Conference | The resolution of commercial conflicts – 18 November 2016

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The Conference started with a formal ceremony with Alain Fortin, “Chargé d’Affaires of the French Embassy” and His Excellency Anh Vong Vathana, Minister of Justice, as honoured guests. His Excellency, Mr. Anh Vong Vathana, welcomed the organization of this event, recalling that the legal professions are one of the “major actors for economic development” and “contribute to the stability and peace in Cambodia”. Finally, the Minister recalled the recent reforms of the Royal Government of Cambodia, notably the adoption of the three fundamental laws in 2014, that correspond to one of the four priorities of the rectangular strategy: good governance.

In front of a conference room full of people, where many current and future legal practitioners were present, the various interventions of the experts have informed the audience on the resolution of commercial disputes in the French and Khmer systems.

The alternative methods of dispute resolution

The new alternative methods of dispute resolution are based on a waiver of conflict resolution through the intervention of a state judge. This renunciation can take two forms, which are often qualified as “alternative resolution”: on the one hand, conciliation or mediation and on the other hand, arbitration. For this first part, the speakers were Me Yudi Bun,Cambodian lawyer from the law firm Bun & Associates and Mr Michel Armand Prevost from the Association Droit & Commerce.

  1. Arbitration in France and Cambodia

                  Background and  benefits

In France, arbitration appears as a contemporary evolution of the conflicts resolution but, as stated by Mr Armand-Prevost: “Aristotle said [already], the arbitrator aims to equity, the judge aims to law, Arbitration was invented for fairness to be applied “. In addition, other references from the French revolutionary as “the law of the 16th and 24th of August 1790 on the judicial organization [states] that arbitration is the most reasonable way to terminate conflicts between citizens”. In France, the legal frame on arbitration is set out in the Civil Code in articles 2059 to 2061 and in articles 1442 and 1527 of the Civil Procedure Code.

Cambodia, for its part, has adopted a similar notion of modern arbitration barely a year after its independence: on December 1954, a law was adopted and offered the parties to resolve their conflicts outside the judicial system. Therefore, built on its tradition, Cambodia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 1958 in 1960.

The “tabula rasa” operated by the Khmer Rouge regime obliged the Government to adopt a new law in 2001 approving and ratifying – again – the New York Convention. In 2006, the Commercial Arbitration Act established a Cambodian arbitration centre, following the Singapore model, to be officially launched in 2013 and called the “National Commercial Arbitration Centre”. Finally, in 2014, a law on the internal rules of the National Arbitration Centre give to Cambodia its own corpus of rules for arbitration.

In Cambodia, the definition of disputes that can be subject to arbitration is unclear: article 2 of the above-mentioned Commercial Arbitration Act states that “a wide variety of trade disputes can be settled by arbitration.” Thus, contracts of sales, services, distribution and construction could be submitted to it.

The two experts then recognized to arbitration the same qualities: its rapidity, its confidentiality, the technical skillby the arbitrators of the disputes they have to settle, but also its “one shot” characteristic because arbitration do not provide any appeal except in the case the parties precise it in the contract. The major disadvantage of arbitration is its high price. The cost may fluctuate from centre to centre, for example in Singapore; it would not be worthwhile to have a dispute resolved there with a contract worth less than 10 million dollars, according to Mr Bun.

                  Legal base, procedure and conflict’s resolution

In France as in Cambodia, arbitration arises from contractual agreement, since it assumes the expression of the will of the parties to submit their dispute to a private judge. It may be provided directly by the contract or agreed by the parties after the occurrence of the dispute. Each possibility does not affect the substance of the arbitration. The parties can choose between one of the existing arbitration centers, which will result in an obligation to comply with the relevant rules of the arbitration center, or choose an “ad hoc” arbitration, allowing the parties to determine the course of their arbitration.

