• The announcement of the winners of the CIArb Singapore 2013 Essay Competition jointly organised by the CIArb Singapore Branch Young Members group and Thirty Nine Essex Street Chambers and prize presentation.
• A talk by Neil Block QC of Thirty Nine Essex Street Chambers on dealing with privilege in international arbitration and the recent Supreme Court decision in the Prudential case.
• The presentation of tokens of appreciation.

Attending the event as Guest of Honour will be Senior Minister of State for Law, Indranee Rajah, who will present the prizes to the winners of the 2013 Essay Competition on the topic “A regulatory framework for arbitrators and increased arbitral accountability: ideas to reinvigorate arbitration or stifle it?”

The evening promises to be lots of fun and a great opportunity for everyone in the arbitration community to get together and catch up over wine, beer and canapes. Admission is free for CIArb Singapore members and $100 for non-members and guests. Registrations close on 23 May 2013. Click here to sign up now.

We look forward to seeing you at the event.

• a new menu of disclosure options containing a broad range of approaches to disclose
• additional incentives to make settlement offers
• greater control over the presentation of expert evidence and cost-capping for experts

How might arbitrators and counsel in arbitrations use these techniques to save costs and reduce delays in arbitrations? What directions can be given by arbitrators? How would the use of these techniques sit where parties have adopted certain institutional rules? What is cost-capping for experts and what forms of control might arbitrators exercise over the presentation of expert evidence?

These are some of the issues that will be covered by The Hon Justice Sir Vivian Ramsey when he presents a talk on “The Jackson Reforms and How They Can Be Applied To International Arbitrations” on Saturday, 18 May 2013, 11am to 12pm (with Q&A), at Stamford Law (10 Collyer Quay #27-00, Ocean Financial Centre, Singapore 049315). Full details of the talk can be found here.

This is an excellent opportunity to hear from Sir Vivian Ramsey who worked on the Jackson Reforms with Lord Justice Rupert Jackson. Click here to register now as spaces are limited.

The IJAL’s Board of Editors now invites original, unpublished submissions for publication in the following categories:

-          Articles

-          Notes

-          Comments

-          Book Reviews

Manuscripts may be submitted via email to editor.cartal@gmail.com to be received latest by 31^st July 2013.

The editorial policy and submission guidelines are available here.

The article examines the different thresholds adopted by the English and Singapore courts regarding the enforceability of multi-tier / escalation clauses and, in particular, how explicit these pre-conditions to arbitration have to be before the English and Singapore courts will enforce them. We also look at unilateral clauses and the different approaches that have been taken by various jurisdictions as to their enforceability.

There is now official confirmation that Myanmar acceded to the New York Convention on 16 April 2013 and that the convention is expected to enter into force in Myanmar on 15 July 2013 (see UNCITRAL’s New York Convention Status page here).

However, we had noted that Myanmar’s Arbitration Act 1944 only provides for domestic arbitration and does not provide a framework for the recognition and enforcement of foreign arbitral awards. We anticipate that the Arbitration Act 1944 will either have to be revised or a new international arbitration act enacted in order to make the New York Convention operative. It is still unclear when such an act will be enacted in Myanmar. 

We are hopeful that an appropriate international arbitration framework for Myanmar will be in place before 15 July 2013 and will keep our readers updated accordingly.

Singapore has for some time now been a popular arbitration venue for Indian parties. In our earlier post on Indian Arbitration Users and the Singapore Appeal, we pointed out the fact that the SIAC handled more cases involving at least one Indian party in the three years from 2009 to 2011 than in the preceding nine years from 2000 to 2008 combined: 84 cases involving at least one Indian party between 2009 and 2011 vs. a total of 50 cases between 2000 and 2008. Furthermore, India contributed the highest number of new case filings in the SIAC between 2009 to 2011. In 2012, India took second place having contributed only two fewer cases than China.

