however, will only occur if members of the legal profession act to ensure that reforms directed at reducing such costs and uncertainties are actively pursued in the course of governmental negotiations which are concerned with the reduction of barriers to trade and investment. Such involvement can occur in a wide range of overlapping forums.
At a multilateral level these issues may be pursued in discussions at the World Trade Organisation, by the implementation and expansion of the Hague Conventions or in the deliberations of organisations such as UNCITRAL, UNIDROIT or INSOL.
At a regional level, the experience of Europe suggests that some matters may be capable of being pursued in the context of ASEAN, or the East Asia Summit involving ASEAN together with Japan, China, South Korea, Australia and New Zealand or in the proposed free trade agreements between individual nations and ASEAN. Some matters may be pursued in the context of APEC. In two weeks time 119 delegates from throughout the region will attend the Asia Pacific Regional Meeting on the Hague Conference on Private International Law to be held in Sydney. This follows on from a seminar held in Malaysia in 2005.
At a bilateral level there is a range of negotiations between individual nations with respect to free trade agreements in which some of these issues could be raised, if lawyers can successfully put them on the negotiating table. There are also a few examples of bilateral arrangements between nations with respect to judicial assistance and other matters directly involving legal issues. A wide range of distinct issues arise only some of which can be discussed. [2]
International Commercial Arbitration
The prominence given to issues of sovereignty whenever a court of law is involved, stands in marked contrast with the acceptance throughout the world, including throughout Asia, of the system for international commercial arbitration. That system is treated as a manifestation of mutual agreement between parties, the barriers to which, as I have said, nations throughout the region are committed to reducing. This is so even though this informal dispute resolution process operates as a substitute for the formal court processes of each state.
The coherent international arbitration system for resolving commercial disputes is based on the interlocked provisions of the UNCITRAL Model Law, [3] the New York Convention for Enforcement of Arbitral Awards [4], and the Washington Convention for Investment Disputes.[5] These international instruments have been widely adopted by legislation throughout Asia. [6]
Commercial arbitration is sometimes said to be preferable to dispute resolution by court processes for a range of reasons. Sometimes, it is suggested that commercial arbitrations is quicker and cheaper. No doubt it can be. However, there is little evidence in Australia that commercial arbitration is in fact more cost effective. Furthermore, by reason of the considerable reduction in delays in judicial processes that have occurred over recent years and the continued operation of special treatment of commercial cases, to which I will further refer, delay is not a pertinent consideration in Australia. It appears to remain important in some other nations.
One advantage of international commercial arbitration is the fact that, unlike the administration of justice by courts, commercial arbitration can occur in private or, from a different perspective, in secret. Commercial parties are frequently reluctant to wash their dirty linen in public.
Perhaps even more significant is the ability to effectively and efficiently enforce arbitration awards, virtually throughout the world, pursuant to the New York Convention. Nothing remotely like this facility exists if one obtains a judgment from a court. Nor, in view of failure to develop a coherent international regime for enforcement of foreign judgments, is this likely to change.
The complexities of international commercial litigation, by way of invidious comparison with arbitration, accurately have been described as a “jungle”.[7] The one significant cost advantage that international commercial arbitration has over international commercial litigation is the proclivity of parties to engage in venue disputation, i.e. controversies about the appropriate jurisdiction in which litigation should occur. These complex, time consuming and costly disputes are always a waste of time and money and, generally, ultimately futile.
To a substantial degree the international system for enforcement of arbitral awards is such that the cost and futility involved in venue disputation is, in large measure, avoided. This invidious comparison is not likely to alter to any significant degree in the future. Accordingly, judges who are sensitive to the need to minimise costs and delays of commercial dispute resolution should support the system of international commercial arbitration by manifesting a reluctance to intervene with arbitral decision-making pursuant to the statutory authority which that international regime permits individual nations to confer upon the courts. Such reluctance is, in any event, appropriate out of respect for party autonomy.
For many years in common law jurisdictions, including Australia, courts treated commercial arbitration with suspicion. In the famous case of Scott v Avery the House of Lords settled the validity of arbitration agreements which made an award a condition precedent to any right of action under a contract. That overturned a long history of judicial opposition to arbitration which, historically, was derived from the fact that judicial salaries in England, until well into the 19th century, were determined by the amount of fees paid to the court. Accordingly, judges had a direct financial interest in maximising the amount of litigation in the official courts and minimising dispute resolution by private mechanisms. [8]
In contemporary debates, commercial arbitrators frequently complain that courts still interfere too much with the arbitration process but, in contemporary circumstances, this refrain manifests the same commercial self-interest of such arbitrators to maximise the workflow to the private system.
Judicial hostility to arbitration has now been replaced, at least amongst commercial judges in all of the jurisdictions with which I am most familiar, with a recognition of the significance of commercial arbitration and a determination to support it by exercising a high level of self-restraint in the exercise of statutory powers. This is clearly the case in Australia.[9]
The judiciary plays an important role in support of the arbitration process: where there is a gap or a failure in the arbitration mechanism; where there is a need to make provisional arrangements pending an award; to enforce the award. Furthermore, it is necessary to recognise the essential role that courts play in maintaining the integrity of commercial arbitration processes.
Arbitrations do go wrong, sometimes fundamentally so. Arbitrators can manifest bias. Arbitrators have been known to commit errors of so fundamental a kind as, on any view, to justify intervention by a court. The court’s role is to maintain the integrity of the process. This should be welcomed by arbitrators, rather than treated with suspicion. The knowledge that the integrity of an arbitration can be assured by a light handed but effective supervisory jurisdiction, enhances the confidence of the commercial community. Furthermore, such supervision constitutes the fulfilment of, rather than any interference with, the autonomy of parties, which is the underlying rationale of commercial arbitration and the reason why it has acquired a privileged status in dispute resolution.
In addition it must be recognised that not all commercial disputes are appropriate to be resolved by mediation or arbitration. Subject to contractual obligations, parties may choose to litigate in preference to arbitration. As with the submission to arbitration itself, such wishes should be respected as a manifestation of party autonomy, where contractually permissible. Furthermore, some disputes raise novel legal issues that can only be authoritatively determined by the formal court process. Finally, commercial arbitration may be rendered ineffective by the inability to invoke the coercive powers available to courts, for example by compelling discovery of documents, the attendance of witnesses and ensuring the preservation of assets.
Accordingly, notwithstanding the fact that, for the foreseeable future, international commercial arbitration is likely to remain the most readily enforceable mechanism for resolving international commercial disputes, those of us who are concerned to minimise the transaction costs that the legal system imposes on international trade and investment, must remain concerned with the particular difficulties that occur in the formal dispute resolution process involving courts.
Civil Procedure
International commercial litigation does not, in principle, differ from domestic commercial litigation in its basic requirements. The need to minimise delay and cost, present in all areas of litigation, is particularly acute and has long been acknowledged as special in most jurisdictions. Uncertainty and increased risk result in commercial timidity or increased insurance premiums. Disputation and delay diverts entrepreneurial energy. Perhaps most significantly, delay means that capital is frozen. While the party ultimately found to owe money may acquire some kind of working capital advantage, neither party can employ the capital for longer term purposes and provisions for contingencies must be increased.
Much civil litigation is about dividing a pie. The effects of delay in commercial litigation is that the pie to be divided is smaller. I have no doubt that in any jurisdiction, reduction in delays involving commercial litigation would liberate significant amounts of dead capital for deployment in the economy.
International commercial arbitration has developed a widely recognised set of procedural rules reflected in the formal rules of the numerous bodies, variously styled “associations”, “chambers”, “centres” and courts, which differ but display considerable overlap. The core procedures are of such universality that parties can approach the process with a high level of certainty and of familiarity. It would be desirable if the same could be said of international commercial litigation.
One could not expect harmonisation of procedure throughout a group of jurisdictions as diverse as those in LAWASIA. Nevertheless, some degree of harmonisation with respect to the basic principles applicable to commercial litigation could play a significant role in minimising the transaction costs of litigation which has a cross-border element. The sense of uncertainty and unfamiliarity that exists when a party is embroiled in foreign proceedings can be significantly attenuated.
