Paradigm shift; the emergence of arbitral forum shopping in CPEC investment disputes

• DOI: https://doi.org/10.1108/JITLP-05-2019-0022
• Pages: 136-151
• Published date: 18 October 2019
• Date: 18 October 2019
• Author: Rao Qasim Idrees,Rohimi Shapiee,Haniff Ahamat
• Subject Matter: Strategy

Paradigm shift; the emergence of

arbitral forum shopping in CPEC

investment disputes

Rao Qasim Idrees,Rohimi Shapiee and Haniff Ahamat

Faculty of Law, Universiti Kebangsaan Malaysia, Bangi, Malaysia

Abstract

Purpose –The phenomena of arbitral forum shoppingto resolve a commercial investment dispute is still

under developmentand more complicated in many states. However, for Pakistan, it seemsin an evolutionary

phase, where the country is struggling hard to adopt the best practiceof dispute resolution through forum

shopping clauses. This struggleis even more inf‌lated with huge Chinese investment through China Pakistan

economic corridor (CPEC) projectsin Pakistan, which come alongside with commercial investment disputes.

For this purpose, the current treaty or contract-based system between China and Pakistan and litigation

based domestic civil court structurelook obsolete, hence, appear to require reinstatement of forum shopping

clauses underconcerned treaties or contracts for CPEC investment-relatedissues.

Design/methodology/approach –The authors choosea legal research method. The research design is a

comparative analysis between CPEC contracts and dispute resolution mechanism between China and

Pakistan and also the domestic civil court’s litigation system. This analysis selected by the authors due to

ineff‌icient bilateralinvestment arrangements and eff‌icient resolution of future commercialdisputes in CPEC.

While the internationalarbitration system is included in the assessment were particular in the time and space

context. The comparisoncomprises on dispute resolution clausesin free trade agreement (FTA) and bilateral

investmenttreaties (BIT) between China and Pakistan and the system of resolvingdisputes by CPEC clauses.

Findings –The authors f‌inds that in the absenceof CPEC forum shoppingclause under dispute resolution

system, Pakistan is highly at risk to lose foreign investors, and therefore, set back the goal of long term

economic sustainability in the region. However, China has already made its investment policies safer with

establishing three internationalcommercial courts (also referred to as Belt and Road courts),one in Xi’an for

the land-based Silk Road EconomicBelt, one in Shenzhen for the Maritime Silk Road and one in Beijing that

will serve as the headquarters. These courts will be offering litigation, arbitration and mediation services.

According to oneview, China aims to have all belt and road initiative (BRI)disputes resolved by these courts.

This makes Pakistanposition more awkward and needs proactive measures,as CPEC investment is based on

Pakistan foreign direct investment policies and legal structure. Therefore, it will be complicated and less

favourablefor Pakistan to deal with such cases under ChineseCourts.

Originality/value –The paper’s primary contribution is f‌inding that comprehensive analysis of

alternativedispute resolution mechanism between China and Pakistanover CPEC investment is inevitable. A

socio-legalresearch combine with an examination of Singapore InternationalCommercial Court functions and

mechanism and CPEC plans further contributes to ascertain the best model of the settlementof commercial

disputes underinvestments in Pakistan. This research paper anticipatesfuture economic and legal problems,

which Pakistanmay encounter.

Keywords China Pakistan economic corridor, Civil court litigation, Forum shopping,

Investment dispute resolution, Hague convention, Investment dispute arbitration

Paper type Research paper

1. Introduction

Forum shopping is not a novel thought or model but it has been known and functional for

decades. The concept of “Arbitral forum shopping”has different dimensions and

interpretations. In itsadvance interpretation, the idea of forum shopping is distinctfrom the

JITLP

18,3

136

Received3 May 2019

Revised23 July 2019

Accepted9 August 2019

Journalof International Trade

Lawand Policy

Vol.18 No. 3, 2019

pp. 136-151

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-05-2019-0022

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1477-0024.htm

very concept of civil litigation. However, the basic principles and functions are remaining

the same in both civil litigation and arbitral forum shopping. The arbitral forum shopping

may include, shopping for a proper place or centre and available jurisdiction, which are

available under stipulated conditions or in absence of such conditions, where parties have

chosen one of these or about to decide the most favourable situation for them (Mckenna,

2005). Under such conditions,the arbitral forum shopping is more technical and complicated

in nature, especially whenit is arrangedunder any contract or treaty to resolve international

investment disputes. The idea of arbitral forum shopping currently revolves around the

conf‌licting situation of an applicable clause in the contract against concerned treaty or

investor-state arbitration regime. This further raises the international concerns regarding

consolidation, waiver, lispendens, res judicata and estoppels (Lectric Law Library, 2017).

Such issues are mostly discussed and prevalent under court litigation in the civil courts

system. However, the factor of increased international investment disputes and arbitration

proceedings; such issues are in play and commonly hinder the smooth process.

Consequently, it further demands more comprehensive study and analysis by the parties

while managing the arbitral forum shopping mechanism owing to its suitability for China

Pakistan economiccorridor (CPEC) commercial disputes (Kreindler, 2005).

The object of this paper is to elaborate and explain the need and importance of the

international commercial court as a forum for the resolution of commercial investment

disputes under differentCPEC dispute resolution clauses. It will be further assessedwhether

and in how far this is an addition to current Pakistan China bilateral investmenttreaty (BIT)

and free trade agreement (FTA) dispute resolution clauses, which are available in CPEC

contractual agreements. To achieve above mentioned objectives, Part 1 discusses the

signif‌icance of forum shopping, Part 2 highlights CPEC dispute resolution clauses, Part 3

analyses ICSID arbitration in Pakistan perspective, Part 4 argues the need of international

commercial court for Pakistan, and Part 5 provides the signif‌icance of Singapore

International Commercial Court (SICC) and Hague Choice of Court convention for Pakistan,

and f‌inally, this papersetup recommendations for CPEC commercial investmentdisputes.

2. Structure of the study

This study is divided among analysis of literature and jurisprudence and author’s analysis

and own ideas based upon legal statutes, case laws, international agreements and bilateral

instruments. Forthis purpose Parts 5,6,7 and 8 is the analysis of literature and jurisprudence

and Parts 9,10,11,12 and 13 is the author’s own ideas and f‌indings prepared in the light of

international and domestic statutes and treaties and China Pakistan bilateral investment

agreements.

3. Methodology

The authors choose a legal research method. The researchdesign is a comparative analysis

between CPEC contracts and dispute resolution mechanism between China and Pakistan

and also the domestic civil court’s litigation system. This analysis selected by the authors

due to ineff‌icient bilateral investment arrangements and eff‌icient resolution of future

commercial disputes in CPEC. While the international arbitration system is included in the

assessment were particular in the time and space context. The comparison comprises on

dispute resolution clauses in FTA and BIT between China and Pakistan and the system of

resolving disputesby CPEC clauses.

The emergence

of arbitral

forum

shopping

137