Litigation Capital Mgmt : THE USE OF LITIGATION FINANCE IN DISPUTES ALONG CHINA’S BELT AND ROAD

		ARBITRATION CLAUSES
		Drafting effective ones for the Belt and Road Initiative
		PROJECT FINANCE
		Project financing issues along the Belt and Road
Commercial Dispute Resolution	CONSTRUCTION LEGAL ISSUES
CDR	What state-owned companies should consider
www.cdr-news.com	September 2021

ESSENTIAL INTELLIGENCE:

The Belt and Road

Initiative

Editorial Board:
Stephen Jagusch QC	Dr Colin Ong QC	Walter Chen
Quinn Emanuel	Dr Colin Ong Legal Services	Grandall Law Firm

4 WELCOME

TABLE OF CONTENTS

EXPERT ANALYSIS

6 Room for the Courts

Andrew Mizner Commercial Dispute Resolution

BRI Project Disputes at HKIAC: The Story So Far

10 Joe Liu & Othmane Benlafkih

Hong Kong International Arbitration Centre

20 Drafting Effective Arbitration Clauses for the Belt and Road Initiative

Stephen Jagusch QC & Michael Greenop Quinn Emanuel Urquhart & Sullivan, LLP

38 Proposed Dispute Settlement Mechanism for BRI Disputes along the Maritime Silk Road

Dr Colin Ong QC

Dr Colin Ong Legal Services

49 The Use of Litigation Finance in Disputes along China's Belt and Road

Nick Rowles-Davies, Roger Milburn, William Panlilio & Joe Durkin LCM

58 Project Financing Issues and Complications Along the BRI

Chris Osborne, Nil Kalağoğlu & Ömer Kama

Osborne Partners

68 Construction Legal Issues Involving State-owned Companies and Contractors on the BRI Amanda Lees, Paul Starr, Daniel Xu & Jessica Fei King & Wood Mallesons

80 The BRI and International Chamber of Commerce Arbitration

Robert S. Pé, Susan Munro, Dr Zhijin (Donna) Huang & Baptiste Rigaudeau ICC

90 Navigating the Dispute Resolution Landscape for BRI Projects: The Advantages of Singapore and SIAC Seok Hui Lim, Michele Park Sonen & Qian Wu

SIAC

CDR THE BELT AND ROAD INITIATIVE 2021

Commercial Dispute Resolution

5

JURISDICTION CHAPTERS

			Brunei		Malaysia
100			169
		Dr Colin Ong QC Dr Colin Ong Legal Services	Lam Ko Luen, Victoria Loi & Nina Lai
						Shook Lin & Bok
			Bulgaria
113
		Kostadin Sirleshtov & Diyan Georgiev CMS Sofia		Serbia
		179
					Teodora Vujošević & Ivan Gazdić CMS Belgrade
			China
121
		Walter (Fayun) Chen, Dan Guo & Tammy Zhe Chen		Singapore
		186
			Grandall Law Firm	Bazul Ashhab, Lionel Chan, Prakaash Silvam &
						Tanya Thomas Vadaketh Oon & Bazul LLP
			Hong Kong
132
		Duncan Watson QC & Tom Brebner		Thailand
		197
			Quinn Emanuel Urquhart & Sullivan, LLP	Kanpimon Naksinn, Tanyalak Chaisorn & Warinbhorn
						Benjasak JTJB International Lawyers Co., Ltd.
			Israel
139
		Gilad Katz & Tal Sticker S. Horowitz & Co.			United Arab Emirates
					207	Paula Boast, Glenn Bull, Sarah Alaiwat & Anna
			Japan		Hackworth Charles Russell Speechlys LLP
149
		Shin-Ichiro Abe & Yoshihiro Takatori
			Kasumigaseki International Law Office			Vietnam
				217
					Dang Viet Anh & Nguyen Le Quynh Chi ANHISA LLC

159 Kazakhstan

Bakhyt Tukulov, Dinara Otegen & Dilbar Kassymova Tukulov & Kassilgov Litigation LLP

THE BELT AND ROAD INITIATIVE 2021

49

The Use of Litigation Finance in Disputes along China's Belt and Road

Nick Rowles-Davies	Roger Milburn
LCM	LCM

William Panlilio	Joe Durkin
LCM	LCM

China's Belt and Road Initiative (the "BRI") is one of the largest and most historic initiatives of its kind in the world today. The BRI seeks to rebuild and expand China's ancient Silk Road through a modern day, global network of large-scale infrastructure projects across international borders. It involves a multitude of stakeholders - countries from across the globe, financial institutions, multilateral organisations and private companies drawn from sectors such as infrastructure, energy and transportation, among others.

In any initiative of this magnitude, disputes are inevitable; and for the BRI, international

disputes are inevitable. For these types of cross- border and multiple stakeholder disputes, international arbitration is arguably the most suitable and efficient means of dispute resolu- tion. Innovations in international dispute resolution such as litigation or disputes finance are becoming critical elements in international arbi- tration. Indeed, among other advantages, litigation finance enables access to justice and makes possible the prosecution of meritorious claims by parties who might otherwise not have the resources to secure their rights through formal proceedings. Parties involved in BRI-related disputes should therefore consider litigation 

THE BELT AND ROAD INITIATIVE 2021

50 THE BRI AND LITIGATION FINANCE

• finance as an additional tool not only in their dispute resolution arsenal, but also as an impor- tant element of their risk mitigation and corpo- rate management strategies - all of which are vital considerations in complex projects arising out of the BRI.

What is the BRI?

In 2013, Chinese President Xi Jinping - in a speech drawing heavily upon over 2,000 years of history that saw China build and grow old trade routes between East and West Asia with Europe

• announced the BRI, envisioned as the most ambitious infrastructure programme in history. President Xi himself best summarised the aspi- rations behind the initiative: "China will actively promote international co-operation through the [BRI]. In doing so, we hope to achieve policy, infrastructure, trade, financial, and people-to-peopleconnectivity and thus build a new platform for international co-operation to create new drivers of shared development."
  As a modern-day equivalent of China's Silk Road, an ancient network of trade arteries through which commerce flowed, the BRI is composed of the land-based "Silk Road Economic Belt", linking China, Central Asia, Russia, and Europe; China with the Persian Gulf and the Mediterranean Sea; and China with Southeast Asia, South Asia, and the Indian Ocean. Complementing that Belt is the "21st Century Maritime Silk Road", which will stretch from China's East Coast to Europe. The BRI aims to develop six economic corridors from China to Eurasia; and seeks to link China's maritime domain with Western China and the Eurasian heartland.
  Together, the modern Chinese Belt and Road aim not only to re-establish and fortify China's ties with its ancient trading partners but also to develop new markets for outbound Chinese investment. The BRI's reach now includes proj- ects in the Middle East, Africa, and even South America. Indeed, the BRI has been extended beyond the original reaches of the ancient Silk Road and reflects China's aim to project its economic and political prowess even further than ever.
  The BRI is sweeping in geographic scope and monumental in the enormity of its ambi- tions. BRI-participating economies contribute more than one-third of global GDP and represent over 62% of the world's population. Governments as well as other members of the international community have taken notice. According to China's top economic planning agency, the National Development and Reform Commission, by the end of 2020, China had signed BRI cooperation deals with 138 countries

CDR COMMERCIAL DISPUTE RESOLUTION

and 30 international organisations addressing a wide range of areas, including transportation infrastructure development, joint set-up of industrial parks, establishment of sister-city networks, trade and investment promotion, financial cooperation and joint collaboration in regional programmes.

When built, the BRI will consist of an unparalleled transcontinental network of bridges, highways, airports, ports, roads, railroads, pipelines, hydropower projects, airports and various other infrastructure that will cross 70 or more international borders. Examples of these include landmark projects such as the USD 5.29 billion Jakarta Bandung high-speed railway in Indonesia (75% funded by the China Development Bank), the 22.5-kilometre second Penang Bridge in Malaysia, the longest cross- sea bridge in Southeast Asia (funded through a USD 800 million loan from China Exim Bank), and the 720MW Karot Hydropower Project of Pakistan (in part financed by the Chinese sovereign State fund, the Silk Road Fund).

The Oxford Business Group estimated that, as of January 2020, over 2,900 BRI-linked projects at a cost of USD 3.87 trillion were planned or under way. It is estimated that USD 5 trillion will be invested in BRI projects, consisting mostly of these types of large-scale infrastructure projects.

Implementing an initiative of this magnitude requires equally tremendous amounts of financing. With this in mind, China established the USD 40 billion Silk Road Fund in December 2014 and the Asian Infrastructure Development Bank (a China-led multilateral financial institu- tion) which, together with China's three government policy banks, as well as other State-owned banks are and will be providing the backbone of financing for BRI projects.

The BRI is ripe ground for cross- border disputes

Because of the mammoth scale of the initia- tive, the BRI will require the involvement of a complex patchwork of stakeholders, including national governments (as well as their agencies, instrumentalities, and regulators), foreign inves- tors, shareholders and joint venture partners, EPC contractors, project companies and even off-takers. Many, if not most, of these parties will be Chinese, specifically State-owned enter- prises, and Chinese financial institutions, as well as the Asian Infrastructure Investment Bank.

However, if it is to succeed, China cannot embark on this initiative alone, and it will have to rely on the participation of corporations and partners from many other countries along the

Commercial Dispute Resolution