The National Commercial Arbitration Centre (NCAC) has settled its first two cases, marking the first time in Cambodia for commercial disputes to be resolved using an independent arbitration panel instead of the country’s court system.
NCAC President Ros Monin said the resolution of the two cases was a watershed moment for the centre, which became operational in 2013 and only received its first case in 2015. That case – a dispute between a foreign national who rented a factory building in Phnom Penh and the building’s owner – was ultimately dropped because it did not fit the institution’s criteria.
NCAC took on its second and third cases in June and December 2016, respectively, and both of these cases have since been settled, according to Monin.
He said one of the resolved disputes involved a construction contract between a Cambodian company and a foreign entity, while the other involved a supplier contract between a private company and a government agency.
“Both cases are closed; they have passed the hearing stage,” Monin said. “According to procedure, the companies need time following the hearing to draft their agreements and send them to [NCAC] for scrutiny.”
He said details on the settled cases and their outcomes could not be revealed at this time, however, the centre “will notify partners when the contracts are official”.
NCAC was established to provide businesses an alternative to resolve contract disputes without having to go through the onerous legal hurdles of court proceedings. The independent body uses a panel of legal and commercial experts overseen by an ethics committee to resolve cases and issue legally binding decisions.
While arbitration is typically faster and cheaper than court proceedings, Monin said the process can only be as expedient as the disputants allow it to be.
“We have a clear time frame, but sometimes the involved parties try to delay the case,” he said. “If there is goodwill between the parties, the case will close quickly.”
He added that cases should not take longer than a year to settle. By contrast, court cases can take several years and run up a hefty legal bill.
“Legally, it can be smart to go to court,” said Monin. “If you go through arbitration, maybe you will pay a higher settlement than you would through the court system, but here there are no other expenses.
“You don’t spend money on a lawyer. The benefit of arbitration is saving on time, which in turn helps you to save on costs.”
NCAC received its fourth case in January. Monin said an internal meeting between arbitrators has already been held, and the pre-hearing for the case is expected within a month, though this particular case could take longer to settle as the involved parties “don’t want to cooperate”.
David Marshall, a partner at investment advisory firm Mekong Strategic Partners, said that while the two settled cases should help boost confidence in the NCAC concerns remain over the whether the body’s decisions can be enforced by local courts.
“I think having a national commercial arbitration centre is ultimately a good thing for Cambodia,” he said. “But the question is enforceability.”
He noted that if either disputant does not agree with the award decided upon by the NCAC, the fear is that they could demand that a Cambodian court verify the ruling, in turn rendering the benefits of an expedient arbitration process obsolete.