Browsing by Author "Cao, Tran Bao"

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Open Access
Central clearing and credit default swaps
(Te Herenga Waka—Victoria University of Wellington, 2016) Cao, Tran Bao
My interest in this research topic was inspired by the apparently global consensus on the mandate for central clearing in the credit default swaps market. At the first glance, the central clearing mechanism with its central counterparties is the hero who saved many market participants from substantial losses following Lehman Brother’s collapse. It was heralded for debunking the complex interconnection among financial counterparties and resolving Lehman Brother’s positions in a timely and orderly manner. Nonetheless, after coming into the spotlight, central counterparties raise significant concern about their potential to concentrate systemic risk and grown into ‘too important to fail’ institutions. Any collapse of a ‘too important to fail’ institution is undoubtedly disastrous and likely results in a cascade of defaults by other market participants. Therefore, it is highly questionable whether central clearing can ultimately maintain and protect the market robustness and sustainability. It is even criticised as the Maginot Line of the financial market for being a costly but inefficient bulwark and creating a “false sense of security”. Therefore, this research paper aims to address the aforementioned concern, whether the central clearing regime should be promoted to mitigate the counterparty risk even when it simultaneously propagates another type of systemic risk to the financial market. As the legal framework and the risk management practices of CCP have not been battle test, it is impossible to reach any final and ex post conclusion on the ultimate efficiency of CCP. Nevertheless, historically CCP managed to withstand severe market distress whereas currently policymakers and regulators are spending increasing efforts on addressing and mitigating the systemic risk concentrated through CCP. Compared to other alternative clearing infrastructures, it is evident that central clearing is the optimal approach to address the counterparty risk and to enhance the market stability. Further, the research demonstrates that despite central counterparties’ potential to concentrate and re-distribute systemic risk, their shortcomings and contagious fallouts are not insurmountable. They can be efficiently controlled and mitigated through the implementation of adequate regulations and supervision.
Open Access
Proving corruption allegations in international arbitration
(Te Herenga Waka—Victoria University of Wellington, 2017) Cao, Tran Bao
With the convergent of international anti-corruption conventions, corruption is increasingly condemned, prevented and adjudicated on both international and national levels. However, international arbitration is allegedly becoming a safe harbour which countenances and validates transnational contracts tainted by corruption. Despite the prevalence of corruption worldwide, corruption findings in international arbitral awards is questionably scarce. In addition, international arbitrators have adopted noticeably divergent approaches to the adjudication of corruption allegations. Subject to the particular evidentiary rules applied by each arbitral tribunal, same allegations supported by evidence of similar nature could lead to contradictory interpretation and conclusions in different arbitral awards. The rules of evidence with respect to corruption allegations therefore are considered as the most controversial topic in international arbitration. Arbitrators who proactively fight against corruption permit the burden of proof to be reversed from an alleging party to an alleged party in order to increase the chance of corruption findings. On the other hand, arbitrators who are more conservative and cautious about the severity of corruption allegations and their consequences insist on a heightened standard of proof. Instead of applying the general standard of ‘balance of probabilities’, they specifically require corruption allegations must be substantiated ‘beyond reasonable doubt’ or at least with ‘clear and convincing’ evidence. Based on the reported cases, none of the aforesaid approaches is practicable and balanced enough to ensure a fair chance of substantiating corruption allegations in international arbitration. Thus, this research paper aims to address the question of what are the appropriate rules of evidence with respect to corruption allegations in international arbitration. Considering that international arbitration, by nature, is subject to the party autonomy and the arbitral discretion, it is not the purpose of this paper to determine any rigid and universally accepted rules of evidence to handle corruption allegations. Alternatively, it is more crucial for international arbitrators to achieve a common understanding of and a consistent approach to the adjudication of corruption allegations in the context of international arbitration. Ultimately, the applicable evidentiary rules should be able to maintain the appropriate equipoise between the pursuit of parties’ commercial interests and the integrity of truth seeking process. Regardless of whether international arbitrators consider themselves as the guarantor of the truth or the servant of the parties, they are always responsible for addressing and adjudicating corruption allegations appropriately. Therefore, the applicable evidentiary rules must enable international arbitrators and dispute parties to substantiate corruption allegations in a balanced, fair and practicable manner. It should be always kept in mind that corruption is intrinsically difficult to prove while international arbitration is devoid of power and resources to investigate, prosecute and pursue evidence. Thus, the persistence of the burden of proof on alleging parties, alongside the ‘balance of probabilities’ standard is an optimal solution to the existing dilemma in international arbitration. The aforesaid evidentiary rules are practicable but stringent enough to ensure that international arbitration is serving its commercial purposes in the compliance with international anti-corruption framework.