Arbitration in Singapore

June 2011 | TALKINGPOINT | LITIGATION & DISPUTE RESOLUTION

financierworldwide.com

FW moderates a discussion covering arbitration in Singapore between Nish Shetty at Clifford Chance, Randolph Khoo at Drew & Napier, and Richard Chalk at Freshfields Bruckhaus Deringer.

FW: What are some of the recurring themes behind corporate conflicts being resolved in Singapore?

Chalk: The arbitrations which we have come across in Singapore typically involve, in broad terms, commercial and corporate disputes, insurance, construction, and shipping. Many of these are multi-jurisdictional in nature, and the parties typically agree to arbitrate in Singapore because it is considered to be a neutral venue. In the past two years, one major trend we have seen is a significant increase in the number of cases commenced due to the financial crisis. A large number of these cases appear to have been commenced for strategic reasons, in an attempt to pressure the respondent to address delays in payment, and to renegotiate their deals, rather than because there was necessarily a ‘genuine’ dispute between the parties. As a result, quite a few of these cases settle relatively early, rather than proceed all the way to a full hearing.

Shetty: Perhaps the single biggest recurring theme is the diversity of the corporate conflicts being resolved in Singapore. Singapore is a venue for resolution of disputes across the board, from commercial/trade to maritime and construction, and so on. Not only is Singapore being designated as a seat for SIAC arbitrations, but it is also increasingly a seat for arbitration under a number of the European institutional rules such as the LCIA Rules and ICC Rules. A number of institutions such as the ICC, WIPO, ICSID, and the PCA – to name but a few – have acknowledged the shifting focus towards Asia, and in particular Singapore, by taking up residence in the new Maxwell Chambers.

Khoo: A broad enduring theme for corporate conflicts resolved here would be quintessential contractual disputes. A closer look at these would disclose a growing number of such commercial conflicts arising out of deals going bad, funding or business drying up, or projects going wrong. Other discernible trends reflect the current intensity and dynamism of foreign direct investment in Asia, leading to legal issues arising from international trade, financing, infrastructure, construction, and maritime work.

FW: Are more companies using the Singapore International Arbitration Centre (SIAC) to resolve their disputes, and if so from what countries?

Shetty: SIAC is one of the fastest growing arbitral institutions in the world in terms of disputes, and has enjoyed 10 consecutive years of growth. If you look at the SIAC 2010 annual report, the number of disputes referred to SIAC increased by 24 percent from 2009. Parties from 45 different countries were involved in SIAC arbitrations, from Panama to Norway to Mongolia, demonstrating that SIAC not only caters for referrals from the Asia region but has global appeal as a forum for resolving disputes. Perhaps the most notable user of SIAC is India, as Singapore is being widely regarded as a proximate and neutral venue for resolution of India related disputes.

Khoo: The SIAC administered 198 new cases in 2010, up from 160 new cases in 2009, and 99 new matters in 2008. The SIAC 2010 Report mentions that “[t]he number of disputes referred to the SIAC in 2010 rose for the tenth consecutive year”. A review of the new cases referred to the SIAC in 2010 would give an idea of the geographical diversity of the arbitrating parties that span 45 jurisdictions. Most disputes were from Singapore, followed by India, Hong Kong, Indonesia, Vietnam, China, the US, Malaysia, Korea, and Japan. The cases handled by the SIAC in 2010 also involved parties from as far afield as Liberia, Mongolia and the British Virgin Islands.

Chalk: In the past two years in particular, the SIAC has seen a very significant increase in its caseload, from 99 new cases in 2008 to 198 new cases in 2010. Unsurprisingly, the largest single group of users comprise Singapore companies. However, given that Singapore is the regional headquarters for many multinationals, a significant proportion of these are in fact Singapore subsidiaries of foreign companies. Perhaps more surprisingly, the second largest group of users now comprises Indian companies, and in recent years, Indian arbitrations have certainly become a significant part of SIAC’s portfolio. Other significant parties include those from Hong Kong, Indonesia, Vietnam, China and other jurisdictions in South Asia. The challenge for Singapore is to attract more users from Europe and the US.

