Doing Cross-Border Business and Resolving Disputes in South & East Asia

Dan Catarivas, Director General Foreign Trade & International Relations, Manufacturers Association of Israel; and Benjamin Grossman, Partner, APM & Co. Head of India Practice

Opening Remarks

• Bilateral trade investment between Israel and countries in South and East Asia has grown significantly and continues to grow.
• As the commercial and trade relations between Israel and most of Asian countries have been developed substantially in the recent years, the turnover of trade with Asia is capturing bigger portion of the volume of trade of Israel.
• As this definitely leads to more deals and collaborations, it also leads to disputes. It is advisable to opt for an Asian institution like SIAC as an alternative to other non-Asian institutions, as an effective dispute resolution is essential for growing trade.

Panel I: Cross-Border Trade and Investment with South & East Asia

Moderator: Prateek Bagaria, Partner, Singularity Legal

Ron Belkine, General Counsel, Tech Mahindra; President, ACC Israel 

Potential challenges in Malaysia

• The company has experienced common challenges like difficult weather conditions, floods, difficulty in accessing the site, and insufficient infrastructure. Due to heavy bureaucracy with respect to international sanctions, setting up a legal entity and banking facilities are difficult. In addition to that, though local laws are evolving, there are still fundamental gaps like company laws. Foreign jurisdictions are therefore preferred in contracts.

Yoav Etzyon, Partner, APM & Co. High Tech and Venture Capital Department

Negotiations and Cultural Differences

• Asian clients see negotiation as the first tool to start a trust relationship in the beginning of a deal. Foreign investors which come from regions where negotiation comes later in closing a deal should beware of these kinds of cultural differences. We advise clients to seek help local legal advisers for full investment protection.

Pranav Mago, Head of South Asia, Singapore International Arbitration Centre (SIAC)

Choice of institutional arbitration in South and East Asia

• As per the statistics, Indian, Chinese and Japanese players are among the top SIAC users and are familiar with SIAC arbitration. Foreign investors are therefore recommended to include SIAC clauses in their contracts while entering South and East Asian markets. This is also because SIAC offers an efficient case management system at a comparatively cheaper but no less responsive price.
• As Singapore International Mediation Centre (SIMC) works in close cooperation with SIAC, and with the growing choice of mediation being a preferred dispute settlement mechanism; SIAC offers the parties the option to mediate after the commencement of arbitration through the Arb-Med-Arb protocol. This is very helpful because if there is a dispute with the settlement agreement itself, the agreement can be enforced under the New York Convention as an arbitral award.

Panel II: Cross-Border Disputes with South & East Asia

Moderator: Anat Bernstein-Reich, Chairperson, Israel-India Chamber of Commerce

Prateek Bagaria, Partner, Singularity Legal

Dispute Resolution Mechanism

• Investors are advised to choose arbitration over the long court proceedings while entering into cross-border transactions in Asia. Cultural differences play an important role in resolving disputes and therefore, it would be prudent to choose institutions like SIAC who are skilled and experienced in handling disputes with parties coming from different backgrounds.

Reemal Madlani, Senior Director, FTI Consulting’s Economic and Financial Consulting practice

Role of economic and financial experts in disputes

• FTI has observed a growing number of complex disputes involving Asian parties. These include a wide range of matters, often relating to breaches of supply contracts, construction projects, as well as disputes over M&A transactions and joint venture exits.
• The role of quantum experts in these kinds of matters is to assist the tribunal by providing independent valuations and loss assessments. Appointing experts early in the process allows for early identification and clarification of the key economic issues, and to identify dependencies with other technical experts in setting case timelines.

Regis Bonnan, Legal Counsel, Omni Bridgeway

Third party funding in disputes

• Before taking the decision to fund a claim, funders carry out an initial assessment of the overall strength of the case; and a team of asset tracing specialists and lawyers assess the chances of success. They work with the clients and their lawyers to provide assistance with case management and litigation strategy.
• Key assessment criteria are merits, quantum and enforceability of the judgment or award. Quantum is not examined in isolation but together with the lawyers’ proposed budget. The importance of these criteria is explained by Omni Bridgeway’s “no win no fee” business model.

Asaf Biger, Partner, APM & Co. Litigation Department

Dispute Resolution Clauses

• Parties should be cautious when choosing arbitration in their contracts. We often come across interpretations by courts which tend to ignore the parties’ choice of arbitration and refer the case to court litigation. Parties are advised to be informed about these tendencies and accordingly act cautious with drafting clear and simple dispute resolution clauses.

Panel III: Cross-Border Infrastructure and Energy Projects with South & East Asia

Moderator: Pranav Mago, Head of South Asia, Singapore International Arbitration Centre

Shemane Chan, Partner, Rajah & Tann Singapore

Choice of form of the contract

• When used, internationally recognized standard forms like FIDIC tend to be heavily modified to allocate the risk onto the contractor. Those jurisdictions in the region which have underdeveloped legal systems do not have any local forms; therefore, projects are based on contracts drafted by employers.

Nadia Davidzon, Partner and Head of APM & Co. Infrastructure and Energy practice

Projects in Israel

• On the infrastructure market in Israel, the government approved a 116 billion Shekel infrastructure plan for the next five years. Tender processes are transparent in Israel. Changes are only allowed at the clarification phase.

Ng Kim Beng, Partner, Rajah & Tann Singapore

Dispute Resolution and Enforcement

• Disputes arising from complex infrastructure projects in the region are usually resolved in arbitration. Players in the South and East Asia region are familiar and prefer having their disputes resolved through amicable means of settlement. Therefore, amicable settlement mechanisms like negotiation and mediation are advisable to foreign investors to better match the business culture of the region.
• Enforcement can be challenging in some jurisdictions in South & East Asia. These proceedings may take a long time, which raises the overall legal costs. It is advisable to discuss matters with third-party funders before initiating legal proceedings.

Prateek Bagaria, Partner, Singularity Legal

Types of disputes and key clauses to consider

• Other than operational disputes, we also often come across joint venture disputes in the region. We recommend strong contractual protections to avoid disputes. To avoid the local partners from using their connections to the investor’s detriment, it is advisable to add call/put options and drag/tag along clauses at the time of signing the contract.