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China’s ‘own courts’ for BRI rows raise eyebrows

By Dipanjan Roy Chaudhury, ET Bureau | Feb 14, 2018, 07.33AM IST

NEW DELHI: China’s recent announcement that it would establish courts under its own judicial system to handle international disputes arising from projects under the Belt and Road Initiative (BRI) has triggered apprehensions that this would lead to dispute settlement on its unilateral terms and conditions.

The courts, which are to be based in Beijing, Xi’an and Shenzhen, have been established under the authority of the Supreme People’s Court of China, ET has learnt.

The Xi’an court will manage commercial disputes for the Silk Road Economic Belt, which connects China, West Asia and Europe. The Shenzhen court will manage commercial cases for the Maritime Silk Road, which connects China, Southeast Asia, Africa and Europe.

Chinese media has reported that the country will seek to promote the courts to resolve disputes that emerge from the BRI. Experts said that the courts could be similar to the International Commercial Court in Singapore and the International Finance Centre Courts in Dubai.

“It is unclear over which authority the Chinese have claimed jurisdiction over BRI disputes,” said a recent brief on the issue by law firm Dezan Shira & Associates, which has been guiding foreign investors in India, ASEAN and China since 1992.

“There are existing mechanisms to deal with such matters, ranging from existing bilateral investment treaties to multilateral agreements such as those ASEAN has with China, the 2012 ‘Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Cooperation’,” said the brief, seen by ET.

Most bilateral treaties and the ASEAN treaty provide for similar conflict resolution processes: consultation, followed by mediation, followed by arbitration by an ad hoc arbitration tribunal, with no preset venue or choice of law, either procedural or substantive, according to the law firm.

The Chinese government is trying to force other sides to accept Chinese mediation and arbitration through its proposal to have these three courts rule on all BRI disputes, experts said.

The country’s move to establish BRI-specific courts seems to alter that position, and move jurisdiction specifically to China on bilateral projects.

The memorandum of understanding (MoU) that China has signed with more 70 nations concerning cooperation on BRI projects does not appear to suggest any differing mechanisms for dealing with disputes, other than the usual terminology referring to “friendly consultations”, though these may differ from case to case, according to Dezan Shira & Associates.

“The question concerning China’s establishment of the BRI courts therefore revolves around the question of how this mechanism was agreed to between China and the BRI nations with which it has signed agreements,” it said.

There are other existing alternatives to accepting arbitration in China. These include an agreement reached in September last year between the Singapore International Mediation Centre and the China Chamber of International Commerce Mediation Centre (CCOIC), which entered into an MoU to resolve BRI cross-border disputes.

“Despite these steps by China, the choice of arbitration venue and law, both procedural and substantive, should be left to negotiation between the concerned parties... third party jurisdictions with established rules and an experienced body of jurists are always preferable to those jurisdictions affiliated with one or the other of the parties to a contract,” the law firm said


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