The Establishment of Commercial Court in Cambodia:
Key Issues and Challenges         

 Despite some concerns, lawyers, NGOs, and private sectors all seem to welcome the establishment of the commercial court with an expectation that this specialised court would lead to just resolutions of commercial dispute

           
            The establishment of a specialised court to adjudicate all commercial disputes is one of many commitments to legal and judicial reforms Cambodia has made in exchange for the membership of the World Trade Organisation (WTO). The preparation of new law to establish the commercial court was listed as the first priority in the National Legislative Programme. The Ministry of Commerce took up responsibility for drafting this law in collaboration with the Ministry of Justice and with the assistance of the Canadian Development Agency.
            The First Draft Law of August 2003 is expected to be submitted to the Council of Ministers in December 2003, and approved by the Parliament by December of 2004. The Draft Law for the Commercial Court indicates that the court will be a separate one of lower level under the Supreme Council of Magistracy. According to the time table, it is estimated that the commercial court will begin to sit in June 2005.
            The commercial court cannot, however, operate alone without supporting commercial laws stipulated in the Criminal Procedure Code and Civil Code of Procedure. These are expected to be approved by the Parliament in December 2004, and June 2005 respectively. After the promulgation of the commercial court law, appointments of judges and prosecutors must occur within six months.

The Need for the Commercial Court

           In a survey by the World Bank, Investment Climate Assessment Survey 2003, almost 60 percent of companies operating in Cambodia indicated that the regulatory policy uncertainty is one of the top ten constraints to private enterprise operation and growth. Over 50 percent snamed the legal system and conflict resolution as the major factors.
          The commercial court will give Cambodia an opportunity to stimulate its economy by providing legal certainty in business transactions. Its commitment to legal reforms with such far-reaching economic implications will help improve investor confidence. It will help minimise business risks associated with legal uncertainty and investments. Lawyers, NGOs, and private sectors all indicate that they welcome the establishment of the commercial court. The expectation is that it will be more effective and efficient in speedily resolving commercial disputes, as the court would have expert knowledge in these specific areas. It would be able to come to a judgment faster than ordinary courts.
          Nevertheless, given the open and widespread corruption in the country, the sceptic would suggest that the commercial court is likely to become just another layer of corruption. The Consultation Workshop with the Private Sector jointly conducted by the Asian Development Bank, the Department of International Development, and the World Bank in October 2003 indicates that the main legal issue in Cambodia lies in interpretation and "implementation."

Characteristics of the Commercial Court

            A draft law in 1995 on the Reform and the Organisation of Cambodian Tribunal of the Ministry of Justice stipulates that the commercial court would be in the form of a specialised chamber that can hear commercial disputes involving an amount greater than 10 million riels (approximately US$ 2,500). However, the current draft law indicates that commercial court will be a separate court; and it does not specify a minimum dispute amount.
           The form of the commercial court for Cambodia is being modeled on those operating abroad. It seems to have mainly followed Thailand's format (Box 1). First, the two countries share a great deal of similarity in culture, tradition, and religions. Second, with a common border, commercial activities between the two are very active. Thailand is a major trading partner of Cambodia, particularly in imports, and is potentially a significant source of investments in Cambodia. It will be most helpful, therefore, for Cambodia to adapt a commercial court system that requires only minimal adjustments to support its commercial activities with major trading partners.
          The commercial court is expected to be located in Phnom Penh, but will have jurisdiction throughout the country. Some observers recommend that this court be mobile as well, so that it can sit in a province where dispute cases occur. This notion of "mobile court" has emerged from a successful experience of the Canadian commercial court, which is also mobile.
 

Human Resources

       Cambodia's judiciary system is seriously lacking both quantity and quality in human resources. Only a few currently practicing judges have proper legal qualifications; most of them are former teachers who were summarily appointed in the immediate aftermath of the Khmer Rouge regime. Only 22 percent of the prosecutors have had some formal legal education, with only 9 percent holding a full law degree.
           The general level of skill and experience in commercial and financial law among judges is even lower than that for criminal and civil cases. To date, training of judges has been largely little, infrequent, and unsystematic.
          If First Draft Law of Commercial Court is passed, the commercial court will cover all business cases of civil and criminal natures. The court will require top officials to be equipped with a great deal of expertise and skill in legal and commercial aspects. The Royal School of Judges and Prosecutors, established only in November 2003, will play a very import role in responding to the urgent need for well-qualified judges and prosecutors, not only for the commercial court, but the whole system. The first batch of graduates from the School, which is a maximum of 50, is expected at the end of a two year course.
          It remains, however, a challenge to appoint specialist judges for the new commercial court that plans to begin hearing cases in June 2005. According to members of the Working Group of the Ministry of Justice for drafting the Civil Code and Code of Civil Procedure, it requires only a year to be ready to train the judges and court clerks, and to prepare other administrative necessities.

Financing

          The Ministry of Justice received only 0.3 percent of the total national budget in 2002. Generally, the judiciary system suffers from a shortage of financial resources. The salary scale for judges and prosecutors is currently about US$ 600 on average per month. Other court officials receive salaries comparable to those of other civil servants, around US$ 24 per month. It is not hard to imagine that corruption may be a significant factor in influencing court decisions.

