“Ghosn is gone”: criminal justice and corporate governance in Japan

[Updated 10 July 2020] Japan welcomed in the New Year of the Mouse (or Rat) with intense media coverage nationally and internationally about former Nissan CEO then President, Carlos Ghosn, who escaped bail on 29 December 2019 to return to his native Lebanon. The ongoing saga (with background eg here) mainly highlights pros and cons of Japan’s evolving criminal justice system, where almost all prosecutions are successful. That 99% conviction rate can be seen positively: prosecutors carefully try to second-guess judges, without subjecting the accused to unnecessary trials. This enhances rule of law values such as predictability and equal treatment, even for alleged white-collar crimes (often not successfully pursued, as we have seen world-wide after the Global Financial Crisis, even in the US). [There is a similarly high conviction rate for US federal prosecutions generally, since so few are contested at trial, as pointed out by Bruce Aronson.] But there remain concerns that Japanese prosecutors unfairly force confessions and the criminal justice system undermines other rule of law values. [These various aspects were discussed along with background shifts in the global auto industry in a 30-minute ABC National Radio program, “Ghosn has flown – the rise and fall of an auto industry mogul”, which aired on 9 February 2020 and is available as a podcast here (with extracts from my interview appearing around mid-way.)] The Ghosn affair also uncovers Japan’s relative paucity of extradition treaties, as I mentioned in a 3 January 2020 Bloomberg news article reproduced below (reprinted in the Japan Times, which continues extensive coverage).

The Ghosn case also highlights the latest (December 2019) amendments to Japan’s Companies Act, “designed to increase transparency in executive compensation at major companies in the wake of the ouster of Nissan Chairman Carlos Ghosn, who was arrested last year for allegedly understating his compensation. He has continued to deny allegations of financial misconduct. Boards of directors will now be required to disclose outlines of executive pay, such as whether it is offered in cash or shares and in a fixed or variable amount.” The revised Act also now requires companies to have at least one outside director, rather than on a “comply or explain why not” basis as under the 2014 amendments. But the revision won’t take effect until June 2021. In addition, almost all listed companies already had at least one outside director, and indeed a growing majority had at least two outside directors satisfying stricter “independence” requirements, under the 2015 Corporate Governance Code (slighted revised in 2018) that continues to apply on the comply or explain basis.

Further, as a Japan Times editorial had concluded in February 2019 (“Empower outside directors“) regarding the Companies Act amendments then being proposed by the Ministry of Justice’s law reform council:

“After the arrest of Ghosn on that and other charges that raised questions about corporate governance at the major automaker, Nissan is reportedly considering increasing the number of outside directors from the current three. However, the charges against Ghosn, who is alleged to have wielded unquestioned power within the automaker, including in deciding executive pay effectively at his own discretion, also put into question whether the outside directors have been able to play substantial roles in overseeing the firm’s management.

The arrest and indictment last year of a former outside director of an electric parts manufacturer listed on the TSE’s first section, on charges of insider trading of the firm’s shares based on confidential information he obtained thanks to his position — also highlighted the question of the quality of outside directors that companies are bringing in.

Many companies are believed to look for candidates among top executives of other firms, academics and lawmakers. The companies often reportedly face difficulties finding the right person with sufficient knowledge and expertise on corporate management. In fact, many well-qualified people are reportedly serving as outside directors at several companies simultaneously. Another question is whether the companies that tap them have established an in-house environment in which these directors can fulfil the roles expected of them, such as by providing them with sufficient access to the firm’s relevant information or by enabling them to be regularly heard by the company’s top management.

Merely making it mandatory under the law for companies to have outside directors on their board won’t be enough. A legal step like this needs to be accompanied by measures that ensure they can actually contribute to improving their company’s governance.”

Ghosn’s Escape From Japan Ramps Up Pressure on Foreign Suspects

By Lisa Du , Bruce Einhorn , and Isabel Reynolds 3 January 2020, 5:55 pm AEDT

Foreigners expected to face tougher time posting bail
Ex-Nissan boss paid record bail bill, then fled the country

The Tokyo district court let Carlos Ghosn post bail last March, overruling prosecutors’ objections that he was a flight risk. After all, how could one of the most recognizable foreigners in the country flee while under round-the-clock surveillance?

As the world learned this week, the court was wrong and Ghosn’s stunning escape is bound to bode ill for future foreign suspects seeking to post bail. Yet longer term, the fallout could carry broader implications for the pace of reforms to a justice system some regard as draconian.

“It’s ironic that Ghosn criticized the Japanese justice system as hostage justice, because the prosecutor’s judgment turned out to be right since he actually fled,” said Hiroki Sasakura, a professor at Keio University Law School in Tokyo. “His action might have a reverse effect on the criminal justice system, especially the Japanese court’s way of thinking, which was turning more liberal.”

