Transitional Challenges in Developing a Pro-Arbitration Regime in Myanmar: Highlights from the Union Supreme Court of Myanmar’s Decision of Myanmar Offshore v. ARV Offshore

In the past decade, Myanmar has made efforts to renew its archaic legal framework for arbitration. Myanmar acceded to the New York Convention 1958 in 2013, and also adopted a new Arbitration Law based on the UNCITRAL Model Law on International Commercial Arbitration in January 2016. The case of Myanmar Offshore Co., Ltd & MOL Offshore Pte Ltd v. ARV Offshore Co., Ltd [Civil Revision Suit No. 599/2022] marks the first-ever case addressing the recognition and enforcement of foreign arbitral awards in Myanmar after the aforementioned legislative reforms. Unfortunately, the Union Supreme Court of Myanmar (“Supreme Court”) denied enforcement in its judgment handed down on 27 July 2023. The Supreme Court vacated the decision of the West Yangon District Court (“District Court”), subsequently upheld by the High Court of Yangon Region (“High Court”), that ordered recognition and enforcement of the foreign arbitral award.

The Supreme Court’s decision is crucial for underlining the procedural question of whether the Arbitration Law should be applied to the enforcement proceeding of a foreign arbitral award resulting from an arbitration pending before the new law was enacted, and shedding light on the concept of public policy, or “national interest”, in Myanmar.

Background of the Case

The dispute arose when Myanmar Offshore failed to transfer profits to ARV Offshore according to a Pipeline Profit Contract (“PLC”) concluded between the parties and the Myanmar Oil and Gas Enterprise (“MOGE”) in 2009. ARV Offshore initiated arbitration against Myanmar Offshore and its Singaporean parent company, administered by the Singapore International Arbitration Center in 2010 and seated in Singapore. The final award was issued in favor of ARV Offshore in August 2016 — about 7 months after the Myanmar Arbitration Law was enacted. ARV Offshore successfully enforced the arbitral award before the High Court of Singapore in 2017 and recovered part of the amounts awarded.

In 2019, ARV Offshore sought to recover the remaining amounts and applied for the recognition and enforcement of the arbitral award before the District Court in Myanmar. Myanmar Offshore resisted enforcement on several grounds, including insufficiency of documentary evidence in the application, incapacity to comply with the terms of the award, non-arbitrability of the subject matter of the dispute, and contrariness to Myanmar's national interest. Nonetheless, the District Court rejected these arguments and ordered recognition and enforcement of the award. The District Court’s decision was further upheld by the High Court on appeal.

Myanmar Offshore then applied for a civil revision suit before the Supreme Court, challenging the lower courts’ decisions. In the trial, the Supreme Court heard arguments on two issues only. First, whether the Arbitration Law applied to the enforcement proceedings. Second, whether the enforcement of the arbitral award should be refused on the ground that it was contrary to national interest.

Applicability of the New Arbitration Law to the Enforcement Proceedings

Before the courts, Myanmar Offshore consistently opposed the application of the new Arbitration Law in this enforcement proceeding because the underlying arbitration commenced before the Arbitration Law was enacted. Accordingly, pursuant to Section 58 of the Arbitration Law, the courts of Myanmar had no jurisdiction to enforce the award, as enforcement should be conducted in the jurisdiction of the PLC’s governing law, which was Singapore law. Section 58 provides that:

58. (a) Unless otherwise agreed by the parties in an arbitration agreement or other documents, the provisions of this law shall not apply to the arbitral proceedings pursuant to an arbitration agreement which were commenced before the enactment of this Law.

(b) Subject to the provision of sub-section (a), if the arbitral proceedings have already been commenced before the enactment of this law, such arbitral proceedings shall be continued in accordance with the governing law in the arbitration agreement between the parties.

The provision seems very clear and unambiguous, prohibiting involuntary retroactive application of the new Arbitration Law to arbitrations pursuant to arbitration agreements concluded prior to its enactment and to arbitrations pending prior to its enactment. However, it does not explicitly prescribe whether this prohibition should be extended to the enforcement of foreign arbitral awards. 

The District Court relied on Section 2(b) of the Arbitration Law, which is promulgated exclusively for foreign arbitrations: “[I]f the place of arbitration is at any other country, which is apart from the State, or place of arbitration is not specified or not determined, section 10,11,30, 31 and Chapter 10, shall be applicable.” As Section 58 was not referred to in the aforesaid Section 2(b), the District Court decided that Section 58 shall not be considered. 

On appeal, the High Court emphasized that the Arbitration Law was a procedural law and relied on Section 3(f) of the Myanmar Interpretation of Expressions Law (1973)

 which provides that “unless otherwise expressly provided in a procedural law itself, it shall be retroactively applied.” Accordingly, the High Court upheld the District Court’s decision that Section 58 shall not be considered, and the award shall be enforced.

Unlike the High Court, the Supreme Court held that Section 58 was express — without parties’ consent, the Arbitration Law shall not be retroactively applied to prior proceedings before its enactment. It ruled that the Arbitration Law was not a procedural law, and the High Court had erred in relying on Section 3(f) of the　Myanmar Interpretation of Expressions Law (1973). Accordingly, the Supreme Court reversed the High Court’s findings.

