Today’s Phnom Penh Post has an interview with the President of the new National Arbitration Centre, Ros Monin. The article is entitled “Arbitration centre facing hurdles”, which is a fair assessment. Although a launching ceremony was held earlier this year, the Mr. Ros doesn’t expect the NAC to be able to handle cases until early 2014. One hurdle is funding to construct offices and for startup operations, which he calls on the Ministry of Commerce to contribute. He also describes briefly how the Arbitration Centre will work and opines on the current state of dispute resolution in the Kingdom. Stay tuned.

spot_icon_23-02-10Cambodia is planning to join the Madrid System for the International Registration of Marks by 2015, according to the relevant authorities. The Madrid System greatly simplifies the process for trademark owners to register their rights in multiple countries at a time.

To register one’s trademark in countries outside the Madrid System, as Cambodia currently is, you have to make a separate application with the national authority (in Cambodia that is the Department of Intellectual Property within the Ministry of Commerce). Once Cambodia joins the Madrid System, it will be much easier, quicker, and cheaper for Cambodians to protect their trademarks abroad, and for foreigners to protect theirs in Cambodia. This would be a good development for intellectual property in Cambodia.

Amidst global economic frailty, foreign direct investment in Cambodia grew by an impressive 73% in 2012. The UN’s Word Investment Report, released today, calculates that FDI reached US$1.6 billion last year, compared with US$902 million in 2011. The influx in investment is credited to businesses looking to cut costs in labor intensive industries, particularly the garment sector. Along with Myanmar and Vietnam, Cambodia is touted as a “bright spot” in Southeast Asia, where overall FDI increased by only 2%.

The Report also stresses Cambodia’s strength in greenfield projects in retail banking. Over the past decade, Cambodia’s banking sector attracted the most capital, US$2.3 billion, of any least developed country, and the second highest number of projects, at 56.

From what we’ve seen so far in 2013, FDI remains robust, especially in manufacturing.

8631695570_e9b908926a_bWith crowded streets and poor enforcement of regulations, road safety is a critical concern in Cambodia. Every year, more than 2,000 people die and over 15,000 are injured on the country’s roads. A coalition of road safety advocates recently called on the Government to pass mandatory comprehensive helmet laws.

Kim Pagna, Country Director of Asia Injury Prevention Foundation Country Director says:

“Motorcycle helmets are proven to reduce the risk of serious injury by 69 percent and of death by 42 percent in a crash, but while motorcycle driver helmet wearing rates are more than 60 percent, fewer than 10 percent passengers wear helmets.”

Economic development means more vehicles on the roads, which means more accidents. Part of the solution is legislative, as the advocates are urging. Unless serious measures are taken to improve the physical infrastructure as well as driving habits, this problem is only going to get worse.

imagesWe had the honor of serving yesterday as a judge for the National Moot Court Competition of Cambodia, organized by East-West Management Institute. A moot court is essentially a play trial, where law students prepare a case and argue it in front of a play-judge. This year’s trial involved criminal charges against a man involved in a drunken fight in a Phnom Penh beer hall. A sadly not uncommon fact pattern.

EWMI has been supporting this competition for a number of years now, and the passion and seriousness of the law students is second to none. This is a BIG DEAL for the teams, and a championship brings a lot of pride to the school.

Law students get to experience what it is like to argue a case in front of judges and a live audience. It also trains them in cross-examination techniques and how to think on their toes.

Congratulations goes to this year’s winner, the Royal University of Law and Economics, runners-up National University of Management, and all the contestants!

What do pirated software and t-shirt have in common? More than you might think.

The Information and Communications Technology Business Association of Cambodia is drawing attention to an important issue for garment exporters to consider: their shipments to the USA might be blocked and they could be fined if they are using pirated software.

A number of American states have passed what are known as Unfair Competition Acts that can be used to block the importation of manufactured goods that have made in factories using pirated software. The rationale behind the law is that by not paying licensing fees for the software, these factories can undercut factories in the US that have to pay for their software. The laws are thus meant to protect US industry from this type of unfair competition.