There is in existence the Model Principles of Transnational Civil Procedure promulgated jointly by the American Law Institute (ALI) and the International Institute for the Unification of Private Law (UNIDROIT) for application to transnational commercial transactions.[10] These Model Principles combine features of both the civil and common law legal traditions in an attempt to overcome the problem of long arm or exorbitant jurisdiction which all nations have traditionally adopted as a manifestation of national sovereignty.
There is a significant substantive element in the Model Principles. It proposes the adoption of a uniform rule for assuming or rejecting jurisdiction: a “substantial connection” test. That test is also found in the Brussels Convention and the EU Regulation, applicable in Europe. There is a body of interpretation to draw on. Although not free from difficulty in a commercial context, this is as good a general criterion as is likely to receive widespread acceptance. Whether there can be a significant level of agreement to replace, at least for commercial cases, the variety of different tests developed in various nations, must be doubted.
The procedural elements for which the Model Principles make provision may be more susceptible to widespread agreement. They extend to joinder of parties, service of process, pleadings, composition and impartiality of the court, default judgments, summary dismissal, mechanisms for settlement, coercive interlocutory orders, case management, discovery, exchange of evidence, admissibility, privilege, burden of proof, cross-examination of witnesses, costs, appeals and enforcement provisions.
The Model Principles are a serious attempt to develop a comprehensive, hybrid model which is understandable to lawyers from both the civil law and the common law traditions. It is a model that could be widely adopted with respect to, at least, practice and procedure. A significant part of the Model Principles – not the “substantial connection” test – could be adopted by Courts under existing powers over practice and procedure in the form of court rules.
Of particular significance for international commercial litigation is the possibility of mutual judicial assistance based on the principle of reciprocity. This is reflected in Principle 31 of the Model Principles:
“The courts of a State that has adopted these principles should provide assistance to the courts of any other State that is conducting a proceeding under these Principles, including the granting of protective or provisional relief and assistance in the identification presentation and production of evidence.”
This Principle applies to freezing orders and search orders which I will discuss below.
Many jurisdictions identify a distinct group of judges to deal with commercial matters, which often include corporations law disputes as well as matters such as contracts and insurance. The original model is the Commercial Court in London which was created in 1895. In my State this model was followed seven years later. Indeed the business lawyers of Sydney celebrated the Centenary of our Commercial List in 2003. [11] The New South Wales Supreme Court also has a separate Corporations List to which specific judges are assigned.
Many other jurisdictions in Asia make such special provision, for example the Commercial List of the High Court in Hong Kong, special Commercial Courts in the Philippines, the Commercial Division in the High Court of Malaysia and Kuala Lumpur and the Commercial Division of the District Court in Tokyo, which is primarily concerned with corporations matters.
Some jurisdictions have a separate group of judges for construction disputes, derived from the old Official Referees List in England, now called the Technology and Construction Court. The New South Wales Supreme Court has such a separate list. So does Hong Kong.
In 2003 the Law Commission of India made a recommendation for the constitution of what it called “Hi-Tech, Fast-Track Commercial Divisions” in High Courts in the States of India. Its report highlighted the need for commercial cases involving significant amounts to be disposed of expeditiously. The authors of the report reacted to the fact that a number of judgments in the United Kingdom and United States had assumed jurisdiction in cross-border cases on the basis that delays in Indian courts were such that those courts would assume jurisdiction in cases where, otherwise, forum non conveniens considerations would have favoured India as the appropriate venue. [12]
I will refer below to the proposal to create a new National Company Law Tribunal to replace the existing company courts in each High Court. There is no doubt that delays are substantial. One study revealed that, in 2003, about 500,000 cases in the High Courts were over ten years old and 80 cases in the Supreme Court were over 20 years old. [13]
I am not aware of any statistics about delays in China. However, there are significant issues with enforcement of court judgments. The Supreme People’s Court is working with Committees of the National People’s Congress to reform the Civil Procedure Code with respect to enforcement.
There is, in my opinion, considerable scope for judges in the region, either separately or together with commercial practitioners, to exchange information about their practices with respect to commercial litigation generally and, particularly, about international commercial litigation. Some element of harmonisation using the ALI/UNIDROIT Model Principles as a standard should not be beyond the realms of achievement with respect to procedural matters. Interaction amongst judges, perhaps in a Conference devoted to these issues, would enhance the understanding of the judiciary of one nation about the practices of other nations and enable judges to make decisions on cases involving cross-border disputes with a higher level of understanding of what is likely to happen if the court declines jurisdiction in favour of another.
The Model Principles are not, of course, a treaty or convention. They may be adopted in whole or in part in any jurisdiction by statute or by rules of court. However, some degree of harmonisation, by reference to an agreed model such as this, could significantly increase the degree of confidence that judges and lawyers have about jurisdictions with which they are not familiar. Such confidence is essential if we are to achieve the level of cooperation between courts now required by the extent of commercial interaction across borders. It is also desirable to ensure that an appropriate level of judicial comity is adopted in the course of making decisions to accept or decline jurisdiction, under the relevant domestic rule in cases of venue disputation.
Anything which reduces the sense of unfamiliarity, indeed of bewilderment, which can sometimes be held by parties and their legal advisors who become embroiled in litigation in a foreign jurisdiction, would also be an advance. In terms of the involvement of commercial practitioners in such a process, LAWASIA is very well placed to be the forum. A first step could be for each interested jurisdiction to assess the degree to which its own practices conform with the ALI/UNCITRAL Model Principles, as we have done in New South Wales. [14]
Venue Disputation
In the jurisdictions with which I am most familiar, globalisation has had a major impact on the nature of legal disputation. Over the last few decades the frequency of disputes about venue have increased dramatically. There were always such issues, but nothing of the size and frequency with which we have become familiar over recent decades. The motivations vary but it is quite clear that lawyers throughout the world have decided that where an issue is litigated matters. It is a feature of the recent development in international commercial litigation, in contrast with the past, that the disputes have not involved the traditional private law issues of choice of law. The disputes have primarily been concerned with issues of jurisdiction. [15]
The process of forum shopping, in recent years including anti-suit injunctions and anti-anti-suit injunctions, represents a transaction cost imposed only on international trade and investment and which, therefore, discourages such trade and investment. [16]
The essential background for venue disputation is the fact that all nations make claims from exorbitant or long arm jurisdiction – in civil law countries generally turning on citizenship or residence and in common law countries generally turning on service of process. The net is cast deliberately widely in all cases, but a discretion is created, by doctrines such as forum non conveniens, to restrict the broad claims to some kind of rational extent. When rules of an unnecessarily wide character are qualified by broadly expressed discretions, the prospect of disputation is inevitably increased. This is a burden on international commerce which is not imposed on domestic commerce.
The frequency and intensity of battles over jurisdiction indicates quite clearly that parties and their lawyers attribute considerable significance to venue. The choice of venue is made, at least in the first instance, by a plaintiff. This is obviously not a neutral process.
Plaintiffs have a “first mover” advantage. Properly advised, a plaintiff will take advantage of the options available. There is nothing neutral about the choice of jurisdiction by a plaintiff, subject of course to an act of self-denial on the part of the jurisdiction first chosen or to an anti-suit injunction issued by another jurisdiction and which can be made effective against a plaintiff. [17] An anti-suit injunction may be commenced as the first action in order to give the first mover advantage to a prospective defendant. Inevitably, in this battle for first mover advantage prospective plaintiffs have resorted to the pre-emptive strike of an anti-anti-suit injunction. [18] Such litigation has emerged in common law jurisdictions, especially the United States, England and Australia but not, it appears, in civil law nations. [19[
The appellation “forum shopping” is no longer universally regarded as a term of abuse. Motivations for choosing a venue vary: some are perfectly legitimate and some offend any objective test of the purposes of the administration of civil justice. For example, in Europe, integrated as it is in these respects, parties to a commercial dispute that believe considerable delay would give it a commercial advantage have been known to institute proceedings in Italy, where they could be confident that no court will hear the matter for many years. This tactic is known in Europe as “the Italian torpedo”.[20] On the other hand, some parties that wish commercial disputes to be resolved quickly will choose a jurisdiction that has an efficient and expeditious mode of determining such disputes. The former motivation would be universally condemned and the latter accepted as legitimate.