FW: Has the government been instrumental in promoting Singapore as a venue of choice for arbitration? How do new facilities such as Maxwell Chambers emphasise this commitment?

Khoo: The government has been consistently cultivating a legislative framework supportive of arbitration. The Attorney General appointed a law reform sub-committee in 1991 to conduct a major review of Singapore’s international arbitration laws. A major impetus behind this was Singapore’s aim of being, at least, a regional centre for arbitration, having laws governing arbitrations in line with most international standards and practices. A major step taken in that direction was the adoption of the UNCITRAL Model Regime under the Singapore 1994 International Arbitration Act. The Legal Profession Act in Singapore was also amended in 2004 to remove all restrictions on foreign lawyers representing clients in arbitrations within Singapore. Prior repealed legislation allowed foreign lawyers to participate in arbitrations in Singapore only where the law ‘applicable to the dispute’ was ‘not the law of Singapore’. In those days, a foreign lawyer only could appear at arbitrations of disputes governed by Singapore law jointly with a Singapore qualified lawyer. Recent legislative amendments have also opened Singapore’s shores to international law firms to setting up practices in Singapore. The Singapore government has also reiterated it will constantly review the legal regime to ensure that Singapore remains arbitration friendly.

Chalk: I have little doubt that the growth of arbitration in Singapore in recent years is very much due to the efforts of the government, and the very focused and deliberate approach in which it has promoted Singapore as a leading venue in the region. The increase in the number of India-related arbitrations, for example, is clearly the result of these efforts. Similarly, Maxwell Chambers which opened to great acclaim in 2009, has certainly raised the bar for international arbitration infrastructure, and it has also further raised Singapore’s profile, particularly beyond the region and onto the international stage. I know from personal experience that many international arbitrators, and not just those based in the region, have been very impressed by the facilities there, and are very happy to accept arbitral appointments in Singapore. This has had good knock-on effects, as we have seen some other countries in the region more prepared to follow Singapore’s lead, and to also invest further in improving their own arbitration-related infrastructure.

Shetty: The Singapore Government has played a critical role with its focus on fostering business through internationalism and efficiency. This focus has permeated into its policy on international arbitration. It is extremely responsive to legal developments in the Singapore courts and further afield, with an enviable reputation throughout the arbitration community for its ability to update and improve arbitration legislation within a matter of months. It’s most recent full scale overhaul of the arbitration legislation – which was specifically aimed at maintaining and enhancing Singapore’s competitiveness in the field of arbitration – came into force in January 2010. The Singapore Government’s investment in the state-of-the-art Maxwell Chambers dispute resolution facility is a tangible demonstration of its commitment to making Singapore the leading venue for international arbitration in Asia. The number of international arbitral institutions and foreign arbitrators that have taken up ‘residence’ at Maxwell Chambers, and the number of Maxwell Chambers-style facilities that are now being opened up in other jurisdictions, is a testament to its success.

FW: Could you note some of the advantages of conducting an arbitration process in Singapore?

Chalk: Many of the advantages of arbitrating in Singapore are well known. On the legal side, these include the fact that it has a strong rule of law; excellent arbitration legislation based on the UNCITRAL Model Law; a pro-active legislature which constantly seeks to ensure that Singapore’s arbitration laws remain ‘state of the art’; an efficient and supportive judiciary; and of course, Singapore is a signatory to the New York Convention. As for the infrastructure, Maxwell Chambers brings with it top notch facilities; and Singapore also has a central location, strong transport links and many excellent hotels. Furthermore, Singapore has a strong multicultural society, a wide range of counsel is available, and there is freedom of representation by foreign counsel in international arbitrations. It is really this strong combination of factors which makes Singapore stand out as a leading arbitration seat for Asian arbitrations.