The ICT Business Association recently sent a letter informing the over 300 garment factories in Cambodia of the issue. Pily Wong, President of the association said in a statement:

Garment is one of the largest industry in Cambodia and software piracy rate is very high in the country. Thus, we see a potential risk that the US garment customers stop ordering from the Kingdom in order to avoid short supply because US customs are confiscating and destroying all the products coming from Cambodia. Cambodia is maybe not enforcing IPR in the country, but US Authorities are definitely very active and one day or another, some factories from Cambodia will get hit. Cambodia is exporting billions worth of products to USA every year and over a million jobs in the Kingdom are at stake, we need the garment factories to be compliant in order to protect their business and their workers. Hopefully GMAC will follow up and play a more active role in informing their members about official regulations which may affect their operations and in providing them good advices about compliance.

A factory in China, and another one in India, have already been hit with a lawsuit in California. More suits are likely to follow, and it is possible that a Cambodian exporter is next in line. By conducting an audit of their IT systems and seeking legal advice, factories can ensure they’re in compliance with these laws and ensure access to the US market.

According to yesterday’s Cambodia Daily (“Gov’t to Restart National Adoptions,” offline only), foreigners will once again be allowed to adopt Cambodian children beginning in January 2013. Though the Law on Adoption was issued in 2009 as a result of widespread international criticism of abuses occurring in the Cambodian adoption system, the implementing regulations needed to put this law into practice have not yet been issued by the Ministry of Social Affairs, the ministry responsible for carrying out the law.

While this development is a positive sign that international adoptions may soon be permitted again in the Kingdom of Cambodia, would-be parents should temper their enthusiasm with caution and patience. Since 2009, there have been several dates announced for the revival of the international adoption process in Cambodia. Further, it remains to be seen how the US and other nations that have implemented bans on adoptions from Cambodia will react to the new policies and procedures. Even if Cambodia permits international adoptions, if the adoptive parents’ home countries fail to recognize the validity of the Cambodian adoption process, those parents and their adopted children may face years in legal limbo. Cautious optimism is the best attitude toward the recent announcement until more concrete policies and procedures are unveiled here and abroad.

Recently, Cambodia has been a hub of international activity with its hosting of the 2012 ASEAN Summit.  This got us thinking about international trade and investment, and we wanted to dive into Bilateral Investment Treaties (BIT).  BITs are agreements between countries that are designed to encourage investment.  It is an agreement under international law that covers how investments are treated in one country made by investors of the other country.  BITs are only entered into by states, not investors, but an investor can enforce her rights directly under the BIT.  A business considering committing assets overseas could be worried about being treated unfairly or disadvantaged in a dispute if it must be at the mercy of a foreign court system.  A BIT aims to allay these kinds of fears.

As the world has gotten smaller and more connected, international investment has grown accordingly.  After WWII, there was no clear framework outlining the rights and responsibilities of investors or host countries.  European countries began negotiating investment treaties with developing countries one by one, and soon industrialized countries were entering into investment agreements with each other.  Now, BITs seem to cover the globe.  Use has exploded in the past few decades.  There are currently 2,400 BIT agreements around the world, while in 1988 there were only 300.  Cambodia has signed over 20 agreements, but not all of them have become binding.  Currently, there are 11 agreements that are enforceable[1]:

  1. China
  2. Croatia
  3. Czech Republic
  4. France
  5. Germany
  6. Japan
  7. South Korea
  8. Netherlands
  9. Singapore
  10. Switzerland
  11. Thailand

BITs, although done individually between countries, are very, very similar around the world.  Generally, four issues are addressed by any BIT:

  1. Conditions for the admission of foreign investors to the host state
  2. Standards of treatment of foreign investors
  3. Protection against expropriation
  4. Methods for resolving investment disputes [2]

While all four issues are important, dispute resolution has gotten the most attention.  The treaties only cover disputes that involve one of the countries to the treaty.  A dispute between the countries is usually handled differently in the treaty than a dispute between an investor and one of the countries.  When it comes to investors, a BIT crucially makes a binding arbitration process available.  In Cambodia’s treaties, there is almost always a six month waiting period from when the dispute begins until the investor can bring the matter to arbitration.  The treaties can differ in how arbitration is conducted and what forums are available.  The International Center for Settlement of Investment Disputes (ICSID), an arm of the World Bank, and the UN Commission on International Trade Law handle many BIT disputes. However, a dispute involving Cambodia might be more likely resolved at the Singapore International Arbitration Center.    Resolving a dispute can still be expensive, because the investor needs to not only obtain council, but also cover half of the costs from the arbitrators.


