Timor-Leste took an important step as regards dispute resolution, filling a gap which has been present in its legal framework for several years, through the approval of the legal regime of voluntary arbitration, approved by the National Parliament through Law No. 6/2021, of 31 March 2021, and through the accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), through Resolution No. 8/2021, of 17 March 2021.
The new legal framework regarding arbitration is applicable to all arbitral proceedings seated in Timor-Leste, whether internal or international, as well as to the confirmation and enforcement of arbitral awards issued outside the country, without prejudice to what is provided in international conventions.
The approval of the Voluntary Arbitration Law represents an innovation in the Timorese legal system, thus opening the doors to internal and international, commercial and investment arbitration, seated in Timor-Leste, and facilitating the recognition and enforcement of foreign arbitral awards, which previously lacked appropriate regulation.
It should be highlighted that the law expressly allows for the celebration of arbitration agreements by public entities whenever the same pertain exclusively to disputes of a private nature; it isalso possible for such arbitration agreements to encompass public law disputes upon authorization by law.
The Voluntary Arbitration Law follows the systematic structure and the principles of the UNCITRAL Model Law on International Commercial Arbitration of 1985, as amended in 2006, containing detailed rules on the procedures for the appointment, acceptance and challenge of the arbitrator. It is relevant to note that, unless otherwise agreed by the parties, the arbitrator’s nationality does not constitute an impediment to his/her appointment and that the law enshrines the principle of neutrality, advising that the nationality of the parties involved in the arbitration should be considered when selecting the presiding arbitrator.
Within the scope of internal arbitration, without prejudice to the principle of free sponsorship, the law allows for the parties to be self-represented or to be represented by any person of their choice, even if not a lawyer. As regards international arbitration, the statute allows the representation of the parties by foreign lawyers which are not registered in Timor-Leste, regardless of their nationality, thus expressly resolving an issue often debated in other jurisdictions and demonstrating the country’s openness to international arbitration.
The Voluntary Arbitration Law provides different grounds for the annulment of an award rendered in an internal arbitration and of an award rendered by an international arbitral tribunal. This said, in both cases the grounds are aligned with the structural principles of arbitration. It should be noted that, despite the provision that the right to request the annulment of an arbitral award is not waivable, in the context of international arbitration, and provided that the legal requirements are met, the parties my reciprocally waive this right.
Moreover, under the terms of this statute, any arbitral award rendered in an arbitration seated in Timor-Leste shall constitute an enforceable title, which can be immediately enforced.
As regards arbitrations seated outside the country, the law sets forth the need for confirmation for the purposes of recognition and enforcement in Timor-Leste, by the competent judicial courts, without this involving an assessment of the merits.
The established regime is applicable in any case without prejudice of the New York Convention, whenever the same is applicable.
Timor-Leste's adoption of the New York Convention represents an important step towards the recognition of the authority of foreign arbitral awards irrespective of the seat of the arbitration or nationality of the parties involved. Specifically, until now, foreign investors had to rely solely on Timorese procedural law for recognition and enforcement of foreign arbitral awards, which had several gaps in this regard. After the entry into force of the Voluntary Arbitration Law and of this relevant international instrument, the formal requirements and grounds for refusal to be considered for the purpose of reviewing foreign arbitral awards will instead be assessed in light of the provisions of Articles IV and V of the Convention.
Timor-Leste has nevertheless made the reciprocity and commercial reservations to the New York Convention. Consequently, (i) the Convention will only apply to the recognition and enforcement of arbitral awards issued in the territory of another Contracting State, and (ii) its regime shall be restricted to disputes arising from legal relationships, contractual or non-contractual, which under Timorese law are commercial in nature.
The instrument of ratification shall now be deposited with the Secretary-General of the United Nations, and the Convention will enter into force in Timor-Leste ninety (90) days after such deposit.
It is unclear whether the New York Convention, once it enters into force in Timor-Leste, will be applicable to the enforcement of past arbitral awards. Timorese courts will soon be tested on their interpretation of this and other issues arising from this international instrument.
Both legal initiatives demonstrate the will to implement an arbitration-friendly legal regime. Time and practice will reveal the challenges that will result from use of this novelty in the Timorese legal system.
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