Shetty: As well as modernised legislation and state-of-the-art facilities, Singapore offers a number of other advantages. Both the courts and the legal profession have embraced arbitration. For example, the courts have consistently upheld arbitral awards and the courts may grant interim relief not only in support of Singapore arbitration but also in support of arbitration conducted abroad. There is no restriction on foreign law firms advising on arbitration, which gives parties the flexibility to shop around for their preferred counsel. Another advantage of conducting arbitration in Singapore is its geographical proximity to many emerging markets and its transport connections. Last but not least, the convenience, efficiency and hospitality of Singapore, makes it an obvious choice as a venue for hearings.

Khoo: Singapore is an independent neutral third-country venue currently top-rated in the world for neutrality in the Corruption Perceptions Index. Its reputably efficient national institutions, including a well-regarded Court system, foster confidence in support for and supervision of arbitral proceedings in the country. The internationally familiar UNCITRAL Model Law is the cornerstone of Singapore’s international commercial arbitration legislation. Parties have full freedom of choice of counsel in arbitration proceedings regardless of nationality. Parties arbitrating can use any governing law and agree on any set of arbitral rules if so desired. Non-residents do not require employment passes or permits to carry out arbitration services in Singapore. Income earned by foreign arbitrators is tax exempt and there is a tax incentive scheme for arbitration work for law firms. SIAC’s arbitral administration costs are lower than almost any other major centre of arbitration. As a party to the 1958 New York Convention on enforcement of arbitration awards, ‘made in Singapore’ arbitration awards are enforceable in over 140 countries worldwide. Logistically, Singapore’s central location in Southeast Asia at a major East-West intersection makes access to and from Singapore relatively easy.

FW: To what extent does Singapore’s well-developed legal system give participants additional confidence and assurance, compared to certain other jurisdictions in Asia?

Shetty: Whilst cross-border business and investment has been growing in the Asia region, many companies with operations in the region do not have full confidence in receiving an impartial hearing in the courts of jurisdictions with relatively less sophisticated and less developed legal systems. In contrast, Singapore has a strong rule of law culture; is ranked first in the world for neutrality under the Corruption Perceptions Index, and enjoys a reputation of having a neutral and impartial judiciary. In addition, parties concerned with reaching a timely resolution may be able to fast-track their dispute in accordance with the ‘expedited procedure’ introduced in the 2010 SIAC Rules, rather than having to be subjected to potentially prolonged and uncertain processes in other jurisdictions. Moreover, Singapore’s arbitration-friendly courts mean that parties do not need to worry about undue judicial interference in the arbitral process, and can have confidence that this attitude is carried over into the court’s approach to enforcement of arbitral awards in Singapore.

Khoo: The Singapore courts have evolved views on arbitration consistent with other leading centres for arbitration. The courts will therefore pay full heed to party autonomy and uphold parties’ agreements to arbitrate even where that intention may be poorly or ambiguously expressed. In a 2008 case, the parties provided an apparently self-contradictory clause calling for arbitration ‘before’ the SIAC ‘in accordance with’ ICC Rules. The High Court decided that this hybrid clause did indeed provide for the SIAC to administer an arbitration governed by the ICC Rules, notwithstanding differences between how the two institutions administer arbitrations. By contrast, foreign courts in the last decade are known to have declared void and labelled as ‘pathological’ similar tortuously worded arbitral clauses. In a 2006 decision, the Singapore Court of Appeal also declined to follow the lead of the Supreme Court of India in its 2003 decision of SAW Pipes Ltd, which decided not to enforce an award on the footing of it being held to be wrong in law, and therefore being in conflict with Indian public policy. The Singapore court adopted a much narrower view of ‘public policy’, confining it to the most basic tenets of morality and justice like corruption, bribery and fraud, not encompassing mere errors of law.