Given the high-profile nature of the suspect, Japan’s legal system was already under heightened global scrutiny, with critics lambasting prosecutors for detaining the fallen automotive titan so long.

Even after gaining release from prison, the former head of Nissan Motor Co. and Renault SA had restricted access to family members and paid the highest bail fees in Japanese history: 1 billion yen ($9.2 million) for his first bail and then another 500 million yen after he was rearrested on new charges. And the court ordered his three passports — from Brazil, France and Lebanon — be confiscated.

(Ghosn’s Legal Odyssey and What It Says About Japan: QuickTake)

Japan is unusual for its lengthy pre-trial detentions, strict bail conditions and long delays before suspects are given their day in court, said Luke Nottage, a professor at the University of Sydney Law School and co-director of the Australian Network for Japanese Law.

More Lenience

In response to criticism from defense attorneys and after the introduction of a new jury trial system and pretrial procedures, Japanese courts in recent years were more lenient in allowing bail, Keio’s Sasakura said. A backlash has already begun, with Ichiro Aisawa, a lawmaker from Japan’s ruling Liberal Democratic Party, denouncing the decision to give Ghosn bail in the first place.

“This should have never happened,” Aisawa wrote on Twitter. “We need to establish measures so we don’t screw up ever again.”

In Japan, authorities are allowed to detain suspects for two 10-day periods for questioning before a decision is made on whether to indict. Sometimes suspects are rearrested on new charges as a way to detain them longer.

Prosecutors rarely pursue cases they think they can’t win, and Japan is known for its near-perfect conviction rate.

Those indicted in Japan may apply for bail as they await trial. About 34% of those detained received bail in 2018, according to the Japan Bail Support Association. That’s up from 15% a decade ago.

‘Rigged’ System?

Such statistics reinforce the criticism by Ghosn, who issued a statement on Dec. 31 from Lebanon saying he had fled there to escape what he called Japan’s “rigged” justice system. This may lead to further calls for a more balanced system, according to Yuichi Kaido, a lawyer who has campaigned for changes to Japan’s criminal justice system.

“I think the international community will look at Japan’s criminal justice system with great severity,” Kaido said. “There will be harsh questions raised there about Japan’s criminal justice system, including the death penalty and what is called hostage justice.”

However, the Ghosn case isn’t likely to have a lasting impact on Japan’s attractiveness as an investment destination, according to Deborah Elms, executive director of Asian Trade Centre, a Singapore-based advisory firm. Foreign companies considering investments in Japan won’t be deterred by the situation surrounding Ghosn, she added, with Asian companies accustomed to unpredictable rules.

“This is just another example of an uncertain legal system that can be worked to your advantage or could come back and bite you,” she said.

Japan should resist internal calls to retaliate by making it even more difficult for suspects to win release from prison ahead of trial, said Nobuo Gohara, a former prosecutor who has been critical of the handling of Ghosn’s case.

“It’s very unfortunate that the efforts of his attorneys to obtain bail and the court’s judgment against the prosecutors to allow it was betrayed,” Gohara wrote in a blog post. “But we shouldn’t simplify the issue to that the court shouldn’t have allowed bail.”

There’s a change that may win widespread support after Ghosn’s escape: a push for more extradition treaties. Japan has only two bilateral agreements, with the U.S. and South Korea. That compares with more than 30 for South Korea and more than 100 for the U.S.

“It’s just one of those areas where they haven’t given much thought and diplomatic attention,” said Nottage, the University of Sydney Law School professor. “The Japanese government might be thinking about maybe we need more extradition treaties.”

— With assistance by Kana Nishizawa

“New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution” (10): New Book with Kluwer

[For updates to chapter titles & authors, plus Abstracts and a link to a free related Webinar on 4 August 2020 5-6pm (Sydney time), please click here.]

Culminating a HKU/USydney joint research project and two conferences over 2019, Kluwer has agreed to publish a monograph under this title co-edited by myself, HKU Prof Shahla Ali, UBrunei A/Prof Bruno Jetin, and Dr Nobumichi Teramura. Manuscripts for the 15 chapters will be submitted by July 2020 so the book is published by early 2021, as part of Kluwer’s widely-read “International Arbitration” series supervised by QMUL Profs Julian Lew and Stavros Brekoulakis. Below is more information on the authors, editors, contributions, and expected readership/features of our new book

Book Contents:

Introduction: New Frontiers in Asia-Pacific Trade, Investment and International Business Dispute Resolution – Jetin & Nottage
ICA and International Commercial Courts: Singapore, Australia and Beyond – Warren & Croft (based on “An International Commercial Court for Australia: An Idea Worth Taking to Market”) [i]
New Frontiers for ICA in Australia: Beyond the ‘(Un)Lucky Country’ – Teramura et al (building on “Country Report on Australia for: International Commercial Arbitration – An Asia-Pacific Perspective”[ii] and “International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards”[iii])[iv]
Transparency versus Confidentiality in ICA and ISDS: Australia and Japan in Regional Context – Nottage (based on “Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations”[v])[vi]
Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS: The CPTPP and Agreements with Hong Kong and Indonesia – Nottage & Ubilava (based on “Costs, Outcomes and Transparency in ISDS Arbitrations: Evidence for an Investment Treaty Parliamentary Inquiry”[vii] and Nottage’s parliamentary submissions regarding new treaties with HK and Indonesia[viii])[ix]
Hong Kong Developments in ICA and ISDS in the Context of China’s Belt and Road Initiative – Ali (based on “ICA and ISDS Developments in Hong Kong in the Context of China’s Belt and Road Initiative”[x])[xi]
Harmonising the Public Policy Exception for ICA along the Belt and Road – Gu (based on “China’s Belt and Road Development and a New International Commercial Arbitration Initiative in Asia”[xii])[xiii]
PRC Developments in Private International Law, ICA and ISDS – Bath[xiv]
Malaysia’s Involvement in International Business Dispute Resolution – Venugopal[xv]
Japan’s New Ambitions as a Regional Dispute Resolution Hub: Better Late than Never? – Claxton, Nottage and Teramura (based on “Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream?”[xvi])[xvii]
Mediating Complex Multi-level Trade and Investment Disputes Between Japan and Korea – Claxton, Nottage and Williams (based on “Resolving Disputes Amidst Japan-Korea Trade and Investment Tensions”[xviii])[xix]
Indian Investment Treaty and Dispute Resolution Practice: Assessing Recent Developments – Singh[xx]
Extending Dispute Resolution Provisions in Free Trade Agreements to Better Enforce Other Treaties: The CPTPP and MARPOL 73/78 – Hu and Huang (based on “Can Free Trade Agreements Enhance MARPOL 73/78 Compliance?”[xxi])[xxii]
Promoting International Mediation through the Singapore Convention – Strong (based on “The Role of Empirical Research and Dispute System Design in Proposing and Developing International Treaties: A Case Study of the Singapore Convention on Mediation”[xxiii])[xxiv]
Conclusions: Expanding Asia-Pacific Frontiers – Reyes, Teramura & Ali

Editors/bios:

Dr Shahla Ali is Professor and Associate Dean (International) and Deputy Director of the LLM in Arbitration and Dispute Resolution at the Faculty of Law of the University of Hong Kong. Her research and practice center on questions of governance, development and the resolution of cross-border disputes in the Asia Pacific region. Shahla is the author of Court Mediation Reform (Elgar, 2018), Governing Disasters: Engaging Local Populations in Humanitarian Relief (CUP, 2016); Consumer Financial Dispute Resolution in a Comparative Context (CUP, 2013); and Resolving Disputes in the Asia Pacific Region (Routledge, 2010) and writes for law journals in the area of comparative ADR. She has consulted with USAID, IFC/World Bank and the United Nations on issues pertaining to access to justice, peace process negotiation training and land use conflict resolution. She serves as a bilingual arbitrator (English/Chinese) with CIETAC, HKIAC (ADNDRC), SIAC and has served on the IBA Drafting Committee for Investor-State Mediation Rules, the DOJ Mediation Regulatory Committee, the UN Mediation Roster and the FDRC Appointments Committee. Prior to HKU, she worked as an international trade attorney with Baker & McKenzie in its SF office. She received her JD and PhD from UC Berkeley in Jurisprudence and Social Policy and BA from Stanford University. (Further details can be found here.)
Dr Bruno Jetin is Associate Professor and Director of the Institute of Asian Studies, University of Brunei Darussalam (UBD). His current work focuses on the ASEAN Economic Community, the One Belt One Road initiative, Chinese investments in Southeast Asia, and the impact of income distribution on growth in Asia. He is also an expert in the automobile industry. Before joining UBD, he was a researcher at the Institute for Research on Contemporary Southeast Asia (IRASEC, CNRS-MAEE, Bangkok) and Associate Professor at the University of Paris 13 Sorbonne Paris Cité, where he obtained his PhD in economics and was Deputy Director of the Research Center in Economics. He was also involved in promoting taxes on financial transactions as alternative sources for financing development as well as innovative regulation of global finance. Bruno’s recent publications include Jetin and Mikic (eds) ASEAN Economic Community: A model for Asia-wide Integration? (Palgrave McMillan, 2016); Jetin (ed) Global Automobile Demand (2 Vols, Palgrave McMillan); Jetin and Chaisse “International Investment Policy for Small States: The Case of Brunei” in Chaisse and Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018); “One Belt-One Road Initiative and ASEAN Connectivity” in Deepak (ed) China’s Global Rebalancing and the New Silk Road (Springer, 2018). (Further details can be found here.)
Dr Luke Nottage specialises in comparative and transnational business law, especially international arbitration and investment law, with a particular interest in Asia. He is Professor of Comparative and Transnational Business Law at Sydney Law School, founding Co-Director of the Australian Network for Japanese Law (ANJeL), and Associate Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS). His books include International Arbitration in Australia (Federation Press, 2010, eds), Foreign Investment and Dispute Resolution in Asia (Routledge, 2011, eds), International Investment Treaties and Arbitration Across Asia (Brill, 2018, eds), Contract Law in Japan (Kluwer, 2019, with Hiroo Sono et al) and 12 other volumes. Luke has or had executive roles in the Australia-Japan Society (NSW), the Law Council of Australia’s International Law Section, the Australian Centre for International Commercial Arbitration, and the Asia-Pacific Forum for International Arbitration. Luke is also a Rules committee member of ACICA and listed on the Panel of Arbitrators for the AIAC (formerly KLRCA), BAC, JCAA, KCAB, NZIAC, SCIA and TAI. Luke serves on Working Group 6 (examining arbitrator neutrality) for the Academic Forum on ISDS. He has consulted for law firms world-wide, the EC, the OECD, the UNDP, ASEAN and the Japanese government; and has made numerous public Submissions to the Australian government on investment treaties, arbitration and consumer law reform. He qualified as a lawyer in New Zealand in 1994 and in New South Wales in 2001. (Full CV downloadable here.)
Dr Nobumichi Teramura is Lecturer at the University of Adelaide Law School and Associate at the Centre for Asian and Pacific Law at the University of Sydney, specialising in international commercial law, especially private international law, arbitration, contract law, with a particular interest in Asia and Australasia. He is the author of Ex Aequo et Bono as a Response to the Over-judicialisation of International Commercial Arbitration (Kluwer, 2020 [forthcoming]). He has published and presented his research extensively in various journals and at academic conferences in different jurisdictions in both English and Japanese. He has also received scholarships and fellowships in highly competitive rounds from leading research institutions or foundations and from the Japanese Government. He was invited to De La Salle University in the Philippines (one of its top law schools) three times over 2016-2019 to teach arbitration and international commercial law, first as a visiting lecturer and later as a distinguished visiting professor.