As the Honourable Senior Minister for State, Indranee Rajah mentioned in her speech at the opening of the SIAC Mumbai office, Singapore and India share close economic, trading and investments ties as well as a unique common legal heritage. Notably,

“8. Indian companies now form the largest foreign corporate contingent in Singapore with more than 5,000 registered Indian companies in Singapore. World-renowned businesses like the Tata Group, leading technologies companies like Infosys and a large number of small and medium enterprise owners have made Singapore their springboard to enter new markets in the rest of Asia. Singapore companies such as Ascendas, First Engineering and YCH Group, have an active presence in India. Ascendas, whose flagship projects include the Singapore Science Park, has more than 10 years of experience in developing and managing industrial facilities in India. First Engineering has established itself as a supplier of ultra-precise plastic moulds and components to consumer electronics and automotive manufacturers in India, whilst YCH Group is now providing third-party logistics services to manufacturers such as Dell in 53 Indian cities.”

There are a few significant differences in the way arbitration is conducted in India as compared to Singapore. For example, ad hoc arbitration is the predominant mode of arbitration in india, whereas institutional arbitration makes up the majority of arbitrations in Singapore. Furthermore, the trend is to appoint retired judges of the Supreme Court or High Court as arbitrators in India. In Ernst & Young’s “Changing Face of Arbitration in India (2011)“, the Indian survey respondents expressed the view that domestic arbitration did not provide cost effective or timely resolutions of disputes.

The views expressed by the Indian Supreme Court in Union Of India v M/S. Singh Builders Syndicate (26 February 2009) are telling and instructive,

“…the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s. … There is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases where retired Judge/s are Arbitrators. The large number of sittings and charging of very high fees per sitting, with several add-ons, without any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of the award. When an arbitrator is appointed by a court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the Arbitrator, even if it is high or beyond their capacity. Secondly, if a high fee is claimed by the Arbitrator and one party agrees to pay such fee, the other party, who is unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provided a solution as the Arbitrators’ fees is not fixed by the Arbitrators themselves on case to case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the Arbitration is held. Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned. … It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self regulation can bring about marked improvement.”

Just last Friday, Olswang Partners, Jonathan Choo and Andrew Stott, led both panel sessions at the Arbitration India: Technology, Media & Telecommunications Conference in New Delhi which was jointly organised by the SIAC and the Confederation of Indian Industry. The event examined the challenges for the TMT industry and the use of arbitration as a mode of dispute resolution for Indian parties in the TMT sectors.  

We also look forward to the opening of another SIAC overseas office in Seoul, South Korea, as had been announced at the SIAC Annual Appreciation Cocktail Reception 2013.

World Intellectual Property Organisation (“WIPO“) recently released its International Survey on Dispute Resolution in Technology Transactions (“Survey”) (see press release here). The Survey tracks the responses of 393 respondents from 62 countries and sheds very interesting light on this paticular area of international arbitration. The Survey is also very timely in light of Singapore’s recent release of its IP Hub Master Plan (see our report here).

The technology agreements and tech disputes referred to in the survey include patent related agreements and patent disputes. In fact such patent related agreements and disputes form the bulk of the technology agreement and disputes surveyed.

We comment below on some of the key highlights of the Survey.

Tech arbitration versus Tech litigation

One of the key findings in the Survey is that arbitration of technology disputes is cheaper and much quicker than litigating such disputes, especially in foreign courts. Unsurprisingly, mediation was the cheapest and quickest method.

• Litigation in home jurisdictions required approximately 3 years on average. Where litigation was in a foreign jurisdiction, it took on average 3.5 years. On average, the legal costs of litigation in home jurisdictions amounted to US$475,000.00, whereas the legal costs of foreign court litigation amounted to slightly over US$850,000.
• Arbitration took on average slightly more than 1 year and the legal costs on average were just over US$400,000. In other words, as compared to litigation, parties in an arbitration would be looking at savings of over 66% in terms of time and between 15% to 55% in terms of costs savings.
• Mediation was the cheapest and quickest method of resolving disputes, taking on average 8 months to conclude. Furthermore, 91% of respondents stated that costs of mediation typically did not exceed USD 100,000.