In between such clear cases of legitimate and illegitimate motivation is a wide range of advantages and disadvantages in the litigation process about which different opinions can reasonably be held. This includes the scope and speed of requirements for disclosure of documents; the extent of sovereign immunity offered under domestic legislation; variations in approach to the lifting of the corporate veil to bring home the sins of the subsidiary to a parent company or to directors personally; the availability of freezing orders against assets and the existence of “mandatory rules” under local statutes, which provide causes of action or procedural advantage unique to a particular jurisdiction.
Furthermore, judgments are made about the quality of the judges in different jurisdictions. The quality of the judiciaries of different nations varies considerably. Although this is difficult to discuss in international conferences, let alone negotiation, in some nations the skill, learning and efficiency of judges is greater than in others. Indeed, some nations the judiciary has significant problems with corruption which does not exist in others. Judges may also vary, as they do within any jurisdiction and over time, with respect to the parochialism or international comity that they display in exercising discretions or formulating judgments within the wide range of choice that, on any view, is permissible on matters of this character. The extent to which litigants from a particular nation could expect some kind of hometown advantage will vary from one nation to another and, indeed, will vary amongst different judges within a nation.
I have already referred to mandatory rules which must be applied by the courts of a jurisdiction even if parties to a commercial arrangement have stated that their agreement is to be subject to the law of another jurisdiction. Australian case law contains a particularly good example of the futility and increased costs associated with an attempt to enforce an Australian statute which modified insurance contracts. [21]
As is well known the forum of choice, if it can be invoked, for many plaintiffs is to establish jurisdiction in the United States. There a case can be pursued on the basis of a contingency fee arrangement without any liability for legal fees or exposure to an order for costs in the event of failure; pre-trial discovery is available to a degree that most jurisdictions would regard as oppressive fishing expeditions; juries award damages that would be regarded anywhere else as exorbitant and statutory provision exists for treble damages in certain situations. [22] The position of the United States is such that multilateral enforcement is not an attainable objective. In any multilateral negotiation about legal issues, the United States is the thousand pound gorilla sitting in the corner. If you ask it for a dance it will decide when the dance is over.
Co-operative arrangements and the establishment of a sense of international comity are most likely to be effective between different jurisdictions that have a lot in common in their legal traditions or in their culture or other alignments. This is the case, for example, between England and Scotland, between Australia and New Zealand and, increasingly, between Hong Kong and China. It is also the case within Europe.
The range of different legal systems operating in the Asian area is such that an overall regional arrangement of the character that is possible in Europe would not appear likely of achievement. Nevertheless, particular regional groupings may be able to make progress to different degrees. For example, within the core ASEAN group of nations may be able to develop European style arrangements on some legal matters. The bilateral free trade agreements between particular nations, or between ASEAN and other nations, could also cover some of this ground under the general rubric of promoting trade in services. A range of models is available for what may be achieved on a bilateral or multilateral basis including the close relationship between Australia and New Zealand [23] and the Brussels Convention applicable in Europe. [24]
Choice of Court Convention
For major commercial litigation one step that could reduce the intensity of disputation and, accordingly, reduce the substantial transaction costs imposed upon international trade and investment, is to ensure that a choice of court provision in contractual documentation is effective.
After many years, the Hague Conference accepted the inevitable: its attempt to draft a multilateral convention on enforcement of foreign judgments was unlikely to come to fruition. That process did, however, lead to the conclusion on 30 June 2005 of a more limited convention applicable to commercial contracts being the Convention on Choice of Court Agreements. No State has yet acceded to this Convention and only one has signed. This delay arises because, as I understand, it is usual for States to await the Hague Conference to issue a detailed Explanatory Report. That has only recently been published. [25]
Under this Convention a court chosen in a commercial arrangement will have jurisdiction, unless the agreement is null and void under the law of the designated State. A court not chosen in a commercial agreement does not have jurisdiction and must decline to hear the case.
There are difficulties with the scope of the Convention.[26] For example, in some jurisdictions, including Australia laws are designed to protect small businesses and may be the subject of statutory mandatory rules. Although the Convention does exempt consumer transactions, it does not exempt small business transactions which, from a policy perspective, are not distinguishable from the protection afforded to consumer transactions. It would not be acceptable for large corporations to insert a foreign choice of court clause in its standard form contracts to evade local laws in the case of small business. International commercial litigation is usually concerned with contractual arrangements of a substantial size. Accordingly, the ultimate purpose of the Convention could be served notwithstanding an exemption directed at small businesses. Article 6 of the Convention excludes agreements which are made null and void by domestic law. Existing statutory mandatory rules may need to be reviewed.
This Convention is concerned with jurisdiction of the official courts. It will be interesting to see whether, in the process of considering ratification, nations approach the Convention with the approach hitherto applied to any matter capable of being described as an interference with sovereignty, on the one hand, or whether the approach applied to international commercial arbitration agreements will determine how nations respond.
In my opinion, the Convention on Choice of Court Agreements has the same core justification as the New York Convention of Arbitral Awards. Parties to a commercial contract have chosen a jurisdiction. The autonomy of the parties should be respected for the same reasons as it is accepted by all those nations that have adopted the New York Convention. As one commentator has noted, the only difference between an arbitration agreement and a choice of court agreement is that, in one case, the parties select a private forum and, in the other case, the parties select a public forum. [27] The international commercial community and its legal advisors have an interest in the widespread adoption of the principles of this Convention in the Asian region.
No doubt, within each nation represented at this Conference some sort of process of consultation will eventually be undertaken. Whether or not it is pursued with any priority may well depend on lawyers who represent corporations likely to be involved in venue disputes promoting the new Convention. Furthermore, acknowledgement of the significance of party autonomy in commercial contracts implicit in this Convention could well be reflected in bilateral treaties or in any of the regional forums to which I have earlier referred. [28]
There will, in any event, be some delay in each nation identifying what kinds of matters should be included in a list of statutory provisions invoking the “null and void” exception. One way to develop a constituency for increasing the priority of this issue is to increase awareness of the fact that the frequency and intensity of venue disputation that has grown dramatically in recent years is likely to expand geometrically in future years unless some such provision is widely adopted.
Cross-Border Insolvency
The single most significant field requiring a high level of international co-operation between courts of different nations is, in my opinion, corporate insolvency where there are assets in more than one jurisdiction. This is not a subject to which the well-established regime for international commercial arbitration has any direct application. The economic significance of reform in this field should not be understated.
The East Asian Financial Crisis of 1997 created a widespread understanding of the need to improve the state of insolvency law and practice in many nations in the Asian region and to establish coherent means of dealing with cross-border issues in all nations throughout the region, indeed, internationally. In the ten years since that Crisis the scope and intensity of cross-border trade and investment throughout the region has increased geometrically.
Furthermore, another development complicates the issues that will need to be determined in insolvency proceedings. The dramatic expansion in the activities of hedge funds which, unlike banks, operate without capital adequacy requirements will give rise to exceptionally complicated issues of considerable commercial significance.
I refer in particular to the explosive growth in the credit derivatives market which did not exist a decade ago. In the course of the 2006 calendar year alone, such derivatives grew from US$294 billion to US$470 billion dollars in terms of gross market value. [29] Credit derivatives slice debt into distinct risk profiles which are acquired by different parties. Issues about location of assets and enforcement will inevitably be more complex than has hitherto been the case.
When, as inevitably will occur, a particular nation or the region as a whole, suffers from an economic recession in the future, the absence of effective mechanisms for ensuring the speedy disposition of cross-border issues will so delay the process of liquidation for corporate groups operating throughout the region as, in my opinion, to significantly impact on the prospects of economic recovery.
The problems of cross-border insolvency are widely recognised. This is a multi-faceted issue about which much can and has been written. [30] There are, however, two particular matters which I wish to emphasise.
First, the broader economic effects of delay in the finalisation of corporate liquidations needs to be acknowledged. Liquidators, and the lawyers who advise them, do not in fact have a commercial interest to ensure that a liquidation is completed within the shortest possible time. Most liquidators and lawyers are dedicated to achieving such a result because of their professional obligations. Regrettably, meetings of creditors, who do have a commercial interest in finalising the liquidation as quickly as possible, are not always capable of joint effective action in this respect. This problem is considerably exacerbated when the liquidator can point to the difficulties associated with the liquidation process by reason of the need to pursue assets in other jurisdictions.