Other book contributors:

Professor Vivienne Bath (Director of the Centre for Asian and Pacific Law at the University of Sydney)
Professor James Claxton (Kobe University Law School, Japan)
The Hon Dr Clyde Croft AM SC (former Judge of the Victorian Supreme Court)
Professor Hu Jiaxiang (KoGuan Law School, Shanghai Jiao Tong University, China)
A/Professor Jeanne Huang (University of Sydney Law School)
James Morrison (Principal of Morrison Law, Sydney; former ACICA Acting Secretary-General)
Justice Anselmo Reyes (Singapore International Commercial Court)
Prof Jaivir Singh (Centre for the Study of Law and Governance, Jawaharlal Nehru University, India)
A/Professor Stacie Strong (University of Sydney Law School, from January 2020)
A/Professor Gu Weixia (University of Hong Kong Faculty of Law)
Mrs Ana Ubilava (Research Assistant and PhD candidate at the University of Sydney Law School)
Professor Marilyn Warren AC QC (former Chief Justice of the Victorian Supreme Court)
Dr A Vijayalakshmi Venugopal (Senior Lecturer, Taylor’s University Law School, Malaysia)
Dr Brett Williams (Principal of Williams Trade Law, Sydney)

Book Aims, Necessity, Features/Benefits

This book project examines the challenges and opportunities for developing international commercial arbitration (ICA) and arbitration through investor-state dispute settlement (ISDS) particularly in the Asia-Pacific region.

Analysing ICA, the pre-eminent mechanism for resolving cross-border disputes among firms, this book builds on Anselmo Reyes & Weixia Gu (eds), The Developing World of Arbitration: A Comparative Study of Arbitration Reform in the Asia-Pacific (Hart, 2018), but examines more recent challenges for ICA. These include the proliferation of international commercial courts (including in Singapore, but also elsewhere and potentially in Australia) as well as the UN’s 2019 Singapore Convention on enforcement of mediated settlement agreements (Singapore Convention on Mediation). There is also competition now among regional centres to become attractive venues for international business dispute resolution, including resolving “Belt and Road” disputes. The present book focuses mainly on Hong Kong and Singapore (competing jurisdictions in the top “Stage 4” for ICA venues, as identified by Reyes & Gu), Australia and Malaysia (“Stage 3” venues), China and Japan (arguably transitioning from “Stage 2” to “Stage 3”), and India (“Stage 2”) but it in a wider Asia-Pacific context.