Court litigation across various jurisdictions can also vary dramatically in terms of time and costs. So for example, whilst in the USA it would take an average of 37 months and cost parties an average of US$1.4 million to resolve a technology dispute through court litigation, in Switzeland it would take an average of 28 months and cost parties US$634,000 in Switzerland.

The Survey’s comparison across jurisdictions is highly instructive. For example, French domestic court proceedings take the longest to resolve disputes (39 months on average) but they are also the cheapest (US$217,000). The UK is the joint quickest with Japan (26 months) and their court proceedings are one of the cheapest too (US$381,000). We have ordered the table by the speed at which a technology arbitration can be resolved through domestic court proceedings.

 Nature of Technology Disputes

According to the Survey, most technology disputes, whether contractual or non-contractual, revolve around patents. Patent disputes formed a full 50% of contractual disputes as compared to copyright (25%) and know-how (25%). In non-contractual disputes, patents formed 55% of such disputes with copyrights at 27% and know-how at 18%.

When asked what type of technology agreements gave rise most often to disputes, 25% of all respondents said that the most “contentious” technology agreements were licensing related agreements. In terms of the types of agreements which gave rise most often to disputes, these were:

• Licenses (25% of Respondents);
• R&D agreements (18% of Respondents);
• NDAs (16% of Respondents);
• Settlement agreements (15% of Respondents);
• Assignments (13% of Respondents); and
• M&A agreements (13% of Respondents)

Furthermore, only 2% of technology agreements gave rise to formal proceedings. However, what the numbers do not indicate is the number of disputes that get resolved even before formal proceedings are initiated.

The large bulk of arbitration cases administered by WIPO involve licensing disputes (40%).

Choice and Considerations of Dispute Resolution Clause

The Survey reveals that Dispute Resolution Clauses in technology agreements are negotiable and generally negotiated. In fact, 94% of survey respondents stated that negotiating the dispute resolution clause formed part of their contract negotiations. However, those negotiations formed only a minor part of contract negotiations.

The most popular choice of dispute resolution clause for technology agreements concluded in the last two years was court litigation (32%), followed closely by arbitration (30% – 26% arbitration and 4% expedited arbitration) and mediation (29% – 12% of agreements provided for mediation as a standalone mechanism, the remaining 17% as part of a multi-tier clause). For more information regarding the use of multi-tier clauses, see here.

Where an ADR clause was chosen, respondents overwhelmingly preferred institutional ADR (86%) over non-institutional means (14%). The most popular institution was the ICC (34%), followed by WIPO (17%), AAA (16%) and then jointly at 4% each, the DIS (German Institution of Arbitration), LCIA and SIAC.

Perhaps unsurprisingly, the geographical region in which respondents were based tended to influence their choice of institutions:.

• North American respondents tended to designate AAA as the ADR institution of choice (50% of technology agreements).
• Asian respondents preferred to designated arbitral institutions within Asia (ICC at 34% of agreements, followed by SIAC at 15%).
• South Americans overwhelmingly choose ICC (57% of agreements, followed by AAA at 15% and WIPO at 9%).
• The majority of Oceania agreements adopted non-institutional means (31% of agreements followed by WIPO at 23% and ICC at 22%).

In choosing a dispute resolution clause, the two main considerations were time and costs. This was regardless of whether a respondent had a majority (>60%) of its dispute resolution clauses as litigation, mediation or arbitration. Other highly relevant factors included, Business Solution, Enforceability and Quality Outcome (including specialisation of decision-maker).

According to the Survey, the top 3 considerations for each category are as follows.