Chalk: In this area, I think Singapore has two clear advantages which are not found in most other jurisdictions in Asia. First, it has a very proactive legislature which has resulted in Singapore consistently having ‘state of the art’ arbitration legislation. Secondly, not only is the legal system first rate, but the courts themselves are very efficient and they are strongly supportive of arbitration. In the region, this combination is not common. In particular, even though a number of jurisdictions in Asia have modernised their arbitration legislation, the actual attitude of the courts towards arbitration is sometimes still quite tentative. So I think these are clearly areas of strength for Singapore.

FW: How would you describe the commercial and technical expertise of arbitrators in Singapore?

Khoo: The SIAC maintains an international panel of accredited arbitrators comprising professionals and experts with a broad range of knowledge and expertise – currently with over 330 arbitrators from 33 jurisdictions. Allowing for a definition of ‘arbitrators in Singapore’ to encompass those who actively and frequently arbitrate here irrespective of their nationality or country of origin, one can find a number of luminaries amongst the ranks of the arbitrators here including Dr Michael Pryles, David W. Rivkin and others, who also sit on the board of directors of the SIAC. The emerging popularity of Singapore as a leading arbitral venue is perhaps the best testimony to the acknowledged commercial and technical expertise of arbitrators here.

Chalk: When we consider arbitrators in Singapore, I think it is important to recognise that this comprises not only arbitrators based in Singapore, but also leading regional and international arbitrators who are happy to sit in Singapore arbitrations. I think that on both fronts, they are excellent. First, as far as the Singapore arbitrators are concerned, Singapore has placed a strong focus on developing their technical skills. As a result, there is now a critical mass of Singapore arbitrators who have a range of skills and experience, and who are able to take on appointments across a range of disciplines. This, coupled with their cultural and linguistic familiarity with the region, means that they are often excellent choices for appointment as arbitrators. As for the foreign arbitrators, many of them are very happy to accept appointments in Singapore, and we have almost never seen a case where a leading international arbitrator has turned down a Singapore appointment, on the basis that he or she does not wish to arbitrate there. In contrast, our experience with certain other arbitral seats in the region has been more mixed.

Shetty: Skills, knowledge and experience are important factors in the selection of arbitrators for parties. With many arbitrators sourced from the Singapore offices of leading international and local firms, the level of skills and knowledge offered by Singapore arbitrators is outstanding and is a key reason for Singapore’s growth in popularity as a centre of arbitration. Singapore arbitrators are also becoming increasingly experienced, given the growing number and diversity of disputes resolved in Singapore. Language skills and multiculturalism are other benefits brought by Singapore arbitrators.

FW: Where does Singapore stand relative to Hong Kong in terms of choice as an arbitration venue in Asia?

Chalk: Both Singapore and Hong Kong are undoubtedly the two leading international arbitration seats in the region. Although much has been made of a supposed rivalry between the two, I think that view is simplistic. Instead, it has become increasingly clear that Singapore is the leading choice for South Asian arbitrations, including India-related arbitrations, whereas Hong Kong still remains very much the pre-eminent choice for China-related arbitrations. This is borne out by the statistics. In 2010, for example, Singapore handled 14 cases involving mainland Chinese parties. In contrast, over the same period, Hong Kong handled 91 cases involving mainland Chinese parties. Instead of focusing on the supposed competition between Singapore and Hong Kong for arbitrations, I think the broader and more important trend is that Asia is increasing its overall share of arbitrations. In particular, even for very substantial international contracts, we are seeing many instances where parties agree to arbitrate in Asia – typically in Singapore or Hong Kong, whereas in the past, these contracts would have provided for arbitration in Europe or the US.

Shetty: Singapore has caught up with, and some would say surpassed, Hong Kong as the choice of arbitration venue in Asia. It is without doubt one of the top choices in Asia. Having said that, Hong Kong appears to be a popular venue for arbitrations that have a connection with China, and Hong Kong is certainly an arbitration-friendly jurisdiction.