Liquidators, however competent, are not entrepreneurs. Capital tied up during the course of a liquidation is in many respects dead capital. I have no doubt that if we could reduce the period that liquidations of companies in Asia now take by, say, 12 months, this would liberate some hundreds of millions of dollars of capital into the economies of the region.
Delay in this respect has very real economic costs. This is true now. If, as inevitably will be the case, economic conditions turn adverse, the considerable expansion of cross-border relationships and transactions, that a decade of globalisation has brought, will mean that these effects are much larger than they have ever been.
The second issue I wish to emphasise is the problems that arise when assets are held in a corporate group of companies in numerous jurisdictions and there are creditors in each of the jurisdictions. In the absence of a high level of integration and co-operation it is natural that courts in any particular jurisdiction have sought to protect the interests of the creditors of that jurisdiction, whenever they are likely to receive a higher dividend if they get access to those assets than they would if those assets were placed into a general pool available to all creditors. This is sometimes called “ring fencing”. This is a classic case in which the protection of special interests has a detrimental effect on the economy as a whole.
The practice to which I have referred is no different to any other kind of government regulation which constitutes a non-tariff barrier to trade and investment. It is a form of protection sanctioned by the state through its courts, albeit perhaps not as blatant as some other forms of government regulation. However, it has the same detrimental effect on the operation of the economy as a whole as any other non-tariff barrier to trade. It should be recognised as a form of protection and, accordingly, feature in free trade negotiations, whether of a bilateral, regional or multilateral character.
The fact that the processes of globalisation significantly exacerbate the problems arising from cross-border insolvency has long been recognised. At an international level it has led to the formulation of the UNCITRAL Model Law on Cross-Border Insolvency of 1997. This international standard has gathered considerable weight by reason of the economic significance of the nations that have adopted it: Japan in 2001; the European Union in 2002; the United States in 2005; the United Kingdom in 2006. Australia announced some years ago that it intends to do so, but the legislation has not yet been introduced and I am unaware why this is taking so long.
In part based on the UNCITRAL Model Law, there have been a range of multilateral and bilateral initiatives seeking to address these issues. This is an exceptionally complicated field on which it is only possible to touch briefly in a paper of this length.
The principal initiatives in the Asian region occurred in the immediate wake of the East Asian Financial Crisis of 1997, when the Asian Development Bank instituted a number of Technical Assistance Programmes with certain Asian nations. These programmes encompassed detailed work on legislative reform and included conferences, workshops and reports about individual nations, culminating in a final report in 2005 which summarised the work that had been done. [31] This contained a range of recommendations. Both UNCITRAL and INSOL have been involved in support of the ADB Technical Assistance Project.
Furthermore, the OECD, in co-operation with APEC and the ADB with assistance from the governments of Japan and Australia, has established a co-operative conference referred to as Forum for Asian Insolvency Reform (“FAIR”). There have been annual meetings since 2001 at which a wide range of issues have been discussed.
The Australian Government, under the auspices of APEC, is proposing to establish a regional network on insolvency reform which will also involve information sharing and constitute a forum for dialogue. This proposal has been endorsed by the APEC Technical Working Group and supported by FAIR. As I understand the proposal, the membership will consist of public sector official responsible for advising governments on insolvency reform.
These examples of international and regional co-operation indicate the scope and complexity of the issues that arise. They also indicate the multiplicity of different organisations and forums in which these issues are being pursued. This is, regrettably, typical of most matters involving international commercial litigation.
UNCITRAL continues to be involved in promoting development in this area particularly in association with the international organisation of practitioners INSOL. In March of this year at Cape Town, judges from some 30 nations, including a judge from my court, attended a conference on cross-border insolvency which discussed the UNCITRAL paper: “Facilitation of Co-Operation – Direct Communication and Co-ordination in Cross-Border Insolvency Proceedings”. This Judicial Colloquium considered proposals for the development of formal protocols for co-operation between judges, particularly in the fields of scheduling proceedings i.e. the order in which matters would be decided between two jurisdictions; the preservation and collection of assets and restraint of enforcement actions.
Necessity has created a mechanism of direct court to court communications – with the agreement, or at least the knowledge, of the relevant parties – in cross border insolvency cases. Formal or semi-formal protocols between courts have been agreed to ensure the efficient distribution of assets. [32] Such protocols have been called “case specific private international insolvencies treaties.” This is an overstatement, but it conveys the significance of the development. [33]
Perhaps the best known example of such protocols was the arrangement between the United States and English courts over the insolvency of the Maxwell group of companies. The interaction between the Supreme Court of NSW and the High Court in London over the liquidation of HIH, a major insurer, is a good case study of this phenomenon. [34]
It may be that such a decentralised ad hoc system will prove adequate. However, in my opinion it will not be able to cope with a major recession. In that eventuality a more formal set of rules and practices – such as the UNCITRAL Model Law – will be required.
The most basic need is to improve the domestic capacity to handle insolvency matters of the judiciary within each nation. Obviously the more significant the economy the more important it is that the judiciary is competent in this regard. There are many programmes such as the ADB Technical Assistance Programme, directed to this need.
There is a wide range of options for addressing cross-border insolvency issues: from “territoriality” at one end, in which separate full scale proceedings are conducted pursuant to a local insolvency law in every forum where a debtor has assets, to “universality” at the other end, where primary, but not exclusive, weight is given to identified central proceedings under one insolvency law. There are, of course, numerous possible permutations in between. [35] Future development must recognise the major cultural differences in attitudes to the stigma of bankruptcy. [36]
The Asian Development Bank has advocated a regional arrangement within ASEAN based on the principle of universality. However desirable, there are real questions about the ability of ASEAN to progress so far in the short term. [37]
The most significant single nation in this regard is the People’s Republic of China. There is some evidence that China is moving away from a strict territorial approach to these matters and the new Chinese Bankruptcy Law contains a provision for recognition by the enforcement of foreign insolvency proceedings, at least where there is a “treaty or reciprocity” subject to certain conditions, potentially of a restrictive character. There are, I understand only two such treaties: with Italy and Hong Kong. That will make this recent charge of limited application unless steps are taken to ensure that the matter is pursued in bilateral discussions with China e.g. in the context of free trade agreements with Australia and ASEAN.
An increase in international confidence in the administration of insolvency laws within China, and the creation either at a bilateral or regional level of effective mechanisms for co-operation between the judiciary of China and that of other nations, is clearly a high priority. The issues are complex and require considerable effort. [38]
The position in India is that it is not a party to any international conventions and has no cross-border legislation. However, I understand the government is considering implementing the UNCITRAL Model Law. [39] At present insolvency proceedings are conducted by the Bureau of Industrial Financial Reconstruction in the established Commercial Courts of the High Courts. The quality of the judiciary in these courts is regarded as high. However, issues of delay do arise.
It is proposed that the existing structure will be replaced by a single body entitled the National Company Law Tribunal to replace the Commercial Courts with ten benches at different locations and an appeal court in New Delhi, with a further appeal to the Supreme Court.[40] I understand there are constitutional issues that arise with this process, which is referred to in India as “tribunalisation”, where jurisdiction is removed from the mainstream judiciary. It is by no means clear to me that the proposal to develop an expert group of decision makers in company law, including insolvency, will survive a constitutional challenge.
In Hong Kong, I understand there is no statutory provision governing the recognition of foreign insolvencies, but common law principles of comity may be successfully invoked, albeit with a high level of judicial discretion that makes the results somewhat uncertain. The Hong Kong Law Reform Commission has recommended a wait and see approach to the implementation of the UNCITRAL Model Law. [41]
In Korea a new unified insolvency statute entitled the Act on Rehabilitation and Bankruptcy of Debtors came into effect on 1 April 2006. This allows a foreign liquidator to approach a court in Korea to request recognition of insolvency proceedings or to seek co-operation in the exchange of information with a Korean Court. The legislation provides that local and foreign creditors are to be treated equally. The Seoul District Court is given exclusive jurisdiction in cross-border insolvency cases. [42]
In Malaysia and Singapore there are modern insolvency laws based on the United Kingdom model but, as I understand the position, no cross-border mechanisms for corporate insolvencies. I am unaware of any proposals to change the situation, although, if the Asian Development Bank initiative with respect to developing an ASEAN based approach proceeds, this would change.
