What is Arbitration?
Arbitration is a method of dispute resolution where parties refer their dispute to an impartial tribunal (consisting of one or more arbitrators). The parties agree to be bound by the tribunal’s decision (known as an “award”).
How do parties agree to arbitrate?
Arbitration is an alternative to court action but can only take place if both parties have agreed to it. Parties can agree to arbitration either by:
- including an arbitration clause in a commercial or consumer agreement at the drafting stage; or
- signing an arbitration agreement after the dispute has arisen.
The following are examples of arbitration clauses:
– Singapore International Arbitration Centre (SIAC) Model Clause: “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in [Singapore] in accordance with the Arbitration Rules of [the Singapore International Arbitration Centre ("SIAC Rules")] for the time being in force, which rules are deemed to be incorporated by reference in this clause. The Tribunal shall consist of [one/three] arbitrator(s). The language of the arbitration shall be [English].“
– International Chamber of Commerce (ICC) Model Clause: “All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the [International Chamber of Commerce] by one or more arbitrators appointed in accordance with the said Rules.”
What are the advantages of Arbitration?
Arbitration has many advantages over court actions, including:
- Choice of Decision Maker – Parties are free to choose their own arbitrator(s). Where the subject matter of a dispute is highly technical this is particularly advantageous as arbitrators with an appropriate degree of expertise can be appointed.
- Choice of Rules and Procedures – Parties can choose their own arbitration rules or select their own procedures and are free to select counsel of any nationality to represent them.
- Privacy – Arbitration hearings are confidential and heard in private. Decisions of an arbitral tribunal are not published.
- Flexibility and Convenience – Parties are free to choose the time and location of arbitration hearings to suit them, their witnesses and the arbitral tribunal. The language of the arbitration can also be selected.
- Efficiency – Arbitration is often faster than litigation in court and can usually be heard sooner than it takes for court proceedings to be listed. Parties looking to resolve their disputes quickly may also rely on fast-track or expedited arbitration procedures.
- Cost-Efficiency - Arbitration is generally considered to be more cost-efficient than litigation.
- Enforceability – It is often easier to enforce an arbitration award in a foreign country than it is to enforce a court judgment. Under the New York Convention 1958, an award issued in a contracting state can generally be enforced in any other contracting state. More than 140 states are party to the New York Convention.
- Finality – Generally speaking, there is no right of appeal in arbitration (although, the court has limited powers to set aside or remit an award). Decisions of an arbitral tribunal are final and binding.
Usual Steps in Arbitration
The process of arbitration differs from case to case but the following is a list of the usual steps in arbitration:
- Initiating the Arbitration – A party wishing to commence arbitration (the “Claimant“) will file a notice of arbitration and serve this notice on the other party (the “Respondent“).
- Appointment of Arbitrator(s) – Arbitrators can be appointed directly by the parties, by existing tribunal members (for example, where each party appoints one arbitrator and those chosen arbitrators appoint a third arbitrator themselves) or by an external party (for example, by a court or institution chosen by the parties).
- Preliminary Meeting – The parties and arbitral tribunal will meet to discuss and agree an appropriate process and timetable.
- Statement of Claim – The Claimant will set out a summary of the matters in dispute and the remedy sought.
- Statement of Response – The Respondent will admit or deny the claims. The Respondent may also introduce a Counterclaim.
- Disclosure/discovery and Inspection – The parties will exchange relevant documents and then review each others’ documents.
- Evidence – The parties will exchange factual and expert written evidence.
- Hearing – The hearing will take place at a time and location agreed between the parties and the arbitral tribunal. The parties will usually be asked to begin with opening submissions. The hearing then proceeds to evidence-in-chief and cross examination of witnesses (factual and/or expert). Finally, parties may be invited to make closing submissions orally at the end of the hearing and/or in writing after the conclusion of the hearing.
- Award – The arbitral tribunal will write its decision in the form of an award which the successful party can then enforce against the losing party.
Why Arbitrate in Singapore?
Parties are increasingly selecting Singapore as their preferred seat of arbitration: the number of cases handled by the Singapore International Arbitration Centre (SIAC) increased from 58 cases in 2000 to 188 in 2011; Singapore also continues to be the most popular seat for International Chamber of Commerce (ICC) arbitrations in Asia. So why is Singapore such a popular choice?
- Singapore is an independent, neutral country with a strong multicultural society.
- Singapore is geographically convenient and well-connected with 4,000 scheduled flights a week to 185 cities.
- Singapore has excellent legal and technological expertise and state of the art arbitration support facilities and services.
- Arbitrating in Singapore is generally regarded as being more cost-effective than arbitrating anywhere else in the world.
- Singapore has a well established legal system that observes the rule of law.
- Singapore’s arbitration laws are user-friendly and adopt the UNCITRAL Model Law.
- Courts in Singapore offer a high level of support for arbitration with a minimal level of intervention.