Luke Nottage, International Commercial and Investor-State Arbitration: Australia and Japan in Regional and Global Contexts (Cheltenham, UK: Edward Elgar Publishing, 2021) 407 pp.
This book is a collection of previously published articles, discussion papers and book chapters on international commercial and investment arbitration in Japan and Australia. The monograph is bookended by introductory and concluding chapters, both of which are original. Each chapter has been updated by their author, Professor Luke Nottage, who is a Professor of Comparative and Transnational Business Law at Sydney Law School, and is a well-known English-speaking scholar of Japanese and Asia-Pacific international commercial and investor-State arbitration. The choice of the two jurisdictions thus arises from Prof. Nottage’s expertise and provides an opportunity to explore the similarities and differences between these two jurisdictions at the “periphery” of international arbitration.
The chapters are tied together around two overarching themes which serve as a barometer to measure the evolution of international arbitration. These themes or tensions are (1) globalization versus local/national idiosyncrasies, and (2) formalization versus informalization, which Prof. Nottage calls glocalisation and (in)formalization, respectively. Throughout the book, the author’s concern for reducing costs and delays in international arbitration also provides a further indicator by which to gauge developments and potential reforms, as Prof. Nottage takes the view that they would be reduced by a more global and informal approach.
The aim of this book is to trace the trajectory of both international commercial arbitration and investor-state arbitration, focusing on Japan and Australia in their regional and global contexts. This book is divided into three parts, comprising a total of 12 chapters, addressing in turn (1) international commercial arbitration in Japan and Australia, (2) crossovers between commercial and investor-state arbitration, and (3) investor-state arbitration and investment treaties.
In Chapter 1, Prof. Nottage posits that although international arbitration was first quite informal and global, it became increasingly formalized under the influence of the common law tradition, following which there was pushback towards more informal and faster arbitration in the 1990s, while we have seen in the past 10–15 years a resurgence of costs and delays. In his view, the growing influence in international arbitration of large US law firms in the 1970s and UK law firms in the 1980s has been and remains a leading cause of increased formalization, costs and delays.
The author takes an analytical, historical and sociological approach in Chapters 2 and 3, exploring the interactions between international arbitration and the lex mercatoria. The author also considers a dozen of the most important issues or “pressure points” in international arbitration, from the use of Arb-Med and the practice of caucusing, to ex parte interim measures.
Chapter 4 is dedicated to Japan’s Arbitration Law of 2003. Prof. Nottage notes that the impetus for Japan’s new Arbitration Law, which applies to both domestic and international arbitrations seated in Japan, was mainly domestic. The author reports that it came about as part of a revamp of the civil and criminal justice landscape around 2001–2004, aiming to move from ex ante regulation by public authorities towards more indirect socio-economic ordering through ex post relief. Accordingly, the 2003 Arbitration Act had little direct impact on the number of arbitrations in Japan. Prof. Nottage reports that the Japanese court decisions on arbitration are generally internationalist and demonstrate a pro-arbitration spirit, and thus are not in his opinion a reason for the low number of arbitrations seated in Japan. Rather, Prof. Nottage points to ongoing structural and institutional barriers, including a comparative lack of dynamism of key arbitration centres, especially in their international engagement, rather than some general “cultural” aversion to formal dispute resolution and confrontation. In addition, he considers that the Japanese government was comparatively unenthusiastic about arbitration throughout the 1990s compared to other Asian countries. Prof. Nottage also reports that when Japanese companies include an arbitration clause in their contracts, they have historically chosen to seat their arbitrations outside of Japan. These arbitrations are thus administered pursuant to the rules of arbitral institutions situated within the “centre” of international arbitration which continue to benefit from their first mover advantage, i.e. the ICC in Paris, the LCIA in London, and the AAA in New York, as well as economies of scale and other practical advantages. Ultimately, Prof. Nottage fears that the renewed interest in promoting international arbitration in Japan since 2017 may be too little, too late, not unlike other jurisdictions on the “periphery,” noting that Korea is a strong contender within the region.
In Chapter 5, the author examines the 2010 reforms of Australia’s International Arbitration Act, which incorporated most of the 2006 revisions to the UNCITRAL Model Law, as well as other reforms aimed at better positioning Australia as an arbitral venue in the Asia-Pacific region. Prof. Nottage identifies certain areas for potential reforms, but also argues that Australia will need to work particularly hard to gain back the ground that has been lost to other regional venues, in particular Singapore and Hong Kong. He also finds it disappointing that the number of cases being contested across Australian courts has remained quite high. The author concludes that although Australian legislation and case law have gradually become more internationalist and pro-arbitration, the approach of law reformers and various Australian courts remains quite conservative and reveals the enduring influence of some ambivalence towards international arbitration.
