More than two years after being formally established by the Ministry of Commerce, the National Arbitration Center (NAC) has voted in a board of directors and will elect its first chairman on Wednesday, officials at the body said on Monday.
The NAC—a commercial-dispute resolution body designed to offer businesses an alternative to Cambodia’s corrupt court system—was established in August 2010 in the hope that the institution would attract more foreign investors to the country.
On January 9, the NAC’s general assembly selected seven individuals to sit on the body’s executive board, said Pa Ngoun Kea, a newly elected board member and a trained lawyer. On Wednesday, the board will elect three more officers, at which point the body will become independent of the Commerce Ministry and able to accept cases.
“After we elect the chairman, deputy chairman and director of finance, it [the NAC] will break away from the ministry,” Mr. Ngoun Kea said.
He said the NAC currently has a total of 53 members: 43 members made up of lawyers and experts from various industries, as well as 10 members from the private sector.
“They come from many different fields, such as the Ministry of Commerce and the Ministry of Industry…others are bachelors in engineering, some are teachers and some are from the health sector,” Mr. Ngoun Kea said, adding that 28 of the members are lawyers.
In October 2011, the Commerce Ministry released a list of 44 arbitrators who would make up the NAC. The announcement followed months of bickering between the government and prospective arbitrators, who refused to take an examination to prove their skills until ordered to do so by Prime Minister Hun Sen.
Phan Panha, another board member, said the NAC would serve both local and foreign investors hoping to avoid the country’s graft-plagued judiciary in the event that a business dispute arises.
“They [investors] don’t want to resolve their disputes using the court system because their [the courts’] procedures are complicated, not transparent and always biased,” Mr. Panha said. “Businessmen don’t want to resolve disputes using the court system; they want to resolve disputes through arbitration, which is confidential and where the cost of legal services is known.”
Despite the high hopes pegged on the NAC, local businessmen were split on the potential merits of a domestic arbitration body, and the impact it would have on future foreign investment.
Stephen Higgins, former CEO of ANZ Royal Bank, said the NAC would not be a “decision factor” for investors considering bringing their business to Cambodia.
“At the margins, you won’t get a single investor deciding to come here because of that,” Mr. Higgins said of the new arbitration body.
“There are far more important things…. Enforcement of existing [investment] laws, for example, is far more important than how you resolve the dispute,” he said, adding that until there is significant judicial reform, foreign investors will seek dispute-resolution assistance outside the country, such as in Singapore and Hong Kong.
But Christophe Forsinetti, CEO of Devenko, a venture capital firm based in Phnom Penh, said the NAC would help Cambodia improve its reputation as an investment hub.
“The minimum criteria for sophisticated investment is the legal framework,” he said.
Mr. Forsinetti added that a local arbitration body would be more efficient and less expensive than an external body. “When you start using Singapore jurisdiction, you don’t know when it’s going to end and how much it will cost,” he said.
Olga Boltenko, legal counsel with the Permanent Court of Arbitration (CPA) in The Hague—which is hosting a series of workshops in Phnom Penh this week to educate government officials and law students on arbitration practices—also said a domestic arbitration system would help Cambodia attract foreign investment.
“If Cambodia provides a certain level of protection to its foreign investors, then there will be more foreign investment in Cambodian industries,” Ms. Boltenko said.
Ms. Boltenko said the advantages of an arbitration body over the courts include negotiable deadlines on decisions—allowing for further investigation into a case if necessary—and arbitrators selected by the parties themselves.
“Arbitration offers more advantages because it is flexible,” she said.
Still, she said it remains to be seen how effective the NAC will be at resolving business disputes fairly and in a timely fashion.
“I’m not sure what the NAC will be doing and I don’t think they know,” she said. “Nobody knows how this is going to work.”