Lawyer in Myanmar Oliver Massmann The Most Important Clause in Any Commercial Contract in Myanmar - Get Your Dispute Resolution Clause Right!

1. Lawyer in Myanmar Oliver Massmann
The Most Important Clause in Any Commercial Contract in Myanmar
- Get Your Dispute Resolution Clause Right!
Oliver Massmann
On 16 April 2013, Myanmar deposited an instrument of accession with the Secretary-General of the
United Nations, expressing its consent to be bound by the New York Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (“New York Convention”). The New York Convention
already came into force in Myanmar on 15 July 2013. As a consequence, arbitral awards made in
Myanmar should be enforceable in more than 140 parties to the Convention, and awards made in
these countries should also be enforced in entire Myanmar.
While Myanmar’s Arbitration Act 1944 only provides for domestic arbitration and does not provide a
framework for the recognition and enforcement of foreign arbitral awards, the Arbitration Act 1944
has already been replaced by the new Arbitration Law (Union Law No. 5/2016) recently adopted by
the Myanmar Union Parliament on 05 January 2016. This legislation is to implement the New York
Convention and is positive news for foreign investors who wish to settle their commercial disputes by
a neutral, independent and impartial arbitration tribunal outside Myanmar and have the awards
enforced in Myanmar. In addition, the new Arbitration Law completes an important piece of the 2012
Myanmar’s Foreign Investment Law, part of which stipulates that a foreign investor is entitled to have
its commercial disputes settled by foreign arbitration.
This article shows foreign businesses the necessity of dispute resolution clauses quite plainly and
provides assistance in choosing appropriate alternatives to the Myanmar courts.
Why arbitration makers sense and new Arbitration Law is needed
Most contracts in North America and Europe specify in detail all of the parties’ obligations and will
be closely watched for the effectiveness of its clauses. The contract’s legal enforceability, however, is
widely regarded as a given.
On the other hand, contracts between foreign investors and Myanmar entities or with a reference to
Myanmar that establishes Myanmar jurisdiction should always specify the question “what institution
will decide any disputes and in which language and what national law is to be applied?”
As stated above, the Arbitration Act 1944 only deals with domestic arbitration. The Act provides that
where both disputing parties are from Myanmar, the dispute may only be submitted to domestic
arbitration according to the Arbitration Act 1944. In case there is one party to the dispute having
foreign identity, it remains unclear whether a Myanmar party could submit the dispute to foreign
arbitration. Under the Myanmar Export Import Law 2012, Myanmar parties in a trade dispute with
foreign companies shall resolve that dispute in accordance with the Arbitration Act 1944. Then it is
possible that in a non-trading dispute, a foreign party may be permitted to have a foreign arbitration
with its Myanmar partner. In this regard, we note that in case laws, it remains unknown whether such
foreign arbitration award will be upheld by the Myanmar courts. With the introduction of the Foreign
Investment Law, in order to take full advantage of the arbitration method of dispute settlement,
foreign investors are advised to structure the commercial relationship as an investment, obtain
necessary investment permits and insert arbitration clause into the agreement.