The arbitrator cannot be a legal entity; it is necessarily a natural person. Parties may decide to appoint jointly a single or three arbitrators. If both parties agree on collegiality, each party shall choose one arbitrator who, in turn, shall designate the third arbitrator who will be the president of the arbitral court.

In France, the implementation of the “juge d’appui” allows the settlement of the difficulties of the setting up of the arbitral court, especially if the contract or the arbitration agreement do not stipulate anything. The “juge d’appui” is usually the “Président du Tribunal de Grande Instance”. Thus, the “juge d’appui” can intervene and designate the third arbitrator if the two arbitrators chosen by the parties cannot agree. Also, the “juge d’appui” can intervene in the multi-stakeholders arbitrations, when there are several defendants or claimants parties, and the parties are not able to designate a common arbitrator.

Article 1456 of the Civil Procedure Code provides that “the arbitral court is constituted when all the arbitrators had accepted the mission entrusted to them. On that date the court is seized of the case“. When they accept their mission, the arbitrators shall respect two fundamental concepts: independence and impartiality. Independence is an objective notion; it involves the absence of links between the arbitrator and one of the parties. Impartiality is a more subjective notion since it results in the absence of a bias of the arbitrator: the arbitrator is obliged to disclose that bias which, if not, may result in the nullity of the arbitral award.image-droit-et-commerce

In a lack of agreement between the parties, the legal time limit during which the arbitral court should be constituted is set out in article 1463 of the Civil Procedure Code and is six months from the date of the seizure. This period may be extended by the parties or by the judge on the request of arbitrators. At the issuance of this time limit, the arbitral court should deliver an arbitral award: the judges secretly deliberate and the award have generally the same structure as a Court judgment. The award is reached by a majority vote and shall be signed by all arbitrators. If an arbitrator refuses to sign, the president shall mention this refusal at the end of the award.

The arbitral award would be enforceable only after an exequatur procedure took place. The exequatur procedure allows the judge to verify that the award is not manifestly contrary to the “public order”, and is rarely denied. Nevertheless, the enforceability of the sentence does not preclude any appeal, indeed three different ways are possible: the appeal, if provided by the parties; The claim for annulation, which is strictly framed and must comply with one of the six limiting criteria (jurisdiction, irregularity, lack of mission, contradiction, lack of reasons and public order); And finally the retraction which is; rarely invoked, especially in cases of fraud or impartiality.

  1. The Conciliation and Mediation in France

These alternative forms of resolution have emerged with the law of February 8th 1995 on the organization of courts and civil, criminal and administrative procedure. The aim of these new forms of settlement is to resolve disputes in an amicably settlement and negotiation and without any judicial intervention of a judge. This growing development responds to a new justice philosophy, which is more focused on compromised rather than judicial litigation, but also to resolve contemporary ills, such as the clogging up of jurisdictions.

Mediation is a method of using an impartial third party which would guide the parties to find a solution. The mediator must be perceived as such by both parties. Then,, he must not only have an university expertise, but must also detain a know-how of being a mediator who combines empathy, asceticism and listening.

The role of the mediator is to make the parties accepting the rules of the play: respect of each other, non-intervention when the other party is speaking, confidentiality and application of the decision. Thus, two phases are following:

  • A so-called “past-looking” phase where each party presents their own version of the facts. This first phase passes through a reformulation stage where each party is put into the other party’s skin. This is the beginning of a progression towards an agreement.
  • A so-called “forward-looking” phase where the mediator invites the parties to make proposals in order to find a remedy. This second phase allows the solution to emerge little by little.

Mediation offers other possibilities such as a separate interview for each party with the mediator; The mediator may also pronounce the suspension to allow a time of reflection for the parties. Finally, the agreement depends exclusively on the parties: the mediator cannot draft a proposal.

Conciliation is very close to mediation; the main difference is that the first one is free whereas mediation is charged. Contrary to mediation, the conciliator is entitled to make a remedy’s proposal to the parties. Finally, the Civil Procedure Code brings conciliation into the judge’s missions. The courts of first instance, with an attempt of judges to systematize it in the relevant cases, increasingly use this form of judicial conciliation. 

The Judicial treatment of commercial disputes

  1.  The judicial resolution “between traders” in France

The experts have then dealt with the judicial treatment of commercial disputes. For this second part, intervened Mr. Charles Vincenti, honorary president of the association Droit et commerce, and his Cambodian counterpart, Mr. LY Tayseng, attorney at the bar of Cambodia, Director-General of HBS Law in Phnom Penh.

Even if arbitration is increasingly used in the business world – according to its many benefits – in France the Commercial Courts remain the most common and accessible settlement mode for commercial disputes. Indeed, Commercial Courts are competent to settle disputes between traders, traders and commercial companies, and those relating to commercial acts.

The French judicial system distinguishes between commercial litigation and civil and criminal litigation. Thus Commercial Courts have been created to deal only with commercial matters. Created in the XVIIth century by the Chancellor Michel de l’Hospital – also “Saint Patron” of the association Droit & Commerce -, Commercial Courts constitute a characteristic of the French judicial system. They are composed of non-professional judges, volunteers and elected by their peers, who are called “juges consulaires”. Nowadays, there are nearly 134 Commercial courts in France, which make nearly 983,787 decisions per year.

Mr. Charles Vincenti insists on the effectiveness of this “realistic justice” which has been creative and pioneering and also suits to the changing world of Business law. For example, the use of an “ad hoc” representative (called “mandataire ad hoc”) in collective proceedings is an invention of commercial courts. The law maker then codified it later.

Mr Vincenti mentioned some benefits of this specialized jurisdiction:

  • Its accessibility: the parties can act themselves; they can be assisted and represented by the person of their choice (Article R662-2 of the Commercial Code, which refers to Article 853 of the Civil Procedure Code).
  • Its simplicity of the referral to the court: by spontaneous appearance of the parties before the court; by joint application or throught fixed assignment by bailiff.
  • Its oral procedure.
  • Its speed of processing.
  • Its effectiveness and adapted procedure: around only 13% of appeals against decisions rendered by the Courts of Commerce. It’s approximately the same percentage as the common jurisdiction.
  • Its low cost of this justice for the State: the consular judges are voluntary judges.

The judicial treatment of commercial disputes by commercial courts appears to be particularly effective in France and faced the changing business world.

  1. The judicial resolution of commercial case in Cambodia

To expose the judicial treatment of commercial disputes in Cambodia, the association Droit & commerce had the honor of receiving Mr. Ly Tayseng, attorney at law from HBS Law.

Contrary to France, the Constitution of Cambodia dated 1993 does not distinguish between administrative, civil and commercial litigation. Then, there is no separate court to deal with commercial disputes.

In Cambodia, there are three levels of jurisdiction: the municipal or provincial courts, the Court of Appeal and the Supreme Court. The municipal or provincial courts are   courts of first instance, which have jurisdiction to resolve all disputes. There is only one Court of Appeal in Phnom Penh whose territorial jurisdiction covers the whole country. If there is currently an exceptional military jurisdiction, there is no special court for dealing with the commercial cases.

However, when Cambodia ratified in 2002 the protocol to accede the World Trade Organization, the Royal Government made a commitment to set up special courts to settle commercial disputes. Twelve years later, this commitment will be partially endorsed by the adoption of a law on the judiciary’s organization on July 16th 2014. This law plans the creation of chambers specialized in business law in the courts of first instance.

If in theory these chambers have been created, in practice there are not yet effective due to the missing of a specific procedure.

In addition, Mr. Ly recalled the problems inherent to the judiciary organization in Cambodia, such as the slowness of the procedure or its cost. This inconvenience might discourage traders to begin a legal proceeding, including in front of specialized chambers.

Credits : Caroline Tissot et Laurent Moulin