In addition, this book project compares approaches in these jurisdictions to ISDS, but we also touch on treaties concluded by Indonesia and Korea as other significant economies in the region. The ISDS procedure allows a foreign investor to bring arbitration claims directly against host states if they violate substantive commitments, such as not discriminating in favour of local investors or expropriation without adequate compensation, usually based on a treaty with the home state of the foreign investor. ISDS has become increasingly controversial as claims have been brought against developed countries, not just developing countries where this enforcement mechanism brings the greatest comfort for foreign firms considering investments. Going beyond Julien Chaisse and Luke Nottage (eds) International Investment Treaties and Arbitration Across Asia (Brill, 2018) [with an introduction partly here], this book project charts evolving treaty practices and high-profile ISDS cases, assesses whether these do or might impact on public attitudes even towards ICA or other forms of arbitration, and explores alternatives or complements to ISDS arbitration.

Why is there a need for it? / Why is now a good time to produce it?

ICA is already “big business” for leading regional venues such as Singapore and Hong Kong. But the recent social unrest in Hong Kong highlights the potential for unexpected developments, and other regional jurisdictions are anyway seeking to emulate their success. These competing venues include mainland China (where arbitrators and courts have growing capacity in cross-border matters), Australia (which may become a venue for some Belt and Road disputes) and Japan (belatedly establishing new international arbitration and mediation facilities). Yet businesses are increasingly concerned about the costs and delays in ICA. They are considering emerging alternatives such as international commercial courts or cross-border mediation, underpinned by new multilateral treaties. Established and emerging jurisdictions for international commercial arbitration therefore need to consider how to position themselves relative to these new frontiers.

ISDS arbitration is also a large and growing area of legal practice, with more engagement recently by Asian parties, yet it too faces challenges. The Philip Morris Asia claim brought under an old Hong Kong investment treaty against Australia to challenge its plain packaging legislation, although unsuccessful, led to Australia refusing over 2011-13 to agree to ISDS provisions in new treaties. Subsequent governments have agreed to ISDS in some treaties, and did so in recently signed Australia – Hong Kong investment agreement (close to ratification), but ISDS remains highly politicised in Australia. China has also been subjected to ISDS claims recently, and so may be reassessing its gradual shift since the late 1990s towards agreeing to wider ISDS-backed protections in its overseas treaties, despite them assisting Chinese outbound investors. Singapore and other Asia-Pacific states have already agreed to the alternative “permanent investment court” proposed by the European Union in their recent treaties, substituting a two-tier court staffed by judges pre-selected only by the states themselves, rather than ad hoc arbitral tribunals. Another potential alternative to ISDS arbitration is investor-state mediation, which could become a mandatory dispute resolution step in future investment treaties (as in the recently-signed Indonesia-Australia FTA).

The significance of investigating ISDS developments, in the context of possible alternatives and broader trends in ICA, is reinforced by UN deliberations into possible ISDS reforms, underway since late 2017. This book project will integrate written and oral statements made in and around UNCITRAL by some of the delegates from the key Asia-Pacific states subject to analysis.

Five features/characteristics: the book

analyses the challenges and opportunities for developing ICA and ISDS in the Asia-Pacific region with the latest updates
assesses recent challenges for ICA: the proliferation of international commercial courts and the rise of international mediation as represented by the Singapore Convention on Mediation
examines the increasingly vigorous competition among regional centres to become attractive venues for international business dispute resolution, focusing on: Hong Kong, Singapore, Australia, China and Japan
compares recent approaches in these jurisdictions to ISDS
is written by leading experts for ICA and ISDS in the Asia-Pacific region

Three benefits: the book help the reader to

make an informed decision on which dispute resolution method – ICA, international mediation or international litigation – is the most suitable for the international business dispute s/he or clients may be involved in
understand recent trends in ADR practice related to business in the Asia-Pacific region, and new resources for dealing with the increasing competition among countries become the next regional dispute resolution hub
refresh knowledge on ISDS practice and debates in significant Asia-Pacific economies in the Asia-Pacific region, including features of their recently concluded treaties

Chapter Abstracts (and related works):

[i] Abstract: International commercial courts are proliferating, including in Asia, offering a new alternative to arbitration as the hitherto dominant mechanism for resolving cross-border disputes. When the significant trade and investment treaties being concluded by Australia are considered with respect to the Asia-Pacific, the opportunities to create an Australian international court are almost boundless. Its establishment cannot be left to the Courts themselves or for the Australian legal profession to develop. The experiences of Singapore, China Dubai, Abu Dhabi, and indeed, London demonstrate that it is vital for there to be government interest and support for such a proposal. Adding an Australian international commercial court to the mix also occurs within a wider international context. A stronger contribution can be made to the rule of law by courts working together than if they are working separately. The early 21st Century is being defined by something of a return to internationalisation and globalisation, although the form and forms that will take remain to be seen. It is for judges to help shape those forms and contribute towards global stability, harmonisation and due recognition of the law in the context of commercial enterprise. These common purposes, as well as quality of justice and the manner of its administration provided at commercial courts and arbitral tribunals, international and domestic, should be promoted and indeed marketed.

