Papua New Guinea's New Arbitration Act: A Boost for Economic Growth and Investor Confidence

In May 2024, Papua New Guinea (PNG) marked a significant milestone in its maturity as an arbitration-friendly jurisdiction with the enactment of the new Arbitration (International) Act (the Arbitration Act), together with a new Arbitration (Domestic) Act. The new Acts aim to enhance the country's appeal as an investment destination and bolster economic stability. This pivotal legislative development comes at a crucial time for PNG, as it is positioning itself to attract and protect international investments through a robust arbitration regime.

Strengthening Legal Foundations

PNG's new Arbitration Act replaces outdated provisions and aligns the nation's arbitration framework with international standards such as the UNCITRAL Model Law, as contextualised for PNG. This modernisation is poised to streamline dispute resolution processes, offering clarity, efficiency, and predictability to domestic and international parties engaged in arbitration seated in PNG. PNG does not presently have a recognised arbitral institution. Arbitration in PNG has generally been conducted under the auspices of regional institutions (eg ACICA, SIAC or ICC) however with the introduction of the new Acts, the Alternative Dispute Resolution Centre located in Port Moresby at the Waigani National and Supreme Court precinct will serve as PNG's Arbitration Centre (PNG ADR Centre). However, the Arbitration Act aims to support all arbitral proceedings, regardless of the institution used.

The Arbitration Act gives force to the New York Convention which PNG signed in 2019. The New York Convention, formally known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, is an international treaty that facilitates the enforcement of arbitral awards across national borders. It establishes a framework for recognizing and enforcing arbitration agreements and awards made in other countries, promoting the effectiveness of arbitration as a method of resolving international commercial disputes.

PNG's ratification of the New York Convention through the new Arbitration Act is separate to but complements existing investor-state protections. Some foreign investors in PNG benefit from the protection of property rights, including protections against expropriation without compensation. PNG is a party to various bilateral investment treaties (BITs) and international agreements, which typically include provisions ensuring fair and equitable treatment, protection against discrimination, and mechanisms for dispute resolution through international arbitration. These protections aim to provide a stable and predictable environment for foreign investors operating in PNG, enhancing confidence and facilitating foreign direct investment.

Implications for International Investors

For international investors eyeing opportunities in PNG, the Arbitration Act introduces several key benefits:

1. Enhanced Arbitral Procedure: It aims to ensure that arbitration proceedings are conducted fairly and transparently, promoting impartiality and procedural flexibility tailored to the needs of parties involved.
2. Enforceability of Awards: Investors can now rely on PNG's strengthened legal mechanisms for the enforcement of arbitral awards. This provision mitigates risks associated with jurisdictional uncertainties, fostering confidence in the resolution of commercial disputes.
3. Reduction in Judicial Intervention: By limiting judicial intervention in arbitration proceedings, the Arbitration Act affords parties greater autonomy and efficiency in resolving disputes, thereby reducing delays and costs traditionally associated with litigation.

Economic Growth and Stability

PNG's economic and legal landscape stands to benefit significantly from the enactment of the Arbitration Act:

• Attracting Foreign Direct Investment (FDI): Clear and robust arbitration laws are pivotal in attracting FDI by offering investors reassurance of a reliable dispute resolution framework. This is crucial in sectors such as mining, energy, and infrastructure, where long-term investment commitments are common.
• Improving Business Confidence: Predictable dispute resolution mechanisms foster an environment conducive to business growth and innovation. Domestic enterprises and foreign investors alike can operate with greater certainty, encouraging long-term economic stability.
• Aligning with International Best Practices: By aligning with global arbitration standards, PNG demonstrates its commitment to international legal norms and practices, signalling maturity and readiness for increased global economic integration.
• Strengthened Legal Framework: Developing robust arbitration laws will also help strengthen the overall legal infrastructure of PNG, leading to improved legal standards, better-trained professionals, and enhanced legal institutions, which collectively contribute to a more effective and reliable legal system that will reaffirm investor confidence.

For matters seated in PNG or where the parties have elected PNG law as the applicable law, , there exists a list of names of several foreign and national arbitrators who have been endorsed by the PNG National Court. Those arbitrators stand ready to take on Arbitration work in PNG. The list includes qualified practitioners in country who have had the requisite training and experience in arbitration, enabling them to be credentialed by the PNG ADR Committee which is currently Chaired by his Honour Deputy Chief Justice Ambeng Kandakasi.

Since the passage of the Acts, it is expected that matters seated in PNG, particularly those that includes a PNG parties are likely to utilise the newly minted PNG ADR Centre. Efforts will also be directed at increasing awareness initiatives and training in arbitration for lawyers and interested members of the public. Outreach is anticipated to commence before the end of 2024 continuing into the new year 2025, with the support of the Asian Development Bank.

Conclusion

The introduction of the new Arbitration Act marks a significant step towards enhancing legal certainty, promoting economic growth, and bolstering investor confidence. As PNG continues to position itself as a regional economic hub, the Act serves as a cornerstone in creating a favourable business environment that prioritises fairness, efficiency, and accountability in dispute resolution. International investors can now approach opportunities in PNG with greater confidence, knowing they are supported by a modern and robust arbitration framework.

In conclusion, while the full impact of the Arbitration Act will unfold over time, its enactment underscores PNG's commitment to fostering a conducive environment for sustainable economic development and attracting global investments. We are ready to navigate these new provisions and assist our clients in leveraging the opportunities presented by this landmark legislation.

Authors: Jeremy Chenoweth, Partner; Ethel Heagi, Senior Associate and Erin Eckhoff, Senior Associate.