2. Under the Arbitration Act 1944, the courts have powers to grant conservatory relief in respect of
domestic arbitration. However, it is uncertain whether the courts will still grant such assistance to the
Myanmar party requesting foreign arbitration proceedings given the lack of an explicit international
arbitration act allowing them to do so.
On the other hand, foreign investors in Myanmar, as in other developing countries, tend to distrust
local courts. They are concerned about impartiality of the judges and corruption. They are also
worried about how long it takes to settle the dispute and whether the court proceedings will invite
participation of the press, which is normally the case if it is a high-profile dispute. Language used in
the proceedings is a barrier to foreign investors as well.
However, arbitration in Myanmar has not yet developed. There is no arbitration centre up to now.
This means an arbitral award has to be enforced by the court. In practice, courts in Myanmar often
exercise wide discretion in setting aside arbitral awards. Thus, a disaster happens when one party after
going through all hard steps to win the dispute in an arbitration proceeding, fails to enforce the arbitral
award against the violating party before the local court. A party may then end up with having its
dispute re-litigated in court. This happens even in case where parties agree to use arbitration abroad,
for example, Singapore International Arbitration Centre. Investors are thus wise not to take such
approach if they are already pretty sure that the foreign arbitral awards are worthless in Myanmar.
Fortunately, these issues have to end up soon as a result of Myanmar’s accession to the New York
Convention and the recent promulgation of the new Arbitration Law. The dispute resolution clause
will become effective if it is made through a written agreement. This remains to be seen how effective
enforcement is in practice but this is a major step towards recognition of Myanmar to be a safe place
to make investment and do business.
Advantages of arbitration
The right arbitration centre provides independent decisions and professional competence. It is usually
possible to select a pool of arbitrators trusted by both parties in the clause, which might lead to a
wider acceptance of a possible arbitrational decision. It is important to consider arbitrator candidates
based on their expertise in the relevant business field. Most arbitration centres provide renowned
experts for certain fields of work.
What is in the new Arbitration Law
The new Arbitration Law is based on widely accepted UNCITRAL Model Law on International
Arbitration 1985 (“Model Law”). This is a step to bring Myanmar’s legislation towards a level closer
to internationally accepted standards in arbitration. The new Arbitration Law is divided into two parts:
the first part applies if the place of arbitration is in Myanmar; and the second part applies to the
enforcement of foreign arbitral awards. Major points to note in the new Arbitration Law:
 The arbitration award is defined to include interim awards for enforcement purposes by the
Myanmar courts. However, the Arbitration Law is silent on whether the definition includes
orders and directions issued by the arbitral tribunal.
 The Chief Justice of the Union has the authority to appoint arbitrators in foreign proceedings
if requested. In respect of domestic proceedings, it is a State Chief Justice or Division Chief
Justice who will make the relevant appointment.
 The Myanmar courts will be given the power to grant interim measures in support of the
arbitration process.

3.  Among other provisions that deal with how the Myanmar courts should approach insolvency-
related claims, Myanmar courts have discretion to refer insolvency cases to arbitration on
application by a party.
 Myanmar courts have the power to extend a contractual time bar to commence arbitration for
arbitrations seated in Myanmar. There is no similar provision in the Model Law or the
International Arbitration Act of Singapore.
 Arbitrations seated in Myanmar that do not fall within the definition of an “international
commercial arbitration” must adopt Myanmar as the substantive law governing the
arbitration.
 Parties objecting to an order that the arbitral tribunal has jurisdiction can seek only to set
aside that order under the strict requirements of Article 34 of the Model Law. This deviates
from Article 16 of the Model Law, which allows parties to refer the issue to court for its
decision.
 Awards made in Myanmar will be enforced where the court has refused to set aside the
award, or where the application to set aside the award has expired.
Conclusion
The question of whether or not to have a dispute resolution clause in contracts in Myanmar can be
answered with a clear yes. However, deciding on the right place for dispute resolution can
involve much complexity, as a number of factors must be thoroughly taken into account,
especially when the arbitration centre in Myanmar has yet been established. There are plans in
place to establish such centre in Myanmar and it is highly expected that awareness of
international arbitration as an appropriate tool to resolve cross-border disputes will be raised.
The Arbitration Law is not merely a positive sign for foreign investors but also beneficial to
Myanmar. It demonstrates Myanmar’s willingness to position itself as an arbitration-friendly
jurisdiction. With the adoption of the Arbitration Law, Myanmar will attract more foreign
investment on better terms and from a broader range of sources. The Arbitration Law is also the
first step to improve arbitration in Myanmar.
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Please contact Oliver Massmann under omassmann@duanemorris.com in case you need legal
support in Myanmar.
Thank you very much!