[ii] Morrison, James and Nottage, Luke R., Country Report on Australia for: International Commercial Arbitration – An Asia-Pacific Perspective (October 23, 2014). Sydney Law School Research Paper No. 14/95. Available at SSRN: https://ssrn.com/abstract=2514124

[iii] Teramura, Nobumichi and Nottage, Luke R. and Morrison, James, International Commercial Arbitration in Australia: Judicial Control over Arbitral Awards (April 10, 2019). Sydney Law School Research Paper No. 19/24. Available at SSRN: https://ssrn.com/abstract=3379494

[iv] Abstract: Some ‘bad luck’ has haunted the arbitration industry in Australia. Geographical remoteness has made the country an unfavourable venue for increasing ICA caseloads compared with its competitors in the Asia-Pacific region. Fortunately, such ‘bad luck’ has not necessarily brought about excessively negative impacts. It has helped the country generate world-class Australian arbitration experts, who are contributors and responsive to developments outside the country, which has indirectly bolstered the Australian ICA industry. Such experts have assist Australia in gradually improving the local legal environment for ICA, following international standards, especially over the last 10-15 years. However, their increasingly concerted efforts and other stakeholders have not yet turned Australia into a popular arbitration hub. The country has not overcome the ‘bad luck’ yet – people still hesitate to seat ICA in the country. Analysing the status quo for ICA in Australia, this chapter discusses recent trends and the possible next steps for its service providers to find new frontiers to develop ICA locally and regionally, without depending on chance or luck.

[v] Nottage, Luke R., Confidentiality versus Transparency in International Arbitration: Asia-Pacific Tensions and Expectations (August 29, 2019). Sydney Law School Research Paper No. #19/52, August 2019. Available at SSRN: https://ssrn.com/abstract=3444692

[vi] Abstract: Confidentiality is still widely seen as significant advantage of international commercial arbitration (ICA) over cross-border litigation, especially perhaps in Asia. This can be seen in rules of most arbitral institutions. Automatic (opt-out) confidentiality is also now found in many national laws, including statutory add-ons to the UNCITRAL Model Law and/or through case law for example in New Zealand, then Hong Kong, Singapore, Malaysia, and eventually Australia. Yet there remain variations in the timing of these developments as well as the scope and procedures associated with exceptions to confidentiality. There is also no confidentiality provided in Japan’s later adoption of the Model Law, although parties mostly choose the JCAA so opt-in to its Rules, which have somewhat expanded confidentiality obligations since 2014.

Another recent complication is growing public concern over arbitration procedures through (especially treaty-based) investor-state dispute settlement (ISDS), especially in Australia since an ultimately unsuccessful treaty claim by Philip Morris over tobacco plain packaging legislation (2011-15). Statutory amendments in 2018 reverse automatic confidentiality for Australia-seated ISDS arbitrations where the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. Concerns over ISDS may impede Australia enacting provisions for confidentiality of arbitration-related court proceedings, which could not be revised recently in New Zealand against the backdrop of its new government’s anti-ISDS stance.

Growing transparency around ISDS arbitration is welcome given greater public interests involved in such cases, but transparency should not be simply transposed into commercial dispute resolution through ICA as the fields are overlapping but distinct. Confidentiality in ICA has the disadvantage of exacerbating information asymmetry, making it harder for clients and advisors to assess whether particular arbitrators and lawyers provide value for money. But confidentiality allows arbitrators in particular to be more robust in proceedings and drafting rulings, thus countering the rise in ICA delays and especially costs. More transparency around ISDS, as well as initiatives like “Arbitrator Intelligence” and experiments in reforming Arbitration Rules (eg recently by the ICC), can help reduce information asymmetry for users anyway, while retaining various advantages of confidentiality particularly in ICA.

This chapter elaborates these tensions between confidentiality and transparency in ICA and ISDS, focusing on Australia and Japan in regional context. Both countries still get few ICA cases but are trying to attract more, taking somewhat different approaches to confidentiality in that field, while negotiating investment treaties that increasingly provide transparency around ISDS arbitration.

[vii] Nottage, Luke R. and Ubilava, Ana, Costs, Outcomes and Transparency in ISDS Arbitrations: Evidence for an Investment Treaty Parliamentary Inquiry (August 6, 2018). International Arbitration Law Review, Vol. 21, Issue 4, 2018; Sydney Law School Research Paper No. 18/46. Available at SSRN: https://ssrn.com/abstract=3227401

[viii] https://japaneselaw.sydney.edu.au/2019/10/new-frontiers-in-international-arbitration-for-the-asia-pacific-region-8-confidentiality-vs-transparency-in-icarb-and-isds/

[ix] Abstract: Investment treaties, and especially ISDS provisions, became a political hot potato from around 2011 when Philip Morris brought the first-ever ISDS claim against Australia under an old bilateral investment treaty (BIT) with Hong Kong. A Labor-Greens Government declared that it would no longer agree to ISDS provisions in future treaties, but when a centre-right Coalition Government regained power from 2013 it reverted to concluding treaties containing ISDS clauses on a case-by-case assessment. Australia therefore agreed to ISDS in FTAs with Korea and China, but not bilaterally with Japan. However ISDS-backed provisions apply between Australia and Japan since the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can into force between them (and five other Asia-Pacific nations so far) from January 2019. Yet the Australian parliament engaged in robust debate about ratification of the CPTPP, with Labor Opposition (and Greens) parliamentarians continuing to voice concerns over ISDS provisions, despite the Philip Morris claim against Australia’s tobacco plain packaging having been rejected on jurisdictional grounds in 2015.

