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The Arbitrary Nature of Arbitration in Maldives

Fathmath Shaahunaz
15 May 2018, MVT 01:27
The government office complex of Velaanaage Building in Male. PHOTO: HUSSAIN WAHEED/MIHAARU
Fathmath Shaahunaz
15 May 2018, MVT 01:27

An implemented but never practised legal alternative

Over the past couple of years, “arbitration” has become a familiar word for common folks. With news of major arbitration cases involving local firms and institutions, such as the prickly dispute between GMR Group of India and the main airport of the Maldives, it has become a recurring term in media. However, one might be surprised to learn that the Maldives itself has an international arbitration centre.

The general public perception is that arbitration cases are always conducted by foreign bodies. One prime example is the previously mentioned airport-GMR case, which was mediated by the Singapore International Arbitration Centre. Yet a fact that relatively few people recall today is the existence of the Maldives International Arbitration Centre, which was formed after the Arbitration Act came into effect in 2013.

The centre is not a household name, however, for the simple reason that, aside from its establishment, it has not conducted a single arbitration case to date. In other words, an entity that exists only in name.

Overhead view of the Supreme Court of Maldives. PHOTO/MIHAARU

An alternative to judicial courts

Though now a familiar word, arbitration is not a layman’s term. Simply put, it is a legal technique used to resolve conflicts between two parties, by an independent third body, outside the courts. The parties involved mutually decide on which centre would settle their dispute, and under the arbitration agreement, the arbitrator’s decision is final and binding.

This system has significant differences to the proceedings of judicial courts. In the latter, the courts are the sole authority when it comes to appointing judges to trials, whereas in arbitration, the mediator is entirely independent and appointed by the involved parties themselves, who can also decide on the number of arbitrators they want.

Moreover, the parties can opt to appoint individuals with educational background or experience in the field of their dispute as arbitrators, instead of legal advocates. For instance, in an insurance conflict, the two parties have the power to appoint an insurance expert to arbitrate their case. However bearing the expense and fees of arbitrators also fall on their shoulders.

When it comes to appointing arbitrators, the parties’ choices come down to those registered as such in countries which implement this system. These registries are compiled by the arbitration centres of each country, and they list arbitrators who match the required educational qualifications and experience as determined by the centres. These arbitrators include specialists and professionals from various fields.

Despite these differences, arbitration also has aspects similar to the judiciary system. For example, experts and witnesses can be summoned to take their statements and testimonies in arbitration cases, much like in courts. However arbitration offers the advantage of speed in settling disputes. In fact, parties can mutually agree on a certain period of time to resolve their case. Hence, the arbitration system is preferred particularly in conflicts which involve labour and business transactions.

The role of the arbitration centres here involves the development of arbitration policies and regulations, compilation of the arbitrators’ registry, and being the general mediator. An example of the latter is that, under circumstances where parties are unable to agree on an arbitrator within the given timeframe, the centre would step in and appoint one.

Despite the pros of arbitration as a reliable and advantageous system for all parties involved, the practice has not progressed from the startline in the Maldives. Though the Arbitration Act was drafted and ratified in an attempt to implement a method which has been long in effect in developed countries, the Maldives International Arbitration Centre is a far cry from that dream.

Former President Mohamed Nasheed (C) and officials of India's GMR Group at the ceremony to lay the founding stone of the then Ibrahim Nasir International Airport (now Velana International Airport)'s new terminal. PHOTO: ABDULLAH JAMEEL/MIHAARU

On the backburner

According to the Arbitration Act, the Maldives International Arbitration Centre was formed as soon as the legislation came into effect. From what we know, the government had established an office to carry out the centre’s work and even appointed some individuals to its three-member board.

Otherwise, little else has been accomplished. The Maldives is yet to see a registry of arbitrators, and so far, only the High Court, which would handle the appeals of arbitrary verdicts, has put together the regulations as directed by the Arbitration Act. It is of note that the Act gave a period of six months for related authorities to compile and publicise these regulations.

Credible sources claim that the main reason for the arbitration centre’s stagnancy is budget constraints. However the longer the centre remains on the backburner, the greater the setbacks that arise. The most prominent drawback is the clause in the Arbitration Act which states that any dispute, which meets the prerequisites for arbitration, cannot be settled in a judicial court. Even should such a case be filed at the court, the Act stipulates the court to reject or halt the trial and refer the case to arbitration.

Yet, without an operative arbitration centre in the Maldives, there is little hope to reach a local solution for such cases. Without other options available, traders and brokers in disputes are forced to look to beyond our seas.

Some legal representatives believe that the government should be more dedicated in executing its responsibilities to facilitate the arbitration system in the Maldives. Although arbitration allows parties involved to appoint mediators of their choosing, legal advocates pointed out that it was the arbitration centre’s mandate to develop the required policies and compile a registry of local arbitrators.

“If the Arbitration Act cannot be executed, then it should be amended; but that has not been done, either. At the time of drafting the Act, they would have known whether or not there were eligible arbitrators in the Maldives,” said a lawyer.

The fiscal landscape of the Maldives is currently undergoing rapid changes, what with the range of new trades being introduced on top of mounting foreign investments in the islands. Hence the existence of a prompt and reliable system to mediate business matters is increasing in importance to the archipelago. It has become a necessity for the arbitration centre that only exists in name, to be taken off the backburner and realised in full, to meet the needs of a nation striving to become a strong regional economy.

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