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Challenges of Arbitration in Macao

Challenges of Arbitration in Macao

 

Cai Yiying

ALSA National Chapter: Macao

Introduction 

As we know, given the success of the New York Convention 1958 with 158 convention-states as members, arbitration is not only an alternative in dispute resolution process, but indeed the mainstream dispute resolution process that involves cross-border transactions. Why do we need to promote the development of arbitration in Macao?

Macao is one of the most densely populated regions in the world and is a free port of international trade, funds, foreign exchange, personnel and so on. In fact, the arbitration to resolve most of the disputes arising from international or foreign commercial relations is a trend toward an increasingly globalized world. However, due to the shortage of judicial officials, complexity of court proceedings and the long waiting time, a large number of civil and commercial cases backlog.[1] Besides, the high costing is also a big problem. Therefore, arbitration is considered more practical as a non-judicial method to rule out conflicts.

Arbitration plays an important role in dispute resolution process for its procedural flexibility, which allows parties to engage in an efficient, confidential and fair process leading to a final, binding and enforceable award. So, it’s necessary to develop arbitration as a better resolution for conflicts in Macao. However, in Macao, the strength of, there are several challenges which this article will analyse.

Slow development of legislation

The arbitration regime of the Macao is divided into Voluntary Arbitration Regime (Decree-Law No 29/96/M, as amended by Decree-Law No 19/98/M) and the External Commercial Arbitration Regime (Regime da Arbitragem Comercial Externa, Decree-Law No.55/98/M)[2]. The latter was promulgated on 23 November 1998, which is almost a complete adoption from the 1985 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (“the Model Law”) and as can be seen, the development of legislation is very slow from the legislation history.[3]

As early as 1962, the provisions of the fourth volume of the Portuguese Code of Civil Procedure concerning the arbitration system had been extended to Macao, but this system was abolished in 1986 along with the Portuguese civil procedure reform. In  1991, article 5, paragraph 2 of the Macao Judicial Organization Outline Act passed by law No. 112-91 of August 29 stipulated: “It is necessary to establish an arbitral tribunal and to establish a non-judicial method and ways to rule out conflicts.”

At the beginning of 1990, the draft of voluntary arbitration law was completed, which is the first draft of the law on arbitration in Macao. After that, the legislative work on the draft was on pause for six years. Finally, until June 1996, the Macao government finally promulgated the law in the Macao Government Gazette, and Macao ended the vacuum history of the arbitration system.

However, the above provisions are merely an outline and cannot be regarded as a complete set of legal systems for arbitration. It was not until 1996 that the Legislative Council enacted the Legal System for Arbitration on the basis of the Outline of the Judicial Organization (Decree-Law No 29/96/M, which came into force on September 15, 1996).

Considering that long-term arbitration in the form of institutions will be more conducive to the parties to resolve disputes through voluntary arbitration, the government of Macao enacted Decree No. 40/96/M establishing the legal system for voluntary arbitration of institutions in July of 1996.

Although the two laws enacted in 1996 to set the basic framework for the arbitration system in Macao, they did not deal with the issue of foreign dispute -related arbitration.

After the establishment of the Macao Special Administrative Region, arbitration has been seen as an important factor in implementing policies that effectively can attract foreign investment and foreign trade, maintain and improve the free market economy system. In response to the above objective, the Legislative Council approved the External Commercial Arbitration Regime (Regime da Arbitragem Comercial Externa, Decree-Law No.55/98/M)[4] on November of 1998, which was promulgated on 23 November 1998 and is almost a complete adoption from the 1985 UNCITRAL Model Law (the “Model Law”) and is for international commercial arbitration.[5]

Decentralization of arbitration resources and arbitration culture

Article 2 (a) of the 1985 UNCITRAL Model Law defines arbitration as any arbitration whether or not administered by a permanent arbitral institution”. As such, the Model Law recognizes both ad hoc and institutional arbitration.[6]

Speaking of Institutional arbitrations, they are administered by an arbitration institution. Typically, proceedings are conducted under the arbitration rules selected by the parties which have been drafted by the chosen institution.

At present, Macao has a total of five arbitration institutions, including namely — the Consumer Arbitration Centre of the Macao Consumer Council, Insurance and Pension Funds Conflicts Arbitration Centre of the Monetary Authority of Macao, Housing Bureau Arbitration Centre for Building Management Affairs, Voluntary Arbitration Centre of the Macao lawyers’ association and the World Trade Centre Macao Arbitration Centre.[7] The functions of each arbitration centre and the nature of the disputes dealt with are different, there are also differences in the composition and charge of the arbitrators. For example, the first three are official arbitral institutions, and for the first two institutions, the upper limit of the value of interest is MOP50,000.

It is understandable that the operational space of the two arbitral centres, which are based on small disputes, will be further pressed. However, there should be a broader perspective on the other three arbitration centres, both in terms of value of interests and admissibility issues.

Macao is a small area, but there are numerous organizations and almost every institution has its own rules and regulations. I understand that the arbitration business is conducted in accordance with the service level of the Macao arbitration institution, so the management and service of arbitration is difficult to get better support because of the decentralization of arbitration resources.[8]

On the other hand, ad hoc arbitration means administered by any arbitral institution, it is arranged solely between the arbitrators and the parties. The parties must envisage and advance the arbitration procedure themselves under the supervision of the tribunal. The parties may choose to adopt a ready-made set of arbitration rules, the proceedings may be conducted in accordance with a set of bespoke rules, drawn up by the parties specifically for that particular case.[9]

Ad hoc arbitration is like a “tailor-made”[10] suit that fits the needs of the parties. It gives ” party autonomy ” to the fullest extent, as if the party is in control of the arbitral process : the parties are free to work out the procedural rules, set their own timetable and move the arbitration along their own pace. administrative structure may add ” time and costs ” to the arbitral proceeding. Therefore, ad hoc arbitration is more flexible, cheaper and faster than institutional arbitration.

Despite ad hoc arbitration has many benefits and permissible in Macao, long-term arbitration in the form of institutions will be more conducive to the parties to resolve disputes through voluntary arbitration. Besides, the legal system for voluntary arbitration of institutions was promulgated on in July of 1996. Therefore, institutional arbitration is the preferred arbitration method in Macao and become the arbitration culture.

Justice and professionalism

First of all, there is a proverb that “Arbitration is only as good as arbitrators.” It cannot be more truth in ad hoc arbitration. Justice and professionalism are the essential elements of the arbitral talents, and the talent is the key to the successful promotion of the arbitration service. While deepening the continuous training of arbitrators, we encourage famous arbitrators to join the list of arbitrators in Macao, which is beneficial to increase the acceptability of the international community to the arbitrator team in Macao. It is related to the creation of a fair atmosphere of arbitration, which is more consistent with the essential attribute of arbitration.

On the legal system, on the premise of full respect for the present situation of local justice, when making legislative choices, it is a good choice to put maneuverability first. The training and assessment mechanism for arbitrators in Macao is at an advanced stage. Actually, the most formal training is conducted at the legal and Judicial Training Centre in Macao. The centre invites the judges of Macao and senior arbitrators from Hong Kong to conduct short-term training for arbitration and conciliation. The training attracts legal experts from the legal profession and various government departments.

Overall, there is a certain distance between the status of training in Macao and Hong Kong. There are not many arbitration cases in Macao, and for some local arbitrators, the relative lack of experience is not hard to understand.

The arbitration practice in Macao does not seem to encourage the entry of foreign arbitrators. Macao is a small area and has close personal connections, these phenomena are objective. It is easy to cause[please reconsider]. The resulting phenomena contradicts the essential requirements of the neutrality of arbitrators and affect the parties’ choice to arbitrate in Macao to resolve disputes.

In areas such as London, New York and Hong Kong where the development of the arbitration industry has progressed well, all foreign arbitrators are open to the arbitration. With the development of the arbitration industry in Macao, the arbitration talents can gain experience, have more talent reserves, and have sufficient acceptance. It is also conducive to the election of Macao as an ideal place of arbitration and a virtuous circle.[11]

Language Problem

With the development of social situations and the transformation of values in Macao, the influence of linguistic factors on judicial efficiency has been heard in the judiciary. In the field of arbitration law, we should also pay close attention to it, especially because the arbitration law is generally involved in the field of commerce. With the popularization of WTO and its wide application in English, it is believed that the application of the arbitration law in English will become more and more common. It is reported that the Portuguese Arbitration Law is in line with the development of the situation, especially the English version, which increases the popularity of the application of the arbitration law, and attracts the parties to choose arbitration in their jurisdictions.

The official language of Macao is Chinese and Portuguese. The Arbitration Law has not yet been officially published in English. The structure of the arbitrators has been set up by local arbitrators. Familiarity with the law is a major advantage. A considerable number of arbitrators also have good English skills, However, the low-key attitude of oriental thinking hinders the outside world from understanding its language ability and to some extent, it affects the acceptability of professional quality of arbitrators.

In the case of advanced jurisdictions, where the trial judge is found to have failed to apply the common language to arbitrate the case, the parties’ choice of arbitration in that place will be affected, especially in the area of commercial matters.

 

Conclusion

Though there are several challenges of arbitration in Macao, the advantages of arbitration are obvious and we can overcome these difficulties and develop it better in the near future. And in theory, the advantages of each arbitration should be the direction of the revision of the legal system, we can learn from the experiences and the pragmatic attitude of other places. I hope we will make legal system of Macao better o

[1] Export.gov, ‘Hong-Kong – Macau – Legal  Regime’, (15 August 2017) <https://www.export.gov/apex/article2?id=Hong-Kong-Macau-Legal-Regime> accessed 13 March 2018.

[2] Decree-Law No 29/96/M (1996), as amended by Decree-Law No 19/98/M (1998); Regime da Arbitragem Comercial Externa, Decree-Law No.55/98/M (1998) (Macao).

[3] Norton Rose Group, ‘Arbitration in Asia Pacific’,  (January 2010), 4 <http://www.dsl-lawyers.com/wp-content/uploads/2014/12/Norton-Rose-Group-Arbitration-in-Asia-Pacific.pdf> accessed 13 March 2018.

[4] Regime da Arbitragem Comercial Externa, Decree-Law No.55/98/M.

[5] Norton Rose Group (n 4).

[6] The UNCITRAL Model Law on International Commercial Arbitration 1985.

[7] Norton Rose Group (n 4).

[8] Adam Majeed, ‘Big Trouble In Little China – The Challenges facing Macau’s legal expert’, (IFLR100, 1 March 2016) <https://www.iflr1000.com/NewsAndAnalysis/Big-trouble-in-little-China-The-challenges-facing-Macaus-legal-market/Index/5096> accessed 13 April 2018.

[9] Out-Law.com, ‘Institutional vs. ‘ad hoc’ arbitration’ (Out-law, August 2011) <https://www.out-law.com/en/topics/projects–construction/international-arbitration/institutional-vs-ad-hoc-arbitration/> accessed 13 April 2018.

[10] HKIAC, ‘What is Arbitration?’ <http://www.hkiac.org/arbitration/what-is-arbitration> accessed 13 April 2018.

[11] Norton Rose Group (n 4).


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