Dispute Resolution Decoupling: The possibility of a China-led international dispute resolution regime?
by Mark Feldman[1]
Notwithstanding the completion of a “phase one” trade agreement between the United States and China, the risk of a sharp reduction in economic interdependence between the world’s two largest economies - known as US-China decoupling - remains significant. The consequences of a US-China decoupling would extend not only to business practice (notably, the structure of global value chains) but also to the development of law. Detaching from China would include detaching from the rulemaking and institution building that China has engaged in with particular ambition over the past several years. Much of that rulemaking and institution building is relevant to commercial dispute resolution. A US-China decoupling would include a dispute resolution decoupling.
The Beijing-based Asian Infrastructure Investment Bank (AIIB) provides one compelling example. The AIIB, which now has 100 approved members, is actively considering how the organization might be able to support international dispute resolution. The 2019 edition of the AIIB Yearbook of International Law, entitled “International Organizations and the Promotion of Effective Dispute Resolution,” considers the relationship between international organizations and dispute resolution generally as well as - quite specifically - the question of whether a “multilateral, rule-of-law based, impartial AIIB is well placed to take on the mantel of a modern ICSID for the Belt and Road.” ICSID - the International Centre for Settlement of Investment Disputes - was established in 1966 by the ICSID Convention, a treaty developed by the World Bank. Nearly 55 years later, the AIIB is now considering whether, like the World Bank, it should develop an institution to support international dispute resolution. Those discussions are occurring against the backdrop of China’s Belt and Road Initiative (BRI), which now includes cooperation agreements with more than 100 countries and a few dozen international organizations. BRI can be expected to give rise to a large volume of international commercial disputes.
If the AIIB ultimately does create an institution aimed at supporting BRI-related dispute resolution, that would not be the first such institution. In 2018, China’s Supreme People’s Court (SPC) launched the China International Commercial Court (CICC), with tribunals based in Shenzhen and Xi’an. The SPC has identified BRI-related dispute resolution as a key factor driving the establishment of the CICC. The CICC holds significant potential for international engagement and influence. Although all CICC judges are Chinese nationals, the work of those judges can be supported by members of the CICC’s International Commercial Expert Committee, which is composed of both Chinese and foreign nationals. The CICC also can seek to interact with a rapidly-expanding set of international commercial courts located in Asia, the Middle East, and Europe. The international enforceability of judgments will be a key consideration for the CICC, and China has actively contributed to the development of a number of bilateral and multilateral instruments that advance such enforceability, including the Hague Choice of Court Convention and the Hague Judgments Convention.
China also has helped to advance the standing of mediation as a form of international dispute resolution, particularly in the context of BRI-related disputes. Members of the CICC’s International Commercial Expert Committee are authorized to serve as mediators. The China Council for the Promotion of International Trade and the Singapore International Mediation Centre have signed a memorandum of understanding on the joint development of a panel of international mediators to support BRI-related dispute resolution. China signed the Singapore Convention on Mediation on the day the treaty opened for signature. Consistent with these developments, the International Chamber of Commerce (ICC) has recommended that “mediation always be considered for Belt and Road Disputes.”
Although the initiatives outlined above create the potential, particularly in a BRI context, for a China-led international dispute resolution regime to emerge, the developments remain at an early stage and occur within a larger international environment in which critical as well as skeptical views on BRI are frequently expressed. China’s efforts to advance international dispute resolution in the context of Regional Comprehensive Economic Partnership (RCEP) negotiations also have faced obstacles, given India’s recent withdrawal from RCEP talks.
At a minimum, however, several elements underscore the potential for a new, and significant, international commercial dispute resolution landscape to form, centered in Asia. First, the significant volume of disputes that can be expected to arise from BRI-related commercial activity. Second, the potential for both new institutions (such as the AIIB and CICC) and well-established institutions (such as the ICC) to provide important resources for resolving such disputes. Third, a greatly enhanced role for mediation in that process. Fourth, an Asia-based legal and economic framework that could be established by an RCEP agreement, which would cover - if ultimately joined by the 16 Asia-Pacific countries that have participated in negotiations - about 30 percent of global trade.
A US-China decoupling would extend to such a dispute resolution landscape. With respect to BRI, the AIIB, and RCEP, decoupling would not require the United States to “detach” from those initiatives, because the United States has not participated in their development. But decoupling would eliminate the possibility of the United States seeking to engage with China in any of those areas. BRI, the AIIB, and RCEP are relatively new initiatives and will continue to face criticism and skepticism. But the potential for those initiatives to create a new, Asia-based, dispute settlement landscape should not be ignored. Decoupling would ensure that the United States plays no role in shaping that landscape.
[[1] Professor of Law, Peking University School of Transnational Law. This essay is adapted from the working draft, “Connectivity and Decoupling: Belt and Road Dispute Resolution in a Fractured Trade Environment,” available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3451034