• Where court litigation clauses were used in >60% of technology agreements: the top 3 considerations were Costs (69%), Enforceability (49%) and Time (48%). Quality Outcome (including specialisation of decision-maker) came in 4^th at 41%.
• Where mediation clauses were used in >60% of technology agreements: the top 3 considerations were Costs (84%), Time (79%), Business Solution (53%). NB: Enforceability came in joint 5^th at 37% after Neutral Forum (42%)
• Where arbitration clauses were used in >60% of technology agreements: the top 3 considerations were Time (64%), Costs (58%) and Quality Outcome (including specialisation of decision-maker) at 56%. Enforceability came in 4^th at 51%.

Observations for Dispute Resolution in Technology Transactions

It is worth concluding by highlighting WIPO’s summary of what respondents should do in respect of dispute resolution in technology transactions

1. Contracts should anticipate dispute – the amount of time and effort spent negotiating dispute resolution clauses was disproportionately tiny in comparison to the time and costs incurred by parties should disputes arise.
2. Dispute policies should anticipate international elements in technology transactions – Despite the fact that many of these technology agreements (especially IP) have a cross-border international element, respondents considered that the choice of dispute resolution mechanism did not necessarily take into account the risk of foreign dispute resolution.
3. Dispute policies should aim to minimise costs and time – given that ADR tends to be cheaper and faster than court litigation (especially litigating in foreign jurisdictions), parties should take a look at their general reliance on court litigation clauses. This is particularly so given that time and costs were consistently the top two considerations for parties.
4. Parties should not shy away from comparing court litigation with ADR especially in patent disputes. Given that time and costs are the two main considerations in resolving technology disputes, parties should seriously consider ADR (arbitration, negotiations, mediation etc.) given the benefits that ADR offers over litigation in terms of time, costs and (cross-border) enforceability.

Conclusion

The arbitrability of IP (particularly patent) disputes is an area of concern in growing the use of arbitration to resolve technology disputes. This was highlighted in Singapore’s IP Hub Master Plan. Nevertheless, ADR is not simply arbitration (meditation and negotiations have very important roles to play in resolving technology disputes). Overall, the results of this Survey are an excellent as a launching pad to stimulate further discussion on the use of ADR to resolve IP/technology disputes.

On behalf of the blogging team, I’d like to thank our readers for their kind words and support since day one. We’ve enjoyed every minute of it. And we’re just getting started. We’re glad to have seen over the course of the year such a huge appetite amongst our readers for interesting, current (and timely) arbitration related news and content. If you have any ideas in terms of topics or issues that you would like us to cover, please let us know.

And oh yes, we’ve refreshed our blog’s header banner to commemorate our one-year anniversary! I hope you like it.

We examine the High Court’s decision and analysis of whether the ICC Rules 2012 prohibit hybrid ICC arbitrations i.e. an arbitration using the ICC Rules but administered by an arbitration institution other than the ICC.

As a result, Sir Alen Ward (delivering the unanimous judgment of the Court of Appeal) called on lawyers and judges to revisit his holding in Halsey v Milton Keynes General NMS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002 that “to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court” (see paragraph [3]).

As the Court of Appeal noted, one of the reasons that the UK Ministry of Justice had recently seen fit to remove the availability of legal aid from “swaths of litigation” was because of its view that “mediation [wa]s a proper alternative which should be tried and exhausted before finally resorting to a trial of the issues” (see paragraph [3]).

However, if parties are truly unwilling to even try mediation, what good would the courts do by ordering compulsory mediation? The Court of Appeal itself noted that “[y]ou may be able to drag the horse (a mule offers a better metaphor) to water, but you cannot force the wretched animal to drink if it stubbornly resists” (see paragraph [3]). So why then did the Court of Appeal consider that it was time to review the rule in Halsey v Milton?

The Singapore Situation

Parenthetically, we should note that these issues of litigants in person, access to justice/costs and the most appropriate mode of dispute resolution are not limited to the UK, In fact they had also been raised at the inaugural Litigation Conference 2013 in Singapore and were recently the subject of the Honourable the Chief Justice Sundaresh Menon’s Keynote Address at the Subordinate Courts Workplan 2013 Seminar (see also here).

