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Commercial arbitration council expected to launch

THE government is close to establishing a commercial arbitration body to keep disputes in-country and prevent those involved from going to court, commerce officials say.

"Companies with problems won't need to go overseas anymore," said Mao Thora, an undersecretary of state at the Ministry of Commerce.

"With commercial disputes in the past, the parties involved filed their cases to Singapore because there was no court in Cambodia to address commercial problems," he said, adding, however, that in its current proposed form, the National Arbitration Council (NAC) could not deliver legally-binding decisions. 

The bill, which falls under the 2007 Law on Commercial Arbitration, is being reviewed by the Council of Ministers and should be passed once a new government is formed, Mao Thora said.

If approved, the NAC would be limited to non-criminal cases where both parties have consented to accept its judgment, he explained, adding that appeals would be passed to the civil court. 

He said that the US$500,000 earmarked for startup costs from a larger $10 million Asian Development Bank loan for financial sector development would likely be expanded to cover costs for a permanent facility.

The body would be expected to become self-funded over time from user commissions.

Business leaders said they were pleased with the panel in principle, but were hesitant to commit to using it until it had proven its integrity. 

"Our members have said they will only use it if it performs properly. If it has corruption and is not fair, then they will not use it," said Som Chamnan, manager of the Cambodian Federation of Employers and Business Associations, which represents a wide swath of industries in the country, from garments to finance.

"So far we have no guarantee, we will see," he added.

Govt-private committee

Hem Vandy, from the ADB, which helped to draft the bill, said a government-private sector committee would be charged with running the body and elaborating on its administrative procedures, including setting user fees.

 He added that the body would be staffed by local officials with backgrounds in Cambodian law and commerce.

"It sends a positive message about Cambodia's investment climate, and it should be a good mechanism to prove that Cambodia is moving forward and ready for the Cambodian Stock Exchange," Hem Vandy said.

 Hor Soneath, a business environment specialist at the World Bank's private sector arm, the International Finance Corp (IFC), acknowledged that the NAC's requirement of joint-party consent provides a loophole for conflicting parties to not cooperate with the council.

But he expected the body would get a boost from "peer pressure in the private sector to use the arbitration centre and not have their reputation tainted".

The IFC helped to draft the bill bringing the council into existence.

"Resolving commercial disputes has always been difficult here," Hor Soneath said. 

He added that  there were significant advantages to having a commercial-specific arbitration body.

"It should be faster, more high quality and less costly than going through litigation in the main court system," he said.

"The body will offer judges with skills and background knowledge specific to the sector so they understand what the parties involved are talking about ...  having a commercial arbitration body is the natural evolution of a developed business environment."

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