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Belt and Road Initiative: How Companies Can Protect Themselves from Risk of Legal Dispute

FEB 7, 2020 | BY 
* [Brought to you by Kudri & Djamaris]*

Belt and Road Initiative (BRI) is an infrastructure project proposed by China with more than $500 billion has been invested since its initiation in 2013. Dubbed as the “21st Century Maritime Silk Road”, massive infrastructure constructions in BRI related project has been considered as an alternative source of financing in participating countries.1 This particular benefit may pose a legal risk for involving party, espe-cially companies, because BRI is massive and complex project with multi-party and multi-contract involved. In case of legal dispute rises, litigation proceeding is always an option, but in BRI context we argue that alternative means such as mediation and arbitration is the “go-to” options, considering litigation relatively takes longer time to resolve a dispute.
As an infrastructure project, construction and financing disputes are the main risk that a company need to aware of. To help companies protect them-selves in the potential of dispute, these options can be considered before entering into BRI contracts; First option is by applying an arbitration clause or med-arb clause in the contract. As for an alternative dispute resolution forum, arbitration has many advantages for contracting parties because its nature of confi-dentiality, procedural flexibility, time efficiency and also arbiter’s expertise concludes the benefits that litigations cannot offers. In Indonesia there is Badan Arbitrase Dan Alternatif Penyelesaian Sengketa Konstruksi Indonesia (Indonesian Construction Arbitration and Alternative Dispute Resolution Body), however Badan Arbitrase Nasional Indonesia (BANI) has much experience and is a favorable forum in Indonesia.
Mediation could be used as another option to solve BRI related dispute considering business culture in Asia, especially for China and Chinese companies as business counterpart in BRI contract, who sees mediation as means to resolve legal dispute more flex-ible. Recently, arbitration institution like International Chamber of Commerce (ICC) has issued a Guidance Notes on Resolving Belt and Road Disputes Using Mediation and Arbitration (Guidance) in 2019. Within the Guidance, ICC stated that there has been a steady increase in number of parties involved in ICC media-tions because they recognized it as a highly effective tool to resolve disputes more quickly, more amicably, and less expensively than litigation or arbitration.2
Another option that needs to be considered is multi-contract and multi-party arbitration mechanism. Due to complexity, BRI contract can involve many parties with multiple contracts. This can lead into another problem for the contracting parties in case of parallel proceedings are taken place between closely related disputes in a different arbitral tribunal, resulting in conflicting decisions and awards. To anticipate this from happening, company can rely on multi-contract and multi-party arbitration mechanism to consolidate all related dispute into a single arbitral proceeding


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