/Understanding the Commercial Courts of the China One Belt One Road Initiative

Understanding the Commercial Courts of the China One Belt One Road Initiative

China is proactively carrying out plans to establish a set of commercial courts for the One Belt One Road Initiative (OBOR), the ambitious investment project to integrate 68 countries, covering 2/3 of the global population. In the past decade, international commercial courts have played an important role in globalization. Most notably, emerging markets have taken the lead in the legal dimension of economic globalization. Recently established international courts include the Dubai International Financial Centre Courts, the Qatar International Court, the Abu Dhabi Global Market Courts and the Singapore International Commercial Court (SICC).

The 6 Corridors of the Belt and Road Initiative

The 6 Corridors of the One Belt One Road Initiative

The success of China’s commercial courts for the Belt and Road Initiative will depend on the ability to establish courts that are independent of political or vested interests. The court’s ability to attract top judges from overseas is likely to be a good indicator of the quality this institution.

 The effective headquarters for the commercial dispute mechanism will be in Beijing. The continental portion of the project (also known as the Silk Road Economic Belt) will have a court in Xi’an in central China (historically an important hub of the Silk Road trade routes), and the Maritime Silk Road will have a court in Shenzhen. The project is likely to offer several options for dispute resolution including arbitration and mediation.

Recent History of International Commercial Courts

Singapore International Commercial Court (SICC)

SICC Location

The SICC is one of the most successful examples among recently established mechanisms for international commercial dispute. The court maintains strong political independence, impartial judgment, and freedom from the influence of vested interests. An excellent indicator of the quality of the court is its consistent ability to staff its bench with top jurors from a variety of countries. It has attracted judges from France, U.S., Canada, England, Austria, Japan, and Australia. In the SICC, jurisdiction is established on the consent of the parties involved. Relief may not be sought as a prerogative order, meaning that rulings may not direct the behavior of other governmental bodies.

New International Commercial Courts

The recent wave of successful international commercial courts (i.e. the SICC, the Dubai International Financial Centre Courts, the Qatar International Court, the Abu Dhabi Global Market Courts) is partly inspired by the London Commercial Court. A notable characteristic of these courts is that they are frequently (or nearly always, in the case of Singapore) ruling on almost entirely overseas disputes between foreign companies.

Court Effectiveness

China’s courts for the Belt and Road Initiative are currently in far too early a stage of development for observers to appraise or forecast their efficacy. Nevertheless, existing international commercial courts provide a blueprint for what these should look like in order to be effective. In particular, these courts will need a high degree of impartiality and political independence. A perception of advantage given to Chinese litigants will greatly undermine the credibility of these institutions. It is safe to say that if the Chinese government and related institutions exert much if any, pressure on these courts to act in the particular interests of Chinese industrial policy, foreign litigants may be unwilling to use these courts in the future. Moreover, if such influence exists, foreign judges will likely be unwilling to join the institution, further undermining its credibility.

Another challenge for this system is the fact that international commercial law is largely based on maritime law. This may be a challenge for the land-based court.

Additionally, domestic concerns within regional partners may pose a challenge for even the highest quality commercial court created by Beijing. Despite the economic promise of this vastly ambitious project, countries remained concerned about their sovereignty. This involves giving power to Multinational Corporations and investors or to China. Anti-globalization activists may suggest that the existence of this court amounts to the activities of businesses in one country being ruled upon by a court in another country. It can be very difficult for politicians to sell this to the median voter. Politicians may be inclined to leverage such rhetoric for political gain. Concerns about national sovereignty and empowering corporations at the expense of ordinary people are already important in the debate in Myanmar. These commercial courts are already a controversial topic in the country. (Additionally, Silk Road infrastructure projects have already been derailed in Myanmar)

Businesses Implications

Businesses will have to stay tuned to see precisely how the court will work. Both the Singapore International Commercial Court and the Dubai International Financial Center Courts, as well as historical cases at the London Commercial Court, will all be useful reference points for businesses attempting to anticipate the functioning of these courts.

How Legal Institutions Promote Investment

Generally speaking, sound legal institutions that rely on impartial legal expertise, and are not manipulated by vested interests, can go a long way in encouraging investment. Some countries involved in the Belt and Road initiative lack the institutional credibility that some investors look for. Additionally, as many of the investments will be infrastructure-related, investors may be more concerned about the risk of government appropriation. Commercial courts for the Belt and Road Initiative may help to promote initiative-related investment by signaling a commitment to the rule of law. This will help to promote transparency and an even playing field. Businesses may want to keep a close eye on the quality of these courts as the authorities implement them and parties use them. Are they impartial or are they focused on promoting Chinese state interests and Chinese companies at the expense of others?

Country Involvement

Businesses should be aware that much of the difficulty in the task of creating this system arises because of the sheer quantity of countries involved. There are vast differences in legal systems, histories, and economic interests between these countries. If commercial courts for bilateral agreements are contentious, one can imagine the difficulty in creating one involving this geography. Nonetheless, jurisdiction will likely be based on consent, similar to the Singapore’s SICC. Additionally, all of these countries share a common interest in the long-term economic benefits of this agreement, which may encourage compromise from countries that have historically had relatively little international investment and are less exposed to globalization.

Conclusion

Effective legal institutions can be instrumental in promoting economic integration. For example, the WTO would be severely limited in its impact on international trade promotion without the dispute settlement mechanism. Chinese authorities are demonstrating their foresight with the creation of these courts at this relatively early stage in the Belt and Road Project. More generally, these courts underscore the comprehensiveness of the vision that China has for the Belt and Road Initiative.

2018-02-15T15:34:40+00:00 February 15th, 2018|

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