AN issue of paramount importance to Cambodia's investment climate is whether a foreign

arbitral award or judgment will be respected and enforced in a Cambodian court.

Enforcement of a foreign judgment is a judical act in which the party who won a judgment

in a foreign court (i.e. French Court) brings an action in a Cambodian court, requesting

the Cambodian court to implement the foreign judgment against assets located in Cambodia

or against a Cambodian resident.

A foreign arbitral award is similar to a foreign judgment in that it is the final

decision of a foreign forum.

It is different from a foreign judgment in that it is made by a private arbitration

tribunal instead of a foreign state court.

Effect of Foreign Judgments in Cambodia

Cambodia does not have laws dealing with enforcement of foreign judgments. However,

there is a clause in a 1982 law which deals with situations where there is an absence

of law. It states that "In civil cases, if the law is not clearly set forth

or has not been set forth, it shall be adjudicated in accordance with custom, tradition,

good sense or equity."

In accordance with the custom and practice of the Cambodian courts, one can make

the argument that Cambodia will not enforce any foreign judgments.

For instance, enforcing a foreign judgment violates Cambodia's independence and sovereignty

over its territory. According to international law, a foreign country may not impose

or force a sovereign nation to accept a foreign country's law or judgment except

under the terms of a treaty.

Since Cambodia has no international agreement with foreign countries regarding this

matter, foreign judgments will not be recognized.

Even if such agreements existed, Cambodian courts would not be obligated to honor

foreign judgments.

According to Article 55 of the Cambodian Constitution: "Any treaty and agreement

incompatible with the independence, sovereignty, territorial integrity, neutrality

and national unity of the Kingdom of Cambodia shall be annulled."

Effect of Foreign Arbitral Awards in Cambodia

Countries that recognize foreign arbitral awards are signatories to the New York

Convention on the Enforcement of Arbitral Awards.

Cambodia acceded to this convention in 1960.

However, Cambodia has not yet implemented laws to bring the New York Convention into

effect.

At this stage, a commercial arbitration law is being drafted which would make the

New York Convention effective in Cambodia.

Implementing the New York Convention and enforcing arbitral awards does not mean

that a Cambodian party is forced to be subjected to foreign laws or a foreign forum.

Most arbitration proceedings exist because parties willingly agree and contract to

have an arbitration tribunal resolve any disputes between the parties.

Enforcing arbitral awards does not mean Cambodian courts will completely lose control.

Most likely, Cambodian courts will be able to maintain control over the enforcement

of arbitral awards by invalidating awards which violate some overriding public policy

concern or which falls within one of the exceptions to enforcement contained in the

Convention.

In the absence of relevant laws, the general principles of custom, tradition, good

sense and equity may be used by the Cambodian court to determine whether arbitral

awards will be enforced against residents of Cambodia.

Recent case history shows a tendency by Cambodian courts to protect its citizens

by invalidating provisions which are considered prejudicial to a Cambodian resident.

However, since arbitration is usually agreed to by the litigants in a contract a

Cambodian court may arguably have a duty to enforce the contractual rights and obligations

of the contracting parties.

If the contracting parties agree that arbitration shall bind them, then the intent

of the parties must be enforced unless there is some serious public policy violation.

Under this argument, good sense and equity would require Cambodian courts to enforce

the contractual rights of the parties involved.

The benefit of enforcing arbitral awards outweighs any disadvantages since foreign

investments will be greatly increased if investors feel secure that their contracts

have a legally enforceable recourse for any investment dispute that arises in Cambodia

or relates to any assets in Cambodia.

Conclusion

If an arbitral award or a foreign judgment is not enforced by the Cambodian court,

it should be used as evidence to show how another forum decided the issue.

Given the Cambodian courts' wide discretion to evaluate a case and the lack of expertise

in Cambodian courts, this would be very useful even though not definitive.

In order for Cambodia to continue to attract foreign investment, Cambodia needs to

take steps to provide an efficient and equitable means to resolve disputes in Cambodia.

The first step is to pass the commercial arbitration law in order to explicitly recognize

the enforcement of arbitral awards in Cambodia.

Foreign judgments, however, are more complicated since they involve the issue of

a nation's sovereignty.

In the future, Cambodia may choose to enter into bilateral or multilateral agreements

with other sovereign nations in order to enforce such judgments.

- (Ratha L. Panh is an associate lawyer in the Phnom Penh office of Dirksen Flipse

Doran & Le.)