Contrary to Myanmar’s National Interest

The Supreme Court then considered the question of whether, if the Arbitration Law applied, enforcement of the award could be refused on the ground that it was contrary to Myanmar’s national interest under Section 46(c)(ii) of the Arbitration Law (corresponding to Art. V(2)(b) of New York Convention). National interest, or ‘A Myo Thar A Kyo Se Pwar,’ is not a defined term in the Arbitration Law, but the Supreme Court issued Arbitration Procedures in 2018 [Supreme Court Notification No. 643/2018] (“Arbitration Procedures”) stating that ‘contrary to national interest’ in the context of arbitration shall be interpreted as “effects such as environmental damage to the nation’s land, water and air, damage to the interests of all citizens, and damage to the national culture and heritage.”

In this case, Myanmar Offshore claimed that as the arbitral award involved a finding that the Minister of Energy and officers of MOGE committed bribery, enforcement would be contrary to national interest. When this issue came before the District Court, the District Court found the award to be well-reasoned, dealing with those allegations pursuant to applicable Singapore laws. It further opined that the validity of the PLC was not affected because bribery was allegedly committed by Myanmar Offshore only after the PLC concluded. Accordingly, it decided that enforcement of the award would not violate Myanmar’s national interests as “enforcement of the award would not raise effects such as environmental damage to the nation’s land, water and air, damage to the interests of all citizens, and damage to the national culture and heritage.” In other words, the District Court assessed Myanmar’s national interests by reference to the definition set out in the Arbitration Procedures.

However, the Supreme Court approached this argument from a completely different perspective. It raised a serious public interest concern that the Minister and government officials alleged to have committed bribery were not interrogated during the arbitral proceedings. It held that enforcement of such an award rendered without providing the accused an opportunity to defend themselves would impact the reputation of the relevant Ministry and the Government of Myanmar. Consequently, enforcing the arbitral award would be contrary to national interest. Notably, the Supreme Court did not expressly engage with the definition of ‘contrary to national interest’ set out in the Arbitration Procedures, but, in any event, appeared to adopt a broader and more expansive conception of national interest. 

Commentary

In this case, given that the relevant arbitral award contained findings implicating the integrity of public officials and the Government of Myanmar, the Supreme Court’s decision to deny enforcement of the arbitral award is not particularly surprising. However, assuming that this factual pattern did not exist, would the Supreme Court have refused enforcement under the Arbitration Law due to the timing of the commencement of the arbitration in question?

This author’s view is that, notwithstanding that the underlying arbitration was commenced prior to the enactment of the Arbitration Law, the award creditor should still be able to seek enforcement of the arbitral award under the Arbitration Law. While the Arbitration Law is not explicit about whether Section 58 should extend to enforcement proceedings, the Supreme Court can fairly exercise its discretionary power in making its decision, considering the facts of the case. The fact that the award was rendered and the enforcement proceedings were commenced after the Arbitration Law was enacted is arguably sufficient to attract the application of the Arbitration Law. Moreover, recognizing and enforcing an award in such a scenario would align with Myanmar’s enforcement obligations under the New York Convention.

If, however, a party is unable to rely on the Arbitration Law to seek enforcement of an arbitral award in Myanmar, the question would then be whether such a party has any alternative legal basis to seek enforcement of an arbitral award. There are two potential options, being the long-standing legislation applicable to arbitration before the enactment of the Arbitration Law: the Arbitration Act (1944) and the Arbitration (Protocol and Convention) Act (1937). Whereas the former is repealed by the new Arbitration Law, the latter remains in force. In any event, the Arbitration Act (1944) lacks provisions to deal with the enforcement of foreign arbitral awards, and therefore is unlikely to be applicable. Judgment creditors may be able to rely on the Arbitration (Protocol and Convention) Act (1937), which was enacted further to Myanmar’s commitments as a signatory of the Geneva Convention on the Execution of Foreign Arbitral Awards (1927) and the Geneva Protocol on Arbitration Clauses (1923). In theory, this Act seems to provide a basis for the enforcement of an arbitral award where the Arbitration Law is not applicable to a particular enforcement proceeding. However, a potential issue could be that an award that is made in a country that is not a signatory to both the Geneva Convention and the Protocol may not be enforceable under this Act.

As this decision introduces uncertainty regarding the effect of arbitration agreements with a Burmese party concluded before the new Arbitration Law was enacted, the Supreme Court should have clarified the circumstances in which parties can rely on the Arbitration Law to seek enforcement of an arbitral award in Myanmar. Therefore, while it is significant that the Supreme Court has now issued its first decision regarding recognition and enforcement of an arbitral award in Myanmar, the lack of clarity around the effect of arbitration agreements with a Burmese party concluded before the Arbitration Law was enacted and circumstances in which the Burmese courts will deny enforcement of arbitral awards remain major barriers to establishing a pro-arbitration regime in Myanmar.