Myanmar Accedes to the New York Convention (3/4)

On July 15, Myanmar became the 149th contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).  This is a significant economic and legal reform with regards to foreign investment in Myanmar. 

Myanmar deposited its formal instrument of accession to the New York Convention on 16 April 2013, and ninety days later, Myanmar formally acceded to the New York Convention.  In accordance with the New York Convention, Myanmar courts are obliged to give effect to foreign arbitration clauses and to enforce arbitral awards made in other member states of the New York Convention.  Foreign investors will be able to choose a neutral offshore forum of the resolution for their disputes, insofar as the parties have agreed to arbitration.

Implementation of the New York Convention

It is however still necessary to adopt domestic legislation in order to implement the New York Convention in Myanmar.  The draft implementing legislation is in circulation and is said will be passed by the Parliament by the end of 2013.  

In addition, there are still certain hurdles to be crossed.  Firstly, the Secretary-General of the UN has yet to issue a formal depositary notification, publishing the terms of Myanmar’s accession to the New York Convention.  Up to now, it is uncertain whether Myanmar has made any reservations with regards to its accession to the New York Convention (e.g. such as with regards to reciprocity which may potentially limit the number of reciprocal countries for the enforcement of the arbitral awards). Furthermore, some observers have said that there is a general lack of local judiciary capacity and experience in order to ensure that the New York Convention and the implementing legislation are applied as per international practice.

In the meantime, foreign investors wanting to include an arbitration clause in an agreement will still have to look to the Arbitration Act of 1944 and the Arbitration (Protocol and Convention) Act of 1939. 

The Arbitration Act of 1939 provides for the enforcement of foreign awards in Myanmar. However, there are very few examples of the enforcement of foreign arbitral awards by the Myanmar courts.  The Myanmar government authorities have up to now followed a general policy (with some exceptions) of requiring the Arbitration Act of 1944 to be applied in contracts between domestic and foreign parties.  In accordance with the Arbitration Act of 1944, the forum of arbitration should be Myanmar but a foreign (e.g. Singaporean) qualified arbitrator can be appointed by the contracting parties to conduct the arbitration proceedings in Myanmar.

Conclusion
Although certain uncertainties remain and the New York Convention is still to be implemented through domestic legislation, Myanmar’s accession to the New York Convention is a significant step in creating a more comprehensive and foreign investor friendly legal environment.

Other Key Myanmar Legal Updates – July/August 2013