In Indonesia insolvency judgments of foreign courts have no effect unless they can be enforced by a treaty of which there are, I understand, none. [43]
The territorial approach appears to be adopted in Taiwan which has an archaic insolvency law system and does not appear to be considering the UNCITRAL Model Law. [44]
The position in Thailand is that the insolvency law is closely based on the United States model. The law does not recognise foreign insolvency proceedings as affecting Thai assets. Thailand is investigating rules to govern cross-border countries. [45]
In the Philippines the courts operate on a principle of comity with respect to the enforcement of foreign judgments. Consideration is being given to reform based on section 304 of the US Bankruptcy Code, but this does not appear to involve much more than freezing orders. [46]
In Vietnam there is no legislation on cross-border insolvency although the matter was considered during the process of drafting the recent 2004 reforms. [47]
Nations such as Bangladesh, Bhutan, Brunei, Burma, Cambodia and Sri Lanka have, as I understand it, no cross-border insolvency legislation and the principle of territoriality applies.
This survey indicates the wide divergence of approaches in the different jurisdictions. It emphasises just how difficult the process of harmonisation is likely to be. The issues involve such a high level of complexity that one has to be pessimistic about the ability to devise a new institutional structure. There are, as I have pointed out, a wide range of initiatives underway in recognition of the significance of these problems. Somehow they have to be brought together.
A different perspective may need to be adopted, so that the task involved will not be primarily dependent upon the work of insolvency practitioners in the different jurisdictions. I do not believe that lawyers and accountants, together with the relevant judges, have sufficient international clout to make substantial, let alone rapid, progress in this regard. The perspective that I recommend be adopted is one that recognises this issue as a non-tariff barrier to trade and investment. That perspective would allow the matter to be pursued at a multilateral, regional and bilateral level in a context where the recognition of the need for reform, based on the principle of reciprocity, is well established. So are the mechanisms for pursuing negotiations involving the deployment of diplomatic and political capital at the highest level.
Judicial Assistance
The expansion of international commercial litigation makes the established mechanisms for the provision of judicial assistance by the courts of one jurisdiction to those of another jurisdiction of even greater significance. Furthermore, there is a need for the development of new modes of assistance. [48]
The significance of judicial cooperation was recognised in the 1999 Seoul Statement on Mutual Judicial Assistance in the Asian Pacific Region signed by or on behalf of the Chief Justices of Australia, Bangladesh, Brunei, China, Fiji, Hong Kong SAR, India, Indonesia, Japan, Kazakhstan, Republic of Korea, Marshall Islands, Micronesia Mongolia, Myanmar, Nepal, New Caledonia, New Zealand, Solomon Islands, Sri Lanka, Northern Mariana Islands, Papua New Guinea, The Philippines, Russia and Samoa.
That statement said:
1. “Increasing numbers of individuals, corporations and other forms of business associations are doing business internationally.
2. Forms of judicial administration and civil procedure differ widely among countries in the Asia-Pacific region.
3. The increasing number of commercial transactions between individuals, corporations and other forms of business associations resident, incorporated or registered in different countries within the Asia-Pacific region creates the potential for conflict over the most appropriate forum in which to determine commercial disputes.
4. International commercial transactions may also involve capital, goods or services in any number of countries throughout the region.
5. The prompt and fair resolution of civil and commercial disputes between residents of different countries in the Asia-Pacific region requires the establishment of procedures for the efficient and effective service of process, taking of evidence and enforcement of judgments by a resident of one state in the territory of another.
6. This Conference adopts as its objective, the establishment of such procedures.
7. In order to achieve this objective, this Conference recommends the formation of a strong network of arrangements on the service of process, taking of evidence and enforcement of judgments between countries in the Asia-Pacific.
8. The Conference notes the provisions of the proposed Treaty on Judicial Assistance in Civil and Commercial Matters between Australia and the Republic of Korea, a copy of which forms Annexure ‘A’ to this Statement, and encourages the adoption of similar or other appropriate arrangements between countries within the Asia-Pacific Region.”
The last paragraph reflected the priority given to these matters by the then Chief Justice of South Korea. The treaty between South Korea and Australia has not been followed elsewhere. This experience emphasises the need for judicial leadership in these matters.
In most nations the same persons are involved in developing legislation and programmes of assistance. Questions of priorities inevitably arise. There is no correct answer to what comes first. My own priorities are as follows:
- Cross- Border Insolvency (discussed above);
- Freezing and search orders;
- Assistance with evidence;
- Service of process;
- Enforcement of foreign judgments.
Freezing and Search Orders
For courts in the common law tradition, what we used to call Mareva injunctions are now called freezing orders and what used to be called Anton Pillar orders are now called search orders. Such orders are designed to prevent a person dissipating assets or destroying evidence in order to frustrate a potential judgment. These are of significance for a wide range of commercial disputes, but are of particular significance wherever fraudulent conduct is likely or suspected. Each jurisdiction has to determine whether it will provide support of this character for proceedings in the jurisdiction of another nation, not simply in support of proceedings within its own jurisdiction.
The UNCITRAL Model Law for Cross Border Insolvency was motivated in part by the ability of insolvent debtors to fraudulently conceal assets, particularly by way of transfer to other nations. Such conduct is not limited to insolvent companies. International fraud demands the same high level of international judicial co-operation. [49]Multilateral initiatives with respect to provisional measures have been at best tentative.[50] This is a matter where communications between courts with a view to ensuring judicial cooperation is highly desirable.
Originally, judicial decisions in England restricted the grant of freezing orders in aid of foreign proceedings.[51] However, this was criticised and altered by legislation. [52] In Australia the courts developed the common law in such a way as to free Australian law from the constraints imposed in England. Orders freezing Australian assets in support of foreign proceedings were made.[53] A harmonisation committee of the Australian Council of Chief Justices formulated a standard form set of court rules with respect to both freezing orders and search orders which have generally been adopted in all Australian jurisdictions.
Australian courts will support foreign proceedings by preserving the assets of foreign defendants held in Australia. On the basis of reciprocity, it is reasonable to request that courts in other nations will preserve the foreign assets of a defendant in Australian proceedings. It would, accordingly, be perfectly appropriate for Australia to seek to incorporate reciprocal obligations in the form of bilateral treaties.
In commercial litigation, these issues are the same everywhere. Wherever genuine and enforceable reciprocity is proffered, it is in the interests of every jurisdiction to offer such assistance on request, especially where the request is made by a court to another court. It may not be too optimistic to pursue bilateral or regional arrangements for all commercial, including corporate, disputes in this regard.
By reason of the ease with which funds and assets can be transferred from one jurisdiction to another, the problem of international fraud is likely to increase. The various forms of regional co-operation to which I have referred could readily be invoked for this purpose. It is also a matter which deserves the attention of the Hague Conference to devise an international convention.
Assistance with Evidence
The Hague Evidence Convention has been one of the most successful of all of the Hague Conventions. However, one of the few regions of the world in which it has not been widely adopted happens to be the Asia Pacific region. Australia is a party, as are China (including Hong Kong), the United States and Singapore. India has recently acceded to the Convention, but it is not yet in force. Nations which have not acceded include Pakistan, the Philippines, Thailand and Japan, as well as the nations that are not members of the Hague Convention such as Indonesia, Bangladesh, Cambodia and Vietnam. It may be that ASEAN is an appropriate forum in which these matters could be pursued by way of a collective accession.
This Convention has been very successful. However, its adoption preceded the considerable expansion of international commercial litigation. It was designed for any kind of civil litigation. It may be that a more efficient regime would be acceptable for commercial litigation and arbitration of significant size. The convention involves a considerable degree of unnecessary expense and delay and its mechanisms are cumbersome. Where the witness is co-operative, the Convention is now regularly bypassed in Australia by the taking of evidence via video link. [54] There is no doubt that more expeditious mechanisms could be adopted.
In lieu of the excessively bureaucratic regime of Central Authorities receiving requests from foreign courts, alternative mechanisms should be developed. Perhaps this can be done on a bilateral or regional basis. Australian practice is, in effect to bypass the Central Authority, because the role has been delegated to the Supreme Courts of each State, by means of their nomination as Additional Authorities under Article 24 of the Convention.
