With would-be arbitrators at the long-awaited National Arbitration Center refusing to submit to knowledge tests, business leaders said yesterday that it would be better to do without such an institution than to have one that lacks credibility.
By law, the government can form what is common in countries around the world: a legally recognized dispute-resolution mechanism avoiding the expense, dysfunction and glacial pace of the court system.
But no date has been set for the arbitration center’s launch and, following last weekend’s boycott of an exam by would-be arbitrators, it’s unclear when and how it will be formed.
Stephen Higgins, CEO of ANZ Royal Bank, said having a credible institution would be viewed as a positive by investors who seek ways to enforce contracts.
“If it doesn’t have credibility, then it’s probably worse than not having one at all,” he said. “If there is a lack of confidence in this institution, that is clearly going to be a negative.”
In April, the government took steps toward forming the center, naming 54 would-be arbitrators, many of whom quit their jobs, as required by law.
But in a move intended to ensure the arbitrators competence, Commerce Minister Cham Prasidh announced in June that arbitrators would be tested on their knowledge.
Though such tests are common in arbitration centers around the world, the would-be arbitrators balked, boycotting the exam last weekend claiming it’s not required by law.
Before the boycott, Commerce Ministry Secretary of State Mao Thora warned that the government might bar boycotting arbitrators from reapplying. He was unavailable this week to comment on the government’s current plans.
Van Sou Ieng, president of the Garment Manufacturers Association in Cambodia, said failure to form a credible arbitration center will reflect negatively on Cambodia.
“It’s not good, otherwise investors in Cambodia will consider that Cambodia is not able to institute any institution that is credible,” he said.
The arbitration center is “extremely important, extremely, extremely important, because there is no alternative dispute-resolution system in Cambodia, and the court is at a level where there is not credibility so far,” he said.
Problems with Cambodia’s legal framework are well known. According to a survey of executives by the World Economic Forum released yesterday, Cambodia ranked 111 out of 133 countries in the category of judicial independence, behind Vietnam, which ranked 68, and Thailand, which ranked 54. In the category of “efficiency of legal framework in settling disputes,” Cambodia ranked 72, behind Thailand which ranked 42, and Vietnam which ranked 49.
KB Thuraisingham, an investment consultant, wrote in an e-mail that the boycott has already hurt the credibility of the center.
“But at the end of the day, businesses will need a credible, cost-effective, efficient and local dispute-resolution system, because no lawyer can provide for documentation that can guarantee avoidance of disputes,” he said, adding that the center was important for the economy’s development.
Foreign investors are often skeptical of another country’s court system, while arbitrators’ speediness, and the conditions of their decisions, are attractive, he said.
“A foreign investor may have doubts as to the impartiality of a particular country’s judiciary,” he wrote. “A foreign investor may have doubts as to the competence of a judge to hear a dispute on a particularly complex point of law because in that country it may be a novel issue.”
And though investors can get arbitration outside Cambodia, often in countries like Singapore and Malaysia, it can be costly, he wrote.
Scott Lewis, the chief investment officer for the private equity fund Leopard Capital, said that while qualified candidates were necessary, the center would still have to prove itself.
“It will take a lot of time. These arbitrators need to earn their stripes. It will take a while for people to have confidence,” he said.
With that in mind, he said his firm would wait before using it.
“We don’t want to be the first guinea pigs,” he said. “Let’s see if it works.”
Nguon Meng Tech, director general of the Cambodia Chamber of Commerce, said the lack of arbitration slowed some investment and in some cases could deter it.
“I feel that might be something that may make them feel reluctant,” he said.
He said the matter of choosing qualified candidates should be handed over to the Singaporean training center that trained the potential arbitrators, and that an exam was unnecessary.
“There is no need to get an exam. They were already evaluated,” he said. “The trainer is the one who knows.”
Chiv Songhak, president of the Cambodian Bar Association, said that the law did not require the arbitrators to take the test and that they are already qualified.
“The minister of commerce and these first arbitrators should read the laws and respect them,” he said.