[2] George M. von Mehren et al., Navigating Through Investor-State Arbitrations: An Overview of Bilateral Investment Treaty Claims, Disp. Resol. J., Feb.-Apr. 2004, at 69, 70.

The Phnom Penh Post has been diligently reporting on the dispute taking place between garment workers and factories.  A central issue of the dispute is the use of Fixed Duration Contracts (FDCs) versus Unspecified Duration Contracts (UDCs).  The garment industry is hugely important for Cambodia: it represents about 15% of GDP and comprises the vast majority of exports.  The workers are almost all women (estimates are about 90%), of which a healthy portion come from rural areas seeking a better life around Phnom Penh.   Many of the workers complain that short-term FDCs leave them in a precarious situation, without the long-term security afforded by UDCs.

FDCs and UDCs mainly differ in their requirements and consequences of termination.  If an employer wants to get rid of an FDC employee, he can simply decide not to renew her contract, which can last from only a few months to a maximum of two years.  While under a UDC, the employer needs a valid reason.  FDCs, generally, require the employer to give less notice in the event of actual termination if they decide not to use the non-renewal tactic. The following charts, from our Guide to the Cambodian Labor Law, summarize the relevant legal requirements:

Discrimination is something we all do all the time.  We use mental shortcuts of our past experiences to make decisions easier.  However, some discrimination is wrong and can be bad for society.  When people of a certain race or gender are excluded from jobs solely on the basis of their skin or gender then useful, productive workers for that job are forced to do something else that they might not be as good at.  A recent article in the Phnom Penh Post details Cambodian women’s difficulty in being treated equally in the workplace.   (story here).

Section 2, Article 12 of The Labor Law of 1997 does provide women and many other groups with protections against discrimination, it reads:

Except for the provisions fully expressing under this law, or in any other legislative text or regulation protecting women and children, as well as provisions      relating to the entry and stay of foreigners, no employers shall consider on account of:

  • race,
  • color,
  • sex,
  • creed,
  • religion,
  • political opinion,
  • birth,
  • social origin,
  • membership of worker’s union or the exercise of union activities;

to be invoked in order to make a decision on:

  • hiring,
  • defining and assigning of work,
  • vocational training,
  • advancement,
  • promotion,
  • remuneration,
  • granting of social benefits,
  • discipline or termination of employment contract.

Distinctions, rejections, or acceptances based on qualifications required for a specific job shall not be considered as discrimination.

This language seems to extend beyond the hiring process and to wage inequality as well.

More generally, the Cambodian Constitution itself says “every Khmer citizen shall be equal before the law . . . regardless of race, color, sex, language, religious belief, political tendency, birth origin, social status, wealth or other status” (article 31).  That covers an awful lot of people, but are LGBT groups left out?  What about the disabled?  At the risk of being too bold, I wonder whether the clause would be stronger if it simply said “every Khmer citizen shall be equal before the law” full stop?

In 2009, a law was passed that had the purpose to “prevent, reduce and eliminate discrimination against persons with disabilities” (article 2 – Law on the Protection and the Promotion of the Rights of Persons with Disabilities).  The law requires all public facilities to provide access for all disabled people (nothing terribly surprising there).  However, provisions requiring “ministries and state institutions that recruit civil servants to be employed, shall employ persons with disabilities as states in article 33 of this law, in accordance with the appropriate set quota.  The set quota and recruitment process shall be determined by Sub-decree.”

Officials from The Cambodian Disabled People’s Organization have been quoted as being happy with the laws on the books, but unhappy with the resources devoted to implementation (source:  here).  I suspect women and other groups would have similar things to say.

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The work of a handful of attorneys at BNG Legal, this blog's mission is to keep the world up-to-date on legal issues in the Kingdom of Cambodia.

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