An alternative mechanism is found in the UNCITRAL Model Law on Cross Border Insolvency which gives recognition and standing to a “foreign representative”, being a person authorised to administer foreign proceedings (Article 2(d)). Such a representative can apply directly to a court of a participating State.
No doubt, in many nations some sort of prior processing by an arm of the central government, referred to as the Central Authority, will remain necessary. However, the degree of interaction which now occurs directly between judges at an international level is of a different order of magnitude than it was when these Hague Convention structures were first determined.
Surely at a time of almost instantaneous international communications, less bureaucratic and cumbersome mechanisms can be devised. I do not see any reason why all requests should be vetted by a central bureaucracy. It would be sufficient for the bureaucracy to receive copies of any request and to intervene if a policy decision is made that in some manner the request impinges upon an issue of national sovereignty. A system based on the presumption that every such request impinges upon national sovereignty appears antiquated in an era of globalisation. Provision should be made for direct communication between courts in this regard.
Furthermore, the only alternative mode of communication, which is by mail, is now completely out of date. The Hague Convention on the authentication of foreign public documents – known as the Apostille Convention – is being reviewed to simplify the required documentation and to facilitate electronic communications. These mechanisms should be considered for the Evidence Convention and the Service Convention as well.
I cannot claim that Australia is a model international citizen in this regard. It is over a decade since the Australian Law Reform Commission prepared a detailed report on updating and improving the Australian legislation which implemented the Hague Evidence Convention. Originally that Convention was enacted in Australia in a form derived from English legislation and adopted by most nations of the British Commonwealth. [55]
The recommendations of the Law Reform Commission covered amendments about a number of evidentiary issues, including the scope of judicial assistance available in Australian courts; permitting foreign lawyers to conduct examinations after a letter of request; clarification of the meaning of “civil or commercial” in Australian statutes and establishing procedures for direct judicial co-operation between Australian and overseas courts in cases of overlapping jurisdiction. [56] Unfortunately no action has been taken to implement these recommendations.
Service
Like the Evidence Convention, the Hague Service Convention is one of the most successful of the Hague Conventions. Nations that have acceded to the Convention include China, South Korea and Sri Lanka. A number of nations in the Asian region have not acceded including Malaysia, New Zealand, Singapore and Thailand. Australia is only now in the process of doing so. India has acceded to it with effect from 1 August this year. As mentioned above, a number of nations in the Asian regions are not members of the Hague Convention at all. Again a collective process to determine accession through ASEAN could be considered.
As with the Evidence Convention, a cumbersome process of making requests through a Central Authority is the general rule. In Australia it is proposed that the Supreme Court of each State will become an Additional Authority, pursuant to Article 18 of the Convention. Mechanisms will need to be put in place to ensure that the Central Authority can intervene should, in its opinion, an issue of national sovereignty arise. It is likely that our system will be based, like the Evidence Convention, on direct application to courts.
This will not be possible in some nations. China has objected to all methods of service except by that of the Chinese Central Authority. [57] Hong Kong has its own Central Authority which permits service by mail. In Taiwan, which is not a member of the Hague Convention, service is effected through a process of judicial assistance pursuant to a Taiwanese statute entitled the Law Governing the Extension of Assistance to Foreign Courts, which requires a request for assistance and a signed copy of original foreign court documents translated in Chinese. India is only just acceding to the Convention. The requirement for all requests to be processed by the Indian Central Authority is part of the scheme.
The central bureaucratic mechanisms for service give rise to an unnecessary element of delay and complication. The fact that the Convention makes provision for service of documents by direct post, but permits any State to object to such service, as many have done, manifests the antiquity of the Convention. “Snail mail” as it is called, is now technologically obsolete. In this, as in other respects, this Hague Convention is also out of date.
Pending the outcome of the long process required for multilateral reform, more efficient mechanisms for dealing with such requests could be devised in the context of bilateral free trade agreements or in regional arrangements of the character I have earlier discussed. This is a matter capable of being implemented in bilateral treaties as indeed it has been in the treaties that Australia has entered into on judicial co-operation with South Korea and Thailand. [58]
Enforcement of Judgments
The diversity of legal systems and the link with national sovereignty considerations that led to the inability of the Hague Conference to develop a Convention on Enforcement of Judgments, is reflected in the LAWASIA region. For the same reasons a broad regional agreement is unlikely. In my address last year I outlined the different approaches towards enforcement of judgments amongst Asian nations.[59] More detailed summaries of the position in each Asian nation are available. [60] There is a wide range of different approaches which complicate the process of assessing reciprocity.
The transaction costs of international commerce are substantially increased wherever the system in one nation involves the re-litigation of substantive issues that have already been determined in another. There is no doubt that whatever can be done in this regard should be done. However, past failures do not suggest that this matter should not be given a high priority, unless determined by clear necessity or in the context of a particular bilateral relationship.
Judicial Globalisation
There is a definite sense of international collegiality amongst judges of different nations, of a character that did not exist a few decades ago. This is a part of a phenomenon that has been called “judicial globalisation” [61] or the creation of a “global community of courts”. [62]
Judges from different nations now meet in many different multilateral, regional and bilateral contexts, sometimes with practitioners, but often only with judges. The new sense of collegiality is enhanced by the recognition that all judges can learn from each other, from each other’s judgments, and that there are many common structural and institutional issues about the administration of justice.
This development is of significance if, as I believe to be the case, the range of circumstances in which judicial cooperation is required will expand as part of the overall phenomenon of globalisation. Direct court to court communications have already shown their value e.g. in the development, discussed above, of formal protocols in cross-border insolvency cases. Similarly, the Hague Convention on International Child Abduction has been widely adopted because of the ease of international travel, which has facilitated the removal of children to another jurisdiction by one party of a failed marriage.
The argument from necessity for direct court to court communication and co-operation is, in my opinion, applicable to the context of international commercial disputes.
Judicial interaction and co-operation has been described as “international judicial negotiation.”[63] This process can be seen as an alternative to the anti-suit injunction approach. It requires court to court communication with the knowledge of, and usually with the approval of, the parties, who often mediate the communication. Such communication is designed to ensure the just and expeditious disposal of the real issues in dispute. The system is still evolving.
Judicial Comity
Although there have always been cases involving jurisdictional disputes in private international law, the frequency and intensity of such disputation has expanded considerably. This trend has not yet seen its course. In determining whether to assume or refuse jurisdiction and in determining what level of cooperation to offer, the traditional conception of the “comity of nations” has inadequacies. A new conception of “judicial comity” appears to be evolving.
The expansion of judicial dialogue, both in general contexts and in case-specific contexts has, perhaps perversely, reduced the willingness of judges to defer to colleagues simply because of their status. However, it has increased in the willingness to defer because the other jurisdiction, if accepted as capable, is more appropriate. The concept of international comity gave automatic deference because of the position of a foreign court as the manifestation of another state. Judicial comity requires respect but not automatic deference. In the context of international commercial litigation what matters is what works.
Judges are now quite willing, at the request of parties in international litigation, to assess the capacity of the another legal system which could resolve the dispute, most clearly on such matters as delay. Increasingly, the overriding principle being applied is to serve the requirements of practical justice in determining the particular dispute, rather than technical rules of conflict of laws or comity based on national sovereignty.
There have been cases in which judges of one jurisdiction have made decisions about jurisdiction, or about enforcing judgments, on the basis of an assessment of the quality of the judges of the other state. [64] Inevitably, this can be controversial. This case law should be understood as early steps in the process of developing the new principles of judicial comity.
