Dispute Resolution in Asia

Part AOzco is a Sydney-incorporated company that invests A$3m in 2018 to established a jointventure company in Bangkok (owned in equal shares with a private Thai company),ThaiJVco, to produce and distribute home medical testing kits primarily for Thai, Australianand Japanese end-users.A month after the WHO declares the COVID-19 pandemic in March 2020, the Thaigovernment orders ThaiJVco and some other producers to limit all kit supplies only todomestic users, declaring that this is essential for public health management of the pandemic.Ozco is unhappy as this reduces the joint venture’s profits considerably and some otherproducers (with closer connections to the government, such as State-Owned Enterprises) donot seem to be subjected to such restrictions.As set infections spread, in June 2020 the government announces that it plans to nationaliseThaiJVco to ramp up production of the kits and produce other medical supplies to address thepandemic. It offers to pay Ozco A$3m in compensation, but the latter voices discontentbecause by end-2019 an independent valuation of its investment was $5m. After fruitlessnegotiations, in August 2020 the government publically alleges that that Ozco bribed someofficials to facilitate establishment of the JV, which Ozco completely denies.Question A.1Advise OzCo about its best options and related procedural law and practice issues toresolve this dispute with the Thai government.In September 2020, ThaiJVco’s exclusive distributor of the kits in Japan, Jco incorporated inOsaka, notifies termination of the distributorship contract. As grounds for termination Jcopoints to the Thai corruption allegations, as well as non-delivery of the medical kits, resultingin Jco becoming close to bankruptcy. After ThaiJVco counter-argues force majeure for nondelivery, in October 2020 Jco adds as another ground for termination that some of its ownbuyers (consumers of the kits) are reporting that they contain serious defects causing personalinjury and/or emotional distress. Jco also refuses to make payments for some kits deliveredbefore the April 2020 export ban from Thailand, and threatens to seek the freezing of someThaiJVco funds held in Japanese bank accounts.The written distributorship contract states that “all related disputes must be resolved bymediation administered in Kyoto, then if necessary subject to arbitration administered inOsaka”.2Question A.2Advise ThaiJVco about its best options and related procedural law and practice issuesto resolve this dispute with Jco.In November 2020, some Thai consumers read news about the Japanese consumer complaintsabout defective kits sourced via Jco, and they start to complain to ThaiJVco about similardefects in some of their kits. A few file product liability claims in the Bangkok Civil Court.Thailand’s main NGO, the Foundation for Consumers, starts hearing about and publicisingthese claims. Discussion emerges across print and social media about a possible class action,and that news also reaches some smaller NGOs and other consumer groups in Japan.Question A.3Advise ThaiJVco about the risks and issues around dispute resolution processes forsuch consumer complaints in both Thailand and Japan.Part BCommon Facts for Questions B.1, B.2 and B.3AusCoal is a company incorporated in Queensland and specializes in coal exploitation andexportation. It supplies coal to customers across the Asia-Pacific region. SingTech is acompany incorporated in Singapore and is famous for its special software to enhance thestrength of steel which is mostly produced by burning coal.Because of the huge demand in coal and steel in China, early in 1995, AusCoal and SingTechestablished a joint venture, China Coal and Steel (CCS), incorporated in Shanghai China.CCS regularly buys coal from AusCoal and has an exclusive license to use the specialsoftware designed by SingTech. CCS made a huge investment to build warehouses close tothe Shanghai port because the ShanghaiMunicipal Government signed a long-term contractwith it, which authorized CCS to use the Shanghai port to import Australian coal freely from1995 to 2025. In return, the contract also required CCS to hire Chinese employees and licensethe software to Chinese steel manufacturers who would buy coal from CCS.Since its establishment, CCS’s business in China has gone very well. However, in 2020,according to the ABC News Report in Australia, due to the tension between Australia andChina, the Chinese central government suddenly issued informal instructions to prevent shipscarrying Australian coal from entering any Chinese ports, which included the Shanghai port.When this apparent ban was issued there were several ships carrying the coal that CCS hadpaid for that were on their way to Shanghai. All the ships were refused permission to beanchored in the Shanghai port and any other Chinese ports for an indefinite period. It wasvery hard for CCS to resell the coal quickly due to the bad global economy in the wake of theCOVID-19 pandemic. Consequently, CCS suffered a huge loss.Question B.1Advise CCS and its shareholders AusCoal and SingTech about their best options andrelated procedural law and practice issues to resolve its dispute with the Chinesegovernment about using the Shanghai (or other Chinese) Port.3Facts only for Question B.2ChinaSteel is a state-owned enterprise in China and is CCS’s largest coal buyer. However,because ships carrying Australian coal are not allowed to enter Chinese ports due to thescenario outlined above, ChinaSteel decided to look for other suppliers. AusCoalrecommends its subsidiary in Indonesia, IndoCoal, to CCS. IndoCoal specializes inproducing and exporting high-quality Indonesian coal. ChinaSteel has basically agreed tosign a sales contract with IndoCoal and AusCoal. This contract provides that ChinaSteel shallbuy Indonesian coal worth of RMB 250 million (AU$ 50 million) from IndoCoal. The coalwill be shipped from Indonesia to China. However, they have disagreement on the drafting ofthe dispute resolution clause in their sales contract. IndoCoal and ChinaSteel are concernedabout burgeoning costs and delays in international arbitration, so agree to resolve all disputesarising from the sales contract through a cross-border litigation process.Question B.2Advise IndoCoal and AusCoal about the risks and issues to resolve their disputes in (1)regular courts in China, Australia or Indonesia, or (2) international commercial courtsin either China or Singapore. You should also discuss the procedural issues to recognizeand enforce foreign judgments in Australia, China, and Indonesia, respectively.Facts only for Question B.3Australia and China have resumed a very friendly relationship. Ships carrying AustralianCoal are now allowed to enter Chinese ports. ChinaSteel continues to purchase coal fromCCS. SingTech licensed ChinaSteel to use the software to enhance the strength of steel.However, the US government discovers that ChinaSteel is a company with a militarybackground, so it required all US companies including their overseas subsidiaries not to dobusiness with ChinaSteel. Because SingTech is a wholly owned subsidiary of a US company,it has to comply with the US government’s order. Consequently, it stops licensing thesoftware to ChinaSteel. ChinaSteel argued that, according to the Chinese Rules onCounteracting UnjustifiedExtra-territorial Application of Foreign Legislation and OtherMeasures, SingTech must continue to license the software to it.Suppose that the software licensing agreement concluded by SingTech and ChinaSteelcontains the following clauses:Clause 9: “Governing Law: This contract is subject to English law.”Clause 10: “Dispute Resolution: Parties agree to submit disputes arising from thiscontract to arbitration administered by the Singapore International Arbitration Centrein Shanghai China.”Question B.3Advise SingTech about its best options and related procedural law issues to resolve itsdispute with ChinaSteel regarding the licensing of the software.