We express no view on the issue of legal aid one way or the other. However, we do endorse the view that alternative dispute resolution, which includes negotiations and mediation as well as arbitration, are very useful tools in resolving disputes between parties in an efficient and cost effective manner. This applies generally to all litigants, including commercial parties.

Multi-Tier Clauses in UK and Singapore

Commercial parties which wish to incorporate mandatory mediation (or negotiations between senior members of manager) as a precondition to arbitration may do so through what is commonly known as a multi-tier clause. However, parties should note that a poorly drafted multi-tier clause might end up prolonging the arbitration process and increasing costs. For example, the party resisting the arbitration may challenge the tribunal’s jurisdiction in the arbitration itself. It may also then challenge any positive jurisdictional award before the supervisory courts on the basis that the pre-conditions of the multi-tier clause have not been fulfilled. Conversely, in order to fulfil the pre-conditions, parties may be obliged to go through the motions of negotiations and mediation even though it may be clearly evident that those steps will ultimately be futile.

In an Asian context, such clauses might also be helpful as a face-saving measure. In particular, a party that wishes to engage in negotiations or mediation will not be seen as losing “face” if the multi-tier could be used as a pretext to initiate contact with the counterparty.

On the futility point, the Singapore High Court in International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and anor, [2013] 1 SLR 973; [2012] SGHC 226 (“IRCP v Lufthansa“) has stated that futility in performing the pre-conditions cannot justify (a) non-compliance with the pre-conditions or (b) a court order to compel parties to arbitrate pursuant to the multi-tier clause. This is because only compliance with the pre-conditions can confer the tribunal with jurisdiction over the parties and the dispute (see paragraph [105]). We discuss the case here.

It is also worth noting that the English and Singapore courts have taken a divergent attitude as to how specific/certain the pre-conditions have to be before the multi-tier clause can be enforced. In this respect, the Singapore courts appear to adopt a lower threshold than the English courts when considering this issue.

This contrast can be observed in the English case of Wah (Aka Alan Tang) and another v Grant Thornton International Ltd and others [2012] EWHC 3198 (Ch) and the Singapore case of IRCP v Lufthansa. While the multi-tier clause was upheld by the Singapore High Court in IRCP v Lufthansa, a somewhat similar (and more detailed) clause was rejected by the English High Court in Wah v Grant Thornton. For a more extensive discussion about the different thresholds applied by the English and Singapore courts, see our previous post here.

Furthermore, the Singapore Court of Appeal has shown its willingness to uphold agreements to negotiate in good faith (in the context of a rent review clause in a concluded tenancy agreement), see HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global Real Estate Investment Trust) v Toshin Development Singapore Pte Ltd, [2012] SGCA 48 (see our case analysis here).

Notably, the Singapore Court of Appeal refused to draw a distinction between an agreement to negotiate in good faith and an agreement to submit a dispute to mediation. The Court of Appeal considered them “similar in nature” to best endeavour clauses which have been upheld by the Singapore courts (see paragraph [43]).

In turn, the High Court in IRCP v Lufthansa relied on HSBC v Toshin to uphold the multi-tier clause (see paragraph [93]),

“…Given the Court of Appeal’s attitude towards mediation clauses, any doubts about an obligation to negotiate in good faith under a multi-tiered dispute resolution clause should be laid to rest. If an obligation to negotiate in good faith which [wa]s part of a broader contractual framework such as a rent review mechanism under a lease agreement is enforceable, the obligation to refer a dispute to various specifically constituted panels pursuant to [Clause] 37.2 should also be enforceable. They [were], after all, essential steps stipulated in the Dispute Resolution Mechanism and expressly made condition precedents to resolution of a dispute by arbitration.”

The precise scope of a mandatory mediation clause remains unclear. IRCP v Lufthansa requires that the pre-conditions in a multi-tier clause be sufficiently certain such that the court can determine if the pre-conditions can be complied with. Accordingly,

“[a] court looking at the conduct of the parties c[ould] easily discern if the entire mediation procedure in [clause] 