As one author has observed:
“Judicial comity provides the framework and the ground-rules for a global dialogue among judges in the context of specific cases. It has four distinct strands. First, judicial comity is marked by a respect for foreign courts qua courts and hence for their ability to resolve disputes and interpret and apply the law honestly and competently, rather than simply as the face of a foreign government. Second, it recognises that courts in different nations are entitled to adjudicate their fair share of disputes - both as co-equals in the global task of judging and as the instruments of a strong ‘local interest in having localised controversies decided at home’. Third, it places a distinctive emphasis on individual rights and the judicial role in protecting them. Fourth, in a seeming paradox, it is marked by a greater willingness to clash with other courts when necessary, as an inherent part of engaging as equals in a common judicial enterprise.”[65]
Conclusion
The assertion of a right to exercise jurisdiction by a court is a specific manifestation of national sovereignty. The dynamics of international trade and investment challenge national sovereignty in numerous ways. International commercial litigation is only one kind of conduct in which traditional modes of international government behaviour are subject to pressure for change. To facilitate trade and investment, judges and practitioners must pursue enhanced levels and methods of cooperation between courts. This is a multifaceted process only some aspects of which I have discussed. This is an objective for the attainment of which LAWASIA is particularly well positioned to provide a forum.
In the decade since the East Asian financial crisis of 1997, this region has experienced exceptionally favourable economic conditions. Disputes in courts increase when the economy turns bad. Inevitably that will happen. When it does there will be a dramatic escalation in disputes about venue in all courts in the region. All of the matters to which I have referred will become more important. The difficulties of dispute resolution with a cross-border element will escalate so as to inhibit mutually beneficial exchanges thereafter. It would be preferable if the institutional infrastructure to avoid this kind of eventuality was in place before the inevitable downturn occurs.
END NOTES
1. See J J Spigelman “Transaction Costs and International Litigation” (2006) 80 Aust LJ 35. Also available at http://www.lawlink.nsw.gov.au/sc “Speeches”.
2. For an overview see P Schlosser “Jurisdiction and International Judicial and Administrative Cooperation” (2000) 284 Recueil des Cours: Collected Courses of the Hague Academy of International Law 9; See also C R Einstein and A Phipps “Trends in International Commercial Litigation in Australia” (2005) IPRax 273, 365 at 367 (an article that comprehensively surveys many of the issues considered in this article and from which I have benefited) also available at http://www,lawlink,nsw.gov.au/sc “Speeches”.
3. Model Law on International Commercial Arbitration (1985).
4. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1959) 330 UNTS 38.
5. Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1966) 575 UNTS 159.
6. See M Pryles (ed) Dispute Resolution in Asia (3rd ed) Kluwer Law International (2006). For an overview of the commercial significance of the New York Convention see J L Amundsen “Membership Has Its Privileges: The Confidence Building Potential of the New York Convention Can Boost Commerce in Developing Nations” (2003) 21 Wisc Int’l LJ 383.
7. See Airbus Industry GIE v Patel (1999) 1 AC 119 at 132 per Lord Goff.
8. This revelation was so embarrassing that the key House of Lords judgment was modified after delivery to remove references to judicial venality. See the analysis of Scott v Avery (1856) 5 HL Cas 811; 10 ER 1121; and, esp 28 LTOS 208, in Raguz v Sullivan (2000) 50 NSWLR 236at [47]-[48].
9. See e.g. Raguz v Sullivan supra; Comandate Marine Corp v Pan Australia Shipping Pty Limited (2006) 157 FCR 45.
10. These principles are available in a number of different locations including: ALI/UNIDROIT Principles of Transnational Civil Procedure Cambridge Uni Press (2006). See also the series of articles on the Model Principles in (2004) 9 Uniform L Rev (Ref dr unif) 811 et seq.
11. See J J Spigelman “Commercial Causes Centenary Dinner Address” at http://www.lawlink.nsw.gov.au/sc “speeches”; see generally V V Veeder “Mr Justice Lawrance: ‘The True Begetter’ of the English Commercial Court” (1994) 110 LQR 292.
12. See Law Commission of India One Hundred and Eighty-Eighth Report on Proposals for Constitution of Hi-Tech Fast-Track Commercial Divisions in High Courts New Delhi, December 2003.
13. V Adhivaraham “Case Management and ADR for the Banking Sector” http://lawcommisionofindia.nic.in/adr_conf/adivarahan1.pdf
14. See B Beaumont “The Proposed ALI/UNIDROIT Principles of Transnational Civil Procedure and their Relationship to Australian Jurisdictions” (2001) 6 Unif L Rev/Rev Dr Unif 951; C R Einstein and A Phipps “The Principles and Rules of Transnational Civil Procedure and their Application to New South Wales” (2004) 9 Unif L Rev/Rev Dr Unif 815. The Einstein and Phipps paper is available on the New South Wales Supreme Court website http://www.lawlink.nsw.gov.au/sc under “Speeches”.
15. See C McLachlan “International Litigation and the Reworking of the Conflict of Laws” (2004) 120 LQR 580.
16. This area of disputation has attracted a growing range of specialist journal articles and books on the subject. See e.g. A S Bell Forum Shopping and Venue in Transnational Litigation Oxford Uni Press (2003); and see particularly the references at p2 fns 8 and 9; also M Keyes Jurisdiction in International Litigation Fed Press Sydney (2005).
17. See Bell Forum Shopping supra at Ch 4 (defendant strategies).
18. See id at [4.137]-[4.142].
19. See C Kessedjian “Dispute Resolution in a Complex International Society” (2005) 29 Melbourne Uni R 765 at fn 134.
20. Widespread dissatisfaction in Europe resulted in Italy adopting a new model for Company and Commercial cases. See F Capri “The Parties and the Judge in the New Commercial Proceedings in Italy and the Ideological Choices” (2006) 25 Civil Justice Quarterly 70.
21. See my discussion in Spigelman “Transaction Costs” supra at 442-443 of Akai Pty Limited v People’s Insurance Co Limited (1996) 188 CLR 418 and Akai Pty Limited v People’s Insurance Co Limited (1998) 1 Lloyd’s Rep 90. See also Bell Forum Shopping supra at [2.50]-[2.51], [4.233] and Keyes International Litigation supra at 84-87.
22. See e.g. the observations of Lord Denning in Smith Kline & French Laboratories v Bloch [1983] 1 WLR 730 at 733 at 734.
23. See Spigelman “Transaction Costs” supra at 451-452.
24. The wide range of options is discussed in numerous places. See e.g. J P George “International Parallel Litigation – A Survey of Current Conventions and Model Laws” (2002) 37 Tex Int’l LJ 499. A comprehensive case book is Ray Goode et al Transnational Commercial Law: International Instruments and Commentary Oxford Uni Press (2004).
25. The recent Explanatory Report by the Rapporteur can be found at http://www.hcch.net/index_en.php?act=publications.details&pid=3959.
The application of the Convention to Australia is discussed in Richard Garnett “The Internationalisation of Australian jurisdiction and judgment law” (2004) 25 Aust Bar Rev 205.
26. See e.g. Spigelman “Transaction Costs” supra at pp450-451.
27. See J S Yackee “A Matter of Good Form: The (Downsized) Hague Judgments Convention” (2003) 53 Duke LJ 1179.
28. The position in each Asian nation with respect to choice of forum agreement is set out, nation by nation, in Pryles Dispute Resolution in Asia supra.
29. See Bank for International Settlements OTC Derivatives Market Activity in the Second Half of 2006 BIS, Paper May 2007 at 10 www.bis.org/publ/otc_hy0705.pdf; See also “At the Risky End of Finance” The Economist 21 April 2007.
30. See e.g. I F Fletcher Insolvency in Private International Law (2nd ed) Oxford Uni Press (2005); OECD Legal and Institutional Reforms of Asian Insolvency Systems (forthcoming) esp paper by S Oh “Comparative Overview of Asian Insolvency Reforms in the Law Decade” ; J Shi “Recent Developments in Chinese Cross-Border Insolvencies”; A J Smits and I M O’Hearn “Multinational Insolvency Forum Shopping” in J R Silkenat and C D Schmerier (eds) The Law of International Insolvencies and Debt Restructurings” Oceana Publications (2006); L M Lopucki “Universalism Unravels” (2005) 79 Am Bankr LJ 143; S L Bufford “Global Venue Controls are Coming: A Reply to Professor LoPucki” (2005) 79 Am Bankr LJ 105; C Anderson “Some Cross Border Issues under the Australian Voluntary Administration Procedure” (2004) 13 Int’l Insolv. Rev 137; R Mason “Local Proceedings in Multi-State Liquidation: Issues of Jurisdiction (2006) 30 Melb. Uni L Rev 145.
