The court system in Cambodia is widely perceived to be inefficient and corrupt. Doing Business 2008 reports that enforcement of a commercial contract requires 44 procedures, 401 days, and 102.7% of the cost of the debt. As such, Cambodian businesses lack a viable means to resolve commercial disputes and are reluctant to enter into commercial contracts with anyone outside of their immediate business network.
The Royal Government of Cambodia passed the Law on Commercial Arbitration in March 2006 to lay the groundwork for the establishment of the National Arbitration Center (NAC) as an alternative to the courts. Since that time, MPDF has supported the government through the preparation of the sub-decree on the establishment of the NAC. The sub-decree sets out the detailed procedures for setting up the NAC and selecting arbitrators and members. Transparency in the selection process and legitimacy of the candidates is crucial for NAC success. IFC MPDF research indicates that businesses are willing to explore this alternative to the formal court system provided that it is fair, independent, and effective.
IFC MPDF played a key role in facilitating three consultative meetings on the sub-decree by involving private sector representatives from leading law firms and business associations in the drafting process. We also provided technical advice to the Ministry of Commerce drafting team. These inputs helped the sub-decree meet private sector requirements for ensuring independence and international standards for the NAC. In addition, the participation of IFC MPDF – which is viewed as an independent broker – has reassured the private sector, thereby increasing the likelihood that the private sector utilizes the NAC once it is established. The Government-Private Sector Forum served as the mechanism for facilitating this dialogue process.