Khoo: The proximity of Hong Kong to China and economic integration of the two economies in 2003, has led to Hong Kong being a popular venue for arbitration of international disputes. These also encompass PRC-foreign party arbitrations with foreign parties wary of disputes being resolved in China. While Hong Kong has been widely considered an attractive and leading arbitration centre in Asia, many practitioners now discern a clear trend of arbitration disputes moving to Singapore. A collaborative survey done by White & Case LLP and the School Of International Arbitration, Queen Mary University of London in 2010 ranked Singapore as the ‘most popular Asian seat’. The survey described Singapore as an emergent ‘regional leader in Asia’, on the backbone of favourable scores in three main factors of having a good ‘formal legal structure’, governing law and convenience – in terms of location, access to counsel, language/culture and efficacy of court supervision. Anecdotal evidence suggests that parties seem to feel more comfortable with Singapore than Hong Kong, especially when the counterparty is Chinese.

FW: Are there any specific issues that participants should know about the arbitration process in Singapore, which perhaps differ from other regions?

Shetty: Perhaps the key issue that differentiates Singapore from other regions is the supportiveness of the courts towards arbitration and the speed at which courts will act. The experience of Singaporean judges in handling arbitration related issues and their non-interventionist/pro-arbitration approach, as well as the fact that all proceedings are conducted in English, makes it the stand-out neutral venue for arbitration within the region. The Singaporean Government’s support of arbitration is also worth bearing in mind. In addition to its proactive approach to ensuring that the relevant legislation remains up-to-date with developments in the field, and the establishment of Maxwell Chambers, it also offers a favourable tax regime for the conduct of arbitrations in Singapore.

Khoo: Singapore has a dual track arbitration regime, with separate statutes governing international and domestic arbitration respectively. The main distinction between the two is the degree of intervention by the courts. For instance‚ the domestic arbitration statute gives parties the right, with leave of court‚ to appeal on questions of law, reserves allegations of fraud for the courts to decide and gives the court discretion whether or not to stay an action brought in breach of an arbitration clause. In contrast‚ there is no right of appeal on questions of law in international arbitrations in Singapore‚ no rule that an arbitrator may not decide on questions involving fraud and the powers of the court to stay an international arbitration are far more limited compared to domestic arbitrations. Parties to an international arbitration may contract out of parts of the international arbitration statute or the UNCITRAL Model Law. Conversely‚ it is also open to parties to a purely domestic arbitration to apply the Model Law.

Chalk: Singapore’s arbitration legislation is based on the well-known UNCITRAL Model Law, and the SIAC’s arbitration rules are based on a number of well-established international arbitration rules. I will highlight just two features of its current rules, which came into effect on 1 July 2010. First, the new rules allow a party to apply for emergency relief from an emergency arbitrator, at the same time as filing the notice of arbitration. Under this procedure, the SIAC will seek to appoint an emergency arbitrator within one business day of receiving the application; and the emergency arbitrator will, within two business days, establish a schedule for considering the application. The emergency arbitrator has the power to order or award any interim relief he deems necessary, but he will have no further power to act after the tribunal is constituted. To date, this procedure has been used in a few cases and the applications have been dealt with promptly. Secondly, the new rules address the current concerns over delays and cost in international arbitrations. They provide for an expedited procedure that applies where the amount in dispute does not exceed S$5m – about US$4m; the parties agree to it; or the case is one of exceptional urgency. Where the procedure applies, the case will be referred to a sole arbitrator, unless the SIAC chairman decides otherwise; the award should in general be rendered within six months; and the tribunal only has to give its reasons in summary form.

FW: Does Singapore lend itself to arbitration involving multi-jurisdictional disputes? Do you expect its appeal to grow further over the months and years ahead?

