Thomas Pearson, Board Chair
Amid the troubling headlines of the past couple of weeks, there was one bright spot for institution building in Cambodia. As the Phnom Penh Post reported, Cambodia's National Commercial Arbitration Center has successfully settled its first two cases. This is an important milestone for the NCAC and for building successful institutions in Cambodia. It also provides a homegrown alternative to Cambodia’s court system, which is notoriously plagued with corruption and inefficiency. According to the World Bank’s Doing Business report, enforcing a contract claim takes an average of 483 days and costs 103.4% of the original claim. One way of addressing corruption and inefficiency issues is by providing a viable alternative for dispute resolution services, which is what the NCAC is attempting to do. However, building the reputation necessary for the business community to trust in the integrity and efficiency of the dispute resolution services provided by the NCAC may take years.
Two, as noted in the Post article, commercial arbitration relies on the court system for enforcement, which could undermine the effectiveness of the institution if enforcement proceedings are seen as corrupt or non-transparent. Cambodia’s courts have already had some experience with enforcing an arbitral award. In 2014, Cambodia’s court system recognized and enforced an arbitral award issued by the Korean Commercial Arbitration Board. Hopefully, the court system will treat domestic awards with the same respect and follow the law for their enforcement when necessary. Fortunately, as one global survey, conducted by researchers at the Queen Mary University of London, found, enforcement proceedings are unnecessary in about 90% of cases as parties voluntarily comply with award decisions. A more recent survey by the same university found that 90% of respondents indicated international arbitration as their preferred dispute settlement mechanism.
All of that is good news for the NCAC, which unlike the court system, must earn revenue from paying clients in order to remain in business. Though there are no other local commercial arbitration centers in Cambodia, the Singapore International Arbitration Center and Hong Kong International Arbitration Center are two very well-regarded commercial arbitration centers in the region that resolve a lot of high-value disputes. The NCAC is in no position to compete with SIAC and HKIAC at this stage, but by focusing on smaller cases, they can slowly build their reputation and become an attractive alternative to the court system, which will not only provide parties to commercial disputes with effective service, but will help support the rule of law in Cambodia. If the court system can't be trusted, then other effective outlets for dispute resolution are essential to providing fair and efficient services. The existence of transparent dispute resolution services demonstrates more clearly the need for reforming the issue-plagued court system.
Cambodia already has one homegrown arbitration institution, the Labor Arbitration Council LAC, which has done incredible work in resolving labor disputes in Cambodia and is one of the institutional success stories here. The LAC is also a model for international rule of law assistance that does not simply try to replicate what has worked in other countries and cultures, but works within the local context to develop a functional institution whose services can be relied on by the community it serves. We remain hopeful that the NCAC will build on its initial successes. Otherwise, the only alternatives to the court system for businesses are informal dispute resolution methods, primarily negotiation, but also forms of mediation and arbitration that have been practiced for thousands of years. Incorporation of these more traditional forms of dispute resolution into homegrown institutions that are recognized by the legal system has proven successful in the case of the LAC and in the rise of formal Alternative Dispute Resolution (ADR) methods, like commercial arbitration, worldwide.