Chapters 6 and 7 turn to the topic of investor-state arbitration. Prof. Nottage explores its evolution and recounts that although investment arbitration cases grew in the second half of the 1990s, especially under Chapter 11 of NAFTA, the real explosion of cases was around 2000, arising from a dramatic increase in worldwide foreign direct investment since the fall of the Berlin Wall and from the conclusion of many free trade agreements and bilateral investment treaties. Fierce criticism raged in Australia following Philip Morris Asia’s challenge to tobacco plain packaging legislation. Although concerns over delays and costs also apply to commercial arbitration, investor-state dispute settlement (ISDS) bears the brunt of the criticism given the policy decisions and public interests involved, as well as what the author describes as greater transparency in comparison to commercial arbitration. Prof. Nottage makes a counter-intuitive suggestion that treaty-based investor-state arbitration may eventually exert some counterbalancing influence through its increased transparency, while it also risks promoting further formalization. These chapters illustrate the use of Prof. Nottage’s framework of globalization and formalization in advancing the scholarship on Japan’s policy, practices and approaches to ISDS, which remains limited.
Chapter 8 focuses on the tension between confidentiality and transparency. Prof. Nottage asserts that confidentiality is particularly important in Asia, even though it is not automatically provided for in Japan’s Arbitration Law. This lacuna is however easily remedied by the use of an arbitral institution’s rules, such as the JCAA’s arbitration rules. Among others, the author argues that we should not simply transpose the transparency available in investor-state arbitration to commercial arbitration. This is because while confidentiality has the disadvantage of exacerbating information asymmetry, among others making it harder for clients to assess specific arbitrators and lawyers, confidentiality conversely allows arbitrators to be more firm in managing proceedings.
In Chapter 9, the author discusses Australia’s policy shift away from investor-state arbitration in 2011–2013, when Australia announced that it would no longer include in future treaties, even with developing countries, clauses which allow investors to initiate arbitration claims directly against host states for illegally interfering with cross-border investments. This was then reversed following the Gillard government’s loss of Australia’s elections in 2013. Prof. Nottage posits that a large shift away from investor-state dispute settlement would indicate a more idiosyncratic, nation-centric rather than global approach. Moreover, the author opines that a domino effect from Australia’s policy would undermine the ‘bottom-up’ or ‘step-by-step’ approach towards developing a harmonized framework for protecting cross-border investment, which had been slowly emerging after ‘top-down’ multilateral initiatives foundered in the late 1990s.
Chapters 10 and 11 focus mainly on Australia and address in turn the lack of an investor-state arbitration clause in the Japan-Australia Free Trade Agreement, as well as ISDS policy and practice in Australia since 2011.
In the last chapter, Prof. Nottage reflects on the impact of COVID-19 and discusses potential ways to foster cooperation, bilaterally and regionally, between all stakeholders of international arbitration. With regard to its impact on arbitral seats in the Asia-Pacific region, Prof. Nottage suggests that certain seats may become more popular if their local courts are capable of holding virtual hearings and managing proceedings remotely. Prof. Nottage values collaboration as a way of promoting informal and global approaches to arbitration, and identifies among others that there is a place for greater collaboration among judges to continue promoting internationalist interpretations of arbitration statutes based on the UNCITRAL Model Law, in particular with a view to promote interpretations that would help reduce costs and delays to restore a more informal approach to arbitration. By way of example, Prof. Nottage reports that Japanese judges are less prone to speak at or attend major international arbitration conferences, in comparison to Australian judges. Prof. Nottage concludes the book by suggesting that in the event that key regional venues within Asia would be displaced or eclipsed, especially given the geopolitical tensions around Hong Kong, more remote venues such as Japan and Australia would have a new opportunity to become attractive hubs for international arbitration.
Despite the drawbacks inherent in compiling previous publications dating back twenty years, which may have overlap or be unevenly amenable to being updated, the depth of Prof. Nottage’s knowledge of arbitration in Japan and Australia is impressive and draws on decades of academic research, involvement in the field and experience. By bringing together in a coherent framework and updating these peer-reviewed publications, Prof. Nottage continues his contribution to the Western-language academic scholarship on the evolution of Japanese commercial and investor-state arbitration.
While each chapter can be perused individually, reading the book from cover to cover offers a helpful panorama of some of the most important dynamics in international arbitration. Beyond the two jurisdictions, Prof. Nottage also makes normative arguments of general application, including on the potential influence of investor-state arbitration on commercial arbitration. This book will be valued by academics, lawyers and policy makers with an interest in the evolution of Japanese or Australian arbitration law and policy in their regional, global, historical, political, and sociological contexts, as a treasure trove of information presented in a useful doctrinal and interdisciplinary framework.
Associate, Mayer Brown LLP. The opinions expressed are those of the author and do not necessarily reflect the views of the firm.