Independence Issue

           Additionally, the independence of the envisaged commercial court may be subject to a severe compromise as the Executive branch can heavily influence the appointment process of the court officials. First, associate judges of the commercial court are recommended by the Inter-Ministerial Commission (IMC) (Box 2). The associate judges are specialist judges who would have expert knowledge in the intricate world of commerce and finance; their inputs and influence on all judgments, or outcomes, of dispute cases will be considerable. They are to be selected to become the associate judges by the IMC whose members are all but one in the Executive branch (Box 2). All of these IMC members, in turn, are duly appointed by a Sub-Decree issued from the Office of the Prime Minister.
           Second, the IMC’s recommendations will go to the Supreme Council Magistracy for the formal appointments of the associate judges. The Supreme Council of Magistracy can act no more than a rubber stamp, as Article 8 of the First Draft Law for the Commercial Court requires that it approve the IMC's endorsements. In any case, the Article may not be so necessarily specific, because the Supreme Council Magistracy is largely perceived to be already under the influence, if not control, of the Executive branch.
           In addition to its task to assist the King in ensuring the independence of the judiciary, the Supreme Council Magistracy is also responsible for maintaining discipline amongst the judicial officers. In its present form and experience to date, however, the Supreme Council Magistracy has been largely ineffective in enforcing discipline amongst judges and magistrates. Although the Constitution says that rules governing judges, prosecutors, and the functioning of the judiciary shall be defined in specific laws, no such laws have been enacted since the establishment of the Constitution 1993. In the presence of political influence and in the absence of a law governing appointments and promotions in the judiciary, appointments are often made on the basis of considerations other than qualifications or merits of the appointees.
 

Effectiveness and Efficiency of the Commercial Court

           The associate judges in the commercial court will be expected to act as experts in technical matters relating to disputed commercial transaction cases on hand. Therefore, a main challenge for the commercial court is how to ensure that it has ready excess to such necessary expertise. Given the fact that the country as a whole has been suffering from the absence of quality human resources, it may be an insurmountable problem, at least in the short run, for the commercial court to find a pool of experts upon which it can rely to provide professional and expert advice or collaboration. The final version of the Draft Law should provide a possibility that the court can call upon experts, professionals, and academia outside the usual judiciary to serve on the bench on a temporary basis in a particular case, if and when necessary.
            There is a concern that the currently assigned jurisdiction for a first commercial court may be too wide to be effective and efficient. It will cover all disputes in the field of business, finance, intellectual property (Box 3); the court also hears all commercial cases that are of civil and criminal natures. It is pointed out that the experience of Thai court system shows that due to overloaded case work and changing in demand, Thailand currently has two specialised commercial courts - one to sit on cases involving intellectual properties and international trade, and another on bankruptcy. The former was established in 1997, and the latter in 1999. The Thai experience could be appropriate for Cambodia in the long run, but for now the necessary specialisation of the commercial court seems far off. It should be noted that Thailand's commercial activities can be assessed to have been far more vibrant and intricate than those of Cambodia for so many decades; yet, the country has just found it necessary to have the two specialised commercial courts in the late 1990's. Cambodia has quite a long way yet in terms of its population size and volume of business activities to draw real benefits from the Thai current specialised commercial court model, which has been in operation for only a few years.
             An operation of a mobile court may be effective and efficient, as it would consider a case on location. Article 54 of the First Draft Law indicates the court is located permanently in Phnom Penh, and it may sit anywhere throughout the Kingdom as it sees appropriate. Perhaps the mobility provision will help the court appreciate more the nature and intricacy of the dispute at hand; it may also take less time to deliver its verdict. It would save disputing parties' travelling costs to attend the court in Phnom Penh, but the court would incur its own costs for all mobile facilities it would require. Basically, everything being equal, it would be a transfer of operating costs of the particular case from the disputing parties to the State that currently may not be willing to absorb the extra expenses. But, of course, it could be possible for the mobile court to pass on those expenses to the parties in dispute.
             The First Draft has left out the minimum amount of dispute the court will hear. This means the court will be flooded with minor cases that may be settled by a simple arbitration outside the court system. Thus it will be more efficient if a minimum amount is set, even at first arbitrarily; it could be adjusted through trial and error as time goes by.
             It seems there is a movement away from a consensus requirement for any issue of judgments, in which a panel of judges would agree to issue only one decision with a set of reasons for any judgment. But in the First Draft Law for the commercial court, each judge in the panel must give their own reason for judgment; if there is a dissension among the judges and the associate judge, the judgment shall be based on the majority. The relaxed requirement may help improve effectiveness and efficiency as it removes an imposition of the consensus that may otherwise be difficult to reach in some cases.

Concluding Remarks

          It is inevitable that a newly-established commercial court will have start-up problems. But the troubles here seem to be insurmountable. Unless the current paltry budget allocation is rectified, the existing severe shortage in qualified personnel will expose many questions about the experience and impartiality of the commercial court. The two-year post graduate course at the Royal School of Judges and Prosecutors is absolutely necessary, but not sufficient for a long term quality enhancement. To improve and maintain the court’s quality, it will be vital to have compulsory on-going training for judges and prosecutors in a professional development program.
     

          
              The timetable to launch the first Cambodian commercial court in June 2005 is rather ambitious unless the professional standard is not really an issue for the system. The Royal School of Judges and Prosecutors, which is responsible for educating judges for the whole country, may not be able to meet the deadline for the start of this court.
              Perhaps the most crucial issue that needs rethinking at this stage is the compromise of judicial independence of the commercial court that would be the consequence of the current violation of the doctrine of Separation of Powers. The proposed structure and setting up of the commercial court system as stipulated in the First Draft Law for commercial court would clearly allow opportunities for the Executive branch to control the entire system and operation of the commercial court. But again a cynic would point out that the current way of establishing the commercial court has conformed perfectly to the status quo; i.e. in Cambodia, the line separating the Executive and the Judiciary is as clear as mud.  

By Chea Samnang