31. See Asian Development Bank Promoting Regional Co-Operation and Development of Insolvency Law Reforms: Final Report (RETA) 5975 April 2005.
32. E D Flashen of R J Siberman “Cross-Border Insolvency Corporation Protocols” (1998) 33 Tex Int’l LJ 587 at 589 and “mini treaty” in A Slaughter “A Global Community of Courts” (2003) 44 Har Int’l LJ 191 at 193, 213ff.
33. See e.g. The American Law Institute in Association with the International Insolvency Institute Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases ALI (2003).
34. See Re HIH Casualty and General Insurance Limited (2005) 190 FLR 398; In re HIH Casualty and General Insurance Limited [2007] 1 All ER 177; A McKnight “A Review of Developments in Law During 2006: Part 2” (2007) 22 J.Int’l Banking Law and Regulation 187.
35. See e.g. Mihailis Diamantis “Arbitral Contractualism in Transnational Bankruptcy” (2006) 35 Sw U L Rev 327.
36. See R Tomasic et al “Insolvency Law Administration and Culture in Six Asian Legal Systems” (1996) 6 Aust J of Corporate Law 1.
37. See Asian Development Bank Promoting Regional Co-operation etc supra esp at 28ff; see also R Fisher and M Sloan “Why Asia Needs a Regional Insolvency Pact” (2004) International Financial L Rev 44 at 45 and c/f K Anderson “Do We Really Need an Insolvency Pact in Australasia? A Reply to an Asian Development Bank Proposal” (2005) LAWASIA J 14.
38. X Zhang and C Booth “Beijing’s Initiative on Cross-Border Insolvency: Reflections on a Recent Visit of Hong Kong Professionals to Beijing” (2002) 10 Am Bankr Inst L Rev 29 at 34; C Booth “Drafting Bankruptcy Laws in Socialist Market Economies: Recent Developments in China and Vietnam” (2004) 28 Columbia Journal of Asian Law 93 at 142; J Shi “Recent Developments in Chinese Cross-Border Insolvencies” at 7-8 http://www.iiiglobal.org/country/china/060710shi-3.pdf; See also J Shi “A Summary of the Position on Cross-Border Insolvency in China” http://www.iiiglobal.org/country/china/China_on_Cross.pdf; L Burton “An Overview of Insolvency Proceedings in Asia” (2000) 6 Annual Survey of International and Comparative Law 113 at 120; Vincent Pace “The Bankruptcy of the Zhu Kuan Group: A Case Study of Cross-Border Insolvency Litigation Against the Chinese State and Enterprise” (2006) 27 U.Pa.J. Int’l Econ L 517.
39. See C Boyle “Foreword” in The Asia-Pacific Restructuring and Insolvency Guide 2006 Globe White Page London (2006) (see http://www.asianrestructuring.com) at 66-78.
40. See S Batra “Insolvency Laws in South Asia: Recent Trends and Developments” Report written after the Fifth Forum for Asian Insolvency Reform (FAIR), Beijing, 27-28 April 2006.
41. See E L G Tyler “Insolvency Law in Hong Kong” at 224 in R Tomasic (ed) Insolvency Law in East Asia (2006) supra; C Booth “Living in Uncertain Times: The Need to Strengthen Hong Kong Transitional Insolvency Law” (1996) 34 Columbia J of Transnational Law 389; L Burton “An Overview of Insolvency Proceedings in Asia” supra esp at 115; J Shi “Recent Developments in China Cross-Border Insolvencies” supra at 17-18.
42. See Asian Development Bank Promoting Regional Co-Operation supra esp at 32-33.
43. See generally R Tomasic Insolvency Law in East Asia supra at 353 (Malaysia), 372 (Indonesia) and 422 (Singapore). See also the Asia Pacific Restructuring and Insolvency Guide 2006 supra at pp79-88 (Indonesia), 107-116 (Malaysia) and 144-153 (Singapore).
44. See L Burton “An Overview of Insolvency Proceedings in Asia” supra; R Tomasic Insolvency Law in East Asia supra at 211; Asian Pacific Restructuring and Insolvency Guide 2006 supra at pp154-160.
45. See L Burton “An Overview of Insolvency Proceedings in Asia” supra esp at 125; see also W Wisitsora “New Thai Statute Blends Chapter 11 with Singapore Practices” (1999) 18 Am Bankr Inst J 1.
46. See R Fisher and M Sloan “Why Asia Needs a Regional Insolvency Pact” supra at 44; R Tomasic Insolvency Law in East Asia supra at 437; L Burton “An Overview of Insolvency Proceedings in Asia” supra at 121; The Asia Pacific Restructuring and Insolvency Guide 2006 supra at 161-171.
47. See Asia Pacific Restructuring and Insolvency Guide 2006 at 172-181;C Booth “Drafting Bankruptcy Laws in Socialist Market Economies” supra esp at 144.
48. These problems are not new. See H L Jones “International Judicial Assistance: Procedural Chaos and a Program for Reform” (1953) 62 Yale LJ 517. For surveys of the field see D McClean International Judicial Assistance Clarendon Press (1992); B A Ristau International Judicial Assistance (Civil and Commercial) International Law Institute (1984) (2 vols).
49. See e.g. Credit Suisse Fides Trust SA v Cuoghi [1998] QB 818 at 827G per Lord Justice Millett.
50. See eg. Kessedjian “Dispute Resolution in a Complex International Society” supra at fn197-203.
51. See Siskina v Distos Compania Naviera SA (The Siskina) [1979] AC 210.
52. See Mercedes Benz AG v Leiduck [1996] AC 284 at 307-308, 314; The Civil Jurisdiction and Judgment Act 1982 (Interim Relief) Order 1995.
53. See Davis v Turning Properties Pty Limited (2005) 222 ALR 676; P Biscoe Mareva and Anton Pillar Orders: Freezing and Search Orders Lexis Nexis Butterworths Australia (2005) Ch 5; P Biscoe “Transnational Freezing Orders” (2006) 27 Aust Bar Rev 161; H Tarrant “Mareva Orders: Assisting Foreign Litigants” (2006) Aust Bar Rev 314.
54. See e.g. Evidence (Audio and Audio Visual Links) Act 1998 (NSW).
55. See J D Maclean and C A McLachlan The Hague Convention on the Taking of Evidence Abroad: Explanatory Documents Prepared for the Commonwealth Jurisdictions Commonwealth Secretariat London (1985). The Convention is implemented in New South Wales by the Evidence on Commission Act 1995 Part 4; See British American Tobacco Australia Services Limited v Eubanks for the United States of America (2005) 60 NSWLR 483 esp at [22]-[40].
56. See Australian Law Reform Commission Legal Risk in International Transactions: Report No 80 (1996) esp Recommendations 11, 13, 15, 16, 17 and 24.
57. On the developing position in China see M Zhang “International Civil Litigation in China” (2002) Boston College Int’l Comp L Rev 59; H Jin and D Huanfang “Chinese Practice in International Law” (2003) Chinese J of Int’l Law 387; F Shen “Are You Prepared for this Legal Maze? How to Serve Legal Documents, Obtain Evidence and Enforce Judgments in China” (2003-2004) 72 UMKC L Rev 215.
58. See Treaty of Judicial Assistance in Civil and Commercial Matters Between the Government of Australia and the Government of the Republic of Korea (2000) ATS 5; Agreement Between the Government of Australia and the Government of the Kingdom of Thailand on Judicial Assistance in Civil and Commercial Matters and Co-Operation in Arbitration (1998) ATS 18.
59. See Spigelman “Transactions Costs” supra at 449-450.
60. See the relevant sections in each chapter of Michael Pryles Dispute Resolution in Asia supra; Herbert Smith Guide to Dispute Resolution in Asia (4th ed) Herbert Smith in association with Gleiss Lutz and Stibbe (2006)
61. Anne-Marie Slaughter “Judicial Globalisation” (2000) 40 VaJ. Int’l LJ 1103
62. Anne-Marie Slaughter “A Global Community of Courts” (2003) supra.
63. See J L Westbrook “International Judicial Negotiation” (2003) 38 Tex Int’l L.J 567.
64. Slaughter “A Global Community of Courts” supra at 210ff.
65. Slaughter “A Global Community of Courts” supra at 206.
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