Establishment of the Brunei Darussalam Arbitration Centre

29
Mar
2017

The Brunei Darussalam Arbitration Centre (“BDAC”) was established in December 2014 and has been operating since 9 May 2016.

Arbitration as an alternative dispute resolution provides advantages in the form of privacy, lower costs and promptness of proceedings as compared to the court system. The arbitration process is particularly important to Brunei Darussalam because under the Constitution of Brunei Darussalam, the government may not be accountable to the Brunei courts and the only means to resolve disputes with a government party is by way of arbitration. As most of the industries in Brunei Darussalam are controlled by the government, this means that most of the high value commercial disputes taking place in Brunei have to be resolved through arbitration.

Under the Arbitration Order 2009 and the International Arbitration Order 2009, the default statutory appointing authority is the Arbitration Association Brunei Darussalam (“AABD”). The AABD sits at the pinnacle of the arbitration system in Brunei Darussalam and is tasked with making all default appointments of arbitrators and deciding on all challenges made by parties against arbitrators.

When Brunei Darussalam implemented the International Arbitration Order in 2009, it became the first country in the Asia-Pacific to adopt the recommendations of the changes made to the UNCITRAL Model Law 2006.

The Arbitration Centre

The BDAC is a company that is wholly owned by the Government of Brunei Darussalam and all members of the board of directors are appointed by the Permanent Secretary of the Prime Minister’s Office.

The BDAC aims to host Alternative Dispute Resolution (“ADR”) services, which include both arbitration and mediation.  The main aim of ADR is to allow commercial parties to bypass the tedious litigious process often associated with the court system.

The BDAC is also capable of hosting both domestic and international disputes.

What does this mean for private parties?

This means that parties have alternative avenues to resolve disputes through a mediation or arbitration process.

Mediation is similar to negotiations.  The difference is that a mediator is present to moderate the parties’ negotiations.  Mediators take a neutral and objective third party role with the aim of guiding disputing parties to reach an amicable settlement. The end-goal behind a mediation process nevertheless rests in the hands of the parties. Although mediation itself is a non-binding process, once a decision is reached, the parties may choose to draft out a settlement agreement to bind one another to the decision.

On the other hand, decisions made through arbitration are final and binding. An arbitrator or panel of 3 arbitrators will be present to adjudge over the proceedings between the parties.

The main differences between arbitration and the court system are as follows:

1. Control of proceedings. Parties have more control and flexibility over the procedures of an arbitration. This includes decisions regarding the venue, appeal system, jurisdiction, language used, seat of arbitration, number of arbitrators as well as the arbitrators themselves. These matters may be decided by the parties at the point of drafting their commercial agreement, or, in some cases, at the point where a dispute arises.

On the other hand, court proceedings tend to be more rigid. Parties would have no choice but to go with the assignments given.

2. Privacy and Confidentiality. Unlike court proceedings where matters may be discussed in open court, arbitration proceedings afford more privacy to the disputing parties. As parties have control over the arbitration procedure, they may opt for a venue which they feel would best serve their privacy.

3. Costs. Arbitrations may be costly if not proceeded with wisely. The costs are not fixed and parties would have to personally pay for items such as venue of the arbitration and fees of the arbitrator. Costs may further increase should the parties choose to be presided over by 3 arbitrators instead of 1, or if they prefer for the arbitrator to be an expert in the subject matter of their dispute. Further, note that there is only one level of arbitration proceedings as opposed to potentially 3 stages for a court litigation (which may include appeals to the Privy Council in London). Therefore, the costs of arbitration often work out to be lower than that of a court proceeding.

In court proceedings, parties would not have to pay for the case to be heard in court nor will they have to pay the individual judges to hear their cases. Rather, these matters are provided for by the State. Parties only have to pay for the legal fees of their respective counsels.

4. Powers. In many aspects, arbitrators have similar powers in granting remedies as High Court judges. They are however not authorised to deal with any matters that are non-arbitrable such as family law issues; criminal law issues and land law issues.

On the other hand, judges can grant remedies which are legal or equitable, which is part and parcel of their discretionary powers. Equitable remedies that judges can grant include, among others, interlocutory injunction, specific performance and rescission.

It should be highlighted that mediation is available to all parties at any stage of dispute, regardless of whether the issue is still under negotiations or whether the matter has proceeded to litigation.  On the other hand, arbitration requires the consent of all parties and the standard practice to enable this is to include an arbitration clause inside an agreement.

If you have any questions or require any additional information, you may contact S. Rozaimarlenny Abdul Rahman or the ZICO Law partner you usually deal with.


This alert is for general information only and is not a substitute for legal advice.