Government drafts new arbitration bill

Introduction
Current regime
New regime
Comment

Introduction

Foreign investors and partners clearly prefer out-of-court dispute resolution. However, owing to Macau's current arbitration regime and the difficulties that it poses, parties typically choose other jurisdictions to resolve disputes.

Therefore, the government has drafted a new arbitration bill which aims to:

• promote Macau as a commercial arbitration centre between China and Portuguese-speaking countries; and
• take full advantage of Macau's high number of bilingual professionals and its cultural and legal similarities to Portuguese-speaking countries.

The bill was approved in general by the Legislative Assembly on 6 June 2018.

Current regime

Macau's dual arbitration system has two key laws:

• Decree-Law 29/96/M (11 June 1996) regulates internal arbitrations; and
• Decree-Law 55/98/M (23 November 1998) regulates external arbitrations relating to commercial transactions.

However, the existence of two decree laws – which apply depending on whether the arbitration qualifies as an internal arbitration or as an external arbitration with a commercial scope – routinely causes conflict between parties. Further, as these laws present conflicting solutions, they are often interpreted and applied inconsistently.

Given that the legislation has been modified only once in the past 20 years, Macau's arbitration regime can be considered outdated.

Moreover, the scope of application of these laws is difficult to define. Generally, Decree-Law 55/98/M applies to arbitrations with a commercial nature (contractual or non-contractual) where:

• the parties to the arbitration agreement had, at the time that the agreement was concluded, their places of business in different states or territories;
• the place of the arbitration (determined in or pursuant to the arbitration agreement) is situated outside the state in which the parties have their places of business;
• any place where a substantial part of the obligations arising from the commercial relationship or the place with which the subject matter of the dispute is most closely connected is situated outside the state or territory in which the parties have their places of business; or
• the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one state or territory.

On the other hand, Decree-Law 29/96/M applies to internal arbitrations (ie, arbitrations falling within the scope of Macau law).

Bearing in mind Macau's role in the commercial and trade cooperation service platform between China and Portuguese-speaking countries, it is essential for Macau to provide a simple arbitration regime that aligns with current international best practice and is easy to comprehend and apply.

Therefore, Decree-Laws 29/96/M and 55/98/M will be revoked when the new arbitration bill enters into force.

New regime

The new arbitration regime replaces the abovementioned laws with a single law, which will apply to both internal and external arbitrations in Macau.

The new law is inspired by the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (as amended in 2006) and reflects some of the previous stipulations of Decree-Law 55/98/M, as well as some good solutions adopted in other jurisdictions which are compatible with the Macau legal system.

The new law establishes a legal regime of voluntary arbitrations and the recognition and enforcement of arbitration awards issued outside Macau (Article 1).

Further, the new regime is based on a number of principles, including:

• the principle of autonomy – whereby parties are free to choose arbitration as an alternative to the courts;
• the principle of contradiction – whereby each party can effectively participate in the arbitral proceedings;
• the principle of equality between the parties;
• the principle of secrecy of the proceedings;
• the principle of informality and simplicity;
• the principle of celerity and efficiency of the tribunal;
• the principle of impartiality and independence of the arbitrators; and
• the minimal intervention principle – whereby the tribunal may act only when specifically entitled to by law.

In terms of its scope of application, the new law implements the principle of territoriality and generally applies only to arbitrations taking place in Macau (Article 2).

Comment

Unifying Macau's arbitration system with a single law is expected to improve legislative cohesion and application. Further, such improvements should encourage foreign investors and partners to choose Macau as their jurisdiction for submitting disputes and strengthen its arbitration credentials internationally – particularly in Portuguese-speaking countries.

For further information on this topic please contact Pedro Cortés or Madalena Perestrello at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email (cortes@lektou.com or perestrello@lektou.com). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.