This chapter first elaborates on evidence presented to the Australian parliament favouring ratification of the CPTPP, including empirical findings about concerns raised such as the typical amounts awarded, arbitration costs, time-frames and transparency involved in ISDS proceedings. The chapter next compares the parliamentary committee report in 2018 that agreed that ratification should proceed, with a report in 2019 recommending Australia’s ratification of investment agreements (also including ISDS) with Hong Kong and Indonesia – but also early termination of an old Australia-Indonesia BIT. It shows how these two new agreements generally retain (originally US-style) CPTPP drafting, but add some innovative features (notably a mandatory mediation step that the host state can trigger before arbitration, in the Indonesia-Australia treaty), and show some variance between themselves (including more transparency for ISDS proceedings, in the Hong Kong – Australia treaty). The Labor Opposition parliamentarians have also toned down their declared opposition to ISDS, perhaps due to suffering an unexpected election loss in May 2019. Finally, chapter looks at the parliamentary inquiry into Australia ratifying the Mauritius (“UN ISDS”) Convention, retrofitting extensive transparency provisions on earlier treaties between Australia and other states that might also accede to that framework Convention. We conclude from these new developments that Australia is now better placed to play a more active role in guiding the future path of international investment treaty-making especially in the Asia-Pacific region.

[x] Ali, Shahla F., ICA and ISDS Developments in Hong Kong in the Context of China’s Belt and Road Initiative (September 13, 2019). Available at SSRN: https://ssrn.com/abstract=3453061

[xi] Abstract: This chapter examines the impact of both the Belt and Road Initiative and the UNCITRAL Model Law on International Arbitration (the Model Law) on both international commercial and investor state arbitration practice in Hong Kong. Given the significance of Hong Kong as a gateway to OBOR project financing and logistics, understanding current dispute resolution policy is critical for gaining insights into China’s approach to the resolution of OBOR disputes. Measures taken to modernize the practice of arbitration including training programmes and legislative reforms are examined with a view to gaining insights into challenges and future developments.

[xii] Gu, Weixia, China’s Belt and Road Development and a New International Commercial Arbitration Initiative in Asia (2018). Vanderbilt Journal of Transnational Law, Vol. 51, No. 5, 2018; University of Hong Kong Faculty of Law Research Paper No. 2019/012. Available at SSRN: https://ssrn.com/abstract=3346924

[xiii] Abstract: The policy centerpiece of President Xi Jinping’s foreign strategy, China’s Belt and Road Initiative (BRI), ambitiously aspires towards expanding regional markets and facilitating regional cooperation. In context of a rising volume of cross-border transactions generated by the BRI, a robust legal framework on dispute resolution is required to forge investor confidence and enable BRI’s integral goal of economic integration. In light of the substantial levels of harmonization among arbitration laws, arbitration is argued to constitute a primary vehicle of international commercial dispute resolution in an economically integrated Asia under the BRI. It is against this backdrop that the chapter argues that the BRI provides a unique opportunity to contemplate the possibility of regional harmonization, as within the Asian economies along the BRI, of the public policy exception to arbitral enforcement. Such an arbitration initiative in Asia, in which China is anticipated to take a proactive role, holds a wealth of potential to project renewed momentum on China as an engine of not only economic power, but also soft power transformation in pioneering international legal norms.

[xiv] Abstract: This chapter will outline the latest developments in the People’s Republic of China as it promotes itself as a regional hub for international dispute resolution, especially in the context of the Belt and Road Initiative, including the establishing of an International Commercial Court.

[xv] Abstract: This chapter reviews Malaysia’s involvement in international dispute resolution. This includes actual involvement in cases in the WTO and investor-state dispute settlement, and as a venue for international dispute resolution especially through the recently rebranded Asian International Arbitration Centre (AIAC). This chapter also extends to Malaysia’s potential involvement in dispute resolution of international business disputes. This part includes the challenges of enforcing foreign judgments in Malaysia and enforcing domestic judgments abroad, as well as questions around international dispute resolution clauses in Malaysia’s trade agreements. This chapter therefore highlights how Malaysia has been involved in international dispute resolution and the continuing significance of this for Malaysia, against the backdrop of significant domestic political changes in recent years.

[xvi] Claxton, James M. and Nottage, Luke R. and Teramura, Nobumichi, Developing Japan as a Regional Hub for International Dispute Resolution: Dream Come True or Daydream? (December 11, 2018). Journal of Japanese Law, Issue 47, 2019 (Forthcoming); Sydney Law School Research Paper No. 19/01. Available at SSRN: https://ssrn.com/abstract=3299097

[xvii] Abstract: The Japanese government, supported by various stakeholders, has recently been attempting to develop Japan as another regional hub for international business dispute resolution services. Tracking this development is important for both theoretical and practical reasons. How it unfolds should reveal which of various theories for explaining Japanese law-related behaviour have more traction nowadays. Assessing the new initiatives is also important for legal practitioners and others interested in the practical question of where to arbitrate or mediate cross-border business disputes. This chapter therefore reports on current attempts to promote existing and new international arbitration centres in Japan as well as the recent establishment of the Japan International Mediation – Kyoto, in the context of intensifying competition from other regional venues for dispute resolution services.

[xviii] Claxton, James M. and Nottage, Luke R. and Williams, Brett G., Mediating Japan-Korea Trade and Investment Tensions (December 3, 2019). Sydney Law School Research Paper No. 19/73. Available at SSRN: https://ssrn.com/abstract=3497299 (shorter version forthcoming in Journal of World Trade, August 2021)

[xix] Abstract: This chapter first describes the trade tensions between Korea and Japan that escalated from mid-2019. It assesses Korea’s prospects in a formal claim now brought before the World Trade Organization, noting difficulties with substantive law, but especially procedure given the general breakdown in the WTO’s usual two-tier inter-state dispute resolution process. The chapter then outlines the possibility of Japan bringing claims under a 1965 Treaty that purported to settle claims resulting from Japan’s colonisation of Korea, or under two investment treaties, regarding Korean courts recently ordering Japanese companies to pay compensation to war-time Korean labourers. Yet such claims also face procedural and/or substantive law difficulties. The chapter also elaborates the possibility of affected Japanese companies instead or in parallel bringing investor-state dispute settlement claims against Korea, similarly alleging denial of justice in Korean court proceedings, under the two treaties. We conclude that these extra complications bolster the attraction of a formal mediation to bring both countries and the affected companies together in order to achieve an overall negotiated settlement.

[xx] Abstract: This chapter provides a perspective on investment treaty practice from India, which lies at the periphery of what is traditionally associated with the Asia Pacific region. While seemingly on the periphery of this collection of countries, India has signed investment and trade treaties with many of them. It has also recently become involved in disputes under them, and so has started to terminate many bilateral investment treaties. Indians now seeks to renegotiate fresh treaties using a template provided by a new model treaty that is oriented towards privileging state rights. The chapter will look at the narrative led to this point, touching on key cases as well as drawing on some path-breaking (econometric) empirical evidence of the impact of India’s investment treaties on foreign investment. This discussion is aimed to lead to assessing the implications of this emerging configuration for the future of investment law and practice in the wider region.

[xxi] Huang, Jie Jeanne and Hu, Jiaxiang, Can Free Trade Agreements Enhance MARPOL 73/78 Compliance? (October 3, 2018). Tulane Maritime Law Journal, Vol. 43. 2018, pp. 59-91; Sydney Law School Research Paper No. 18/62. Available at SSRN: https://ssrn.com/abstract=3259734

[xxii] Abstract: Whether Free Trade Agreements can effectively encourage states to comply with the International Convention for the Prevention of Pollution from Ships and its Protocols. This question has not been well researched, although the latter has been incorporated into the former since the 2006 US-Peru FTA and most recently in the 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This chapter explores the CPTPP’s achievements and deficiencies to enhance marine environment protection from four aspects: flags of convenience, the vague role of coastal states, affecting trade or investment, and dispute resolution. It adds proposals to address the deficiencies. It concludes by assessing the broader potential for using FTA dispute resolution processes to assist in ensuring compliance with inter-linked treaties, especially for the Asia-Pacific region.

[xxiii] Strong, S.I., The Role of Empirical Research and Dispute System Design in Proposing and Developing International Treaties: A Case Study of the Singapore Convention on Mediation (February 11, 2019). 20 Cardozo Journal of Conflict Resolution __ (anticipated 2019). Available at SSRN: https://ssrn.com/abstract=3332503

[xxiv] Abstract: This chapter seeks to provide insights into the “black box” of early treaty-making processes by undertaking a case study of the development of the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention on Mediation). The discussion focuses on several issues that have seldom been discussed in the legal literature, including the way in which a proposal for an international treaty makes its way to the relevant decision-makers and how those decision-makers determine which of the various alternatives to pursue. In so doing, the article focuses particularly on the role that dispute system design (DSD) and empirical research played in the early development of the Singapore Convention on Mediation. The analysis also considers how interested individuals can assist the treaty-proposing process, particularly if they are not NGO members. The chapter concludes with implications for international dispute resolution policy development and treaty-making, including for the Asia-Pacific region.