Investors Positive on Impending Arbitration Center

The Coca-Cola company is one of major foreign investors to Cambodia. (Photo: AP)

Ros Sothea, VOA Khmer
Phnom Penh Thursday, 24 June 2010

“One of the main concerns of foreign investors is dispute resolutions."

Foreign investors doing business in Cambodia say they would like to see the newly formed National Arbitration Center solve commercial disputes, but at least some remain skeptical that it will help them.

The center, due to be established this year, will resolve such disputes within crossing the current court system.

The center will be build with financial and technical assistance from various international partners, including the World Bank, Asian Development Bank and European Union and will house approximately 60 national and international arbitrators.

Analysts believe the center will build confidence among existing investors and draw more businesses.

Janet Hausen, president of the International Business Association, which has 70 members, said the center will encourage investors to expand their businesses here.

“One of the main concerns of foreign investors is dispute resolutions,” she said in an interview. “The court procedures not just in Cambodia but other countries are very tedious. So you tend not to be so aggressive in businesses.”

In addition, a local arbitration facility can cut costs, she said.

Currently, businesses must rely on the courts to solve business disputes. Sometimes, companies will take their disputes to Singapore or Hong Kong, where credible dispute bodies are found.

But a 2009 survey by the International Finance Corporation found a need for a local arbitration center. Court cases can take up to 400 days and can cost more than the original dispute, the survey found.

Sok Reden, executive director of the agro-industry company Enviro Corporation Cambodia, said his company is currently involved in a cash dispute for $350,0000 with a former partner. He has sought court resolution, but in two years has seen no movement, he said.

“We filed a lawsuit in the court in 2008, but we haven’t seen any intervention since then,” he said. “This makes the investors afraid, because we don’t have proper measures.”

Sok Reden said he was optimistic about the upcoming arbitration center.

Cambodia also needs to bring in major investors from Japan, the US and Europe, which currently invest heavily in neighboring Singapore, Thailand and Vietnam, economists say, even as it has gained foreign investment from China, South Korea and Vietnam.

About 200 European countries are here operating small and medium-sized businesses, especially in tourism, garments and import-export. But according to David Lipman, president of the EU’s delegation in Cambodia, only a few are investment companies.

An arbitration center will bring more European companies to Cambodia, he said.

“Direct investment will increase once investors are sure the climate is safe for their investment, and this center is exactly the right direction that we want,” he said in an interview. “Once European investors see their investments are secure and there is a proper system of arbitration when there is a dispute, then even more investors will come to Cambodia. And I do believe that we will see the fruit from this within the coming year or two.”

That fruit may not extend to the potentially lucrative oil and gas sector, said Michael McWalter, an adviser to the National Petroleum Authority.

“With respect to the establishment of an Arbitration Center in Cambodia, I do not believe that it will have any effect on the willingness of the petroleum industry to invest in Cambodia at all,” he wrote in an e-mail.

The international nature of most petroleum contracts means an international arbitration site is already agreed on at the early stages of deals, he said.

A national arbitration center would not be seen as “neutral ground” unless the dispute was between Cambodians, he said.

Meanwhile, the quality of the arbitration remains to be seen.

“The quality of the people and the quality of the center are very important to the private sector,“ said Billie Jean Slott, a law consultant for Sciaroni and Associates. If it looks like poor quality, disputes will be settled elsewhere.

Arbitrators will have to speak many foreign languages and must learn about international commercial law, such as Singaporean law and Hong Kong law, which would be used in arbitration, Slott said.

Mao Thura, secretary of state for the Ministry of Commerce, said a lack of support for the center from the private sector will mean its collapse. So the ministry has been working on strengthening its quality and to provide training to arbitrators.

Finally, arbitrators will have to be above corruption, Commerce Minister Cham Prasidh said.