Khoo: The responsive governmental, legislative and judicial policies to arbitration are undoubtedly going to continue to make Singapore conducive to arbitration of multi-jurisdictional disputes. For instance, the Singapore Court of Appeal in 2007 ruled that the existence of the Singapore court’s personal jurisdiction over a defendant per se, did not allow a court to grant a mareva injunction in aid of foreign arbitration. A legislative amendment tabled in 2009 and coming into effect on 1 January 2010, empowers the Singapore courts to grant injunctions in aid of foreign arbitrations. The increase in multinational corporations doing business in Asia and countries surrounding Singapore having confidence in the legal infrastructure, convenience and cost-effectiveness of resolving cross-border disputes by arbitration in Singapore, is also likely to contribute to Singapore taking the lead in Asia in resolving multi-jurisdictional commercial conflicts. The SIAC’s steady increase in its caseload is indicative of the country’s increasing popularity and the SIAC’s emerging success as an arbitration centre for the resolution of international disputes. As such, I would certainly expect Singapore’s appeal as an international arbitration centre to be ascendant in the months and years ahead.

Chalk: Last year, for example, about 70 percent of the SIAC’s cases were international arbitrations, which are typically arbitrations and multi-jurisdictional in nature. I think this is an important point to highlight about the SIAC’s caseload, because even though we are seeing a steady increase in the number of arbitration cases in Asia when it comes to international arbitrations, it is really only Singapore – and Hong Kong – which stand out from the rest. From our own personal experience, what is striking is that in many cases, parties agree to arbitrate in Singapore, even though the contract itself has little or no connection with Singapore. That, I believe, is the hallmark of a true international arbitration centre, and Singapore is clearly a leader here. This is similarly reflected in the figures from the ICC, where in recent years, Singapore has been the most popular seat for ICC arbitrations seated in Asia. For the immediate future, I think the impetus is definitely very much in favour of Singapore and it is certainly doing all the right things to attract more arbitrations. Looking further ahead, there are a number of other arbitral jurisdictions which are also promoting their services actively, although we will have to wait for at least a few years to see if they continue to grow in importance.

Shetty: Singapore is an attractive seat for arbitration involving multi-jurisdictional disputes. It has long been a hub for world trade, which means that the familiarity of its legal practitioners and judiciary with disputes in a cross-border context is unrivalled. It is a signatory to all of the key conventions that facilitate international arbitration, notably, of course, the New York Convention. Singapore has grown to be the Asian regional leader in arbitration and as increasing levels of capital flow east its attractiveness as a centre for arbitration is likely to only increase.

Nish Shetty is a partner and head of International Arbitration and Dispute Resolution, South East Asia, at Clifford Chance. He is regarded as a leading expert in the field of dispute resolution, in particular international arbitration. He has advised on many complex cross-jurisdictional disputes in recent years, including arbitrations in south and south east Asia. Nish is also a Judge of the International Court of Appeal of the FIA and a member of the Editorial Board of the IBA’s Dispute Resolution International. He speaks regularly at regional seminars and conferences and contributes articles to leading publications on arbitration, litigation and insolvency law. He can be contacted on +65 6410 2285 or by email: nish.shetty@cliffordchance.com.

Randolph Khoo is a director in the dispute resolution department of Drew & Napier LLC. He handles a wide range of litigation and arbitration work, comprising international and domestic arbitration (both as counsel and as an arbitrator), shareholder, infrastructure, family asset, and joint venture disputes. He is a fellow of the Chartered Institute of Arbitrators and the Singapore Institute of Arbitrators and spearheads the firm’s China dispute resolution practice. Mr Khoo can be contacted on +65 6531 2418 or by email: Randolph.khoo@drewnapier.com.

Richard Chalk is head of the Asia dispute resolution practice at Freshfields Bruckhaus Deringer. He has broad commercial dispute resolution experience having acted for a wide range of financial institutions and corporate clients. His specialist areas include international arbitration, banking and financial services disputes, fraud proceedings and regulatory inquiries. Mr Chalk can be contacted on +852 2846 3466 or by email: richard.chalk@freshfields.com.

THE PANELLISTS

Nish Shetty

Clifford Chance

Randolph Khoo

Drew & Napier

Richard Chalk

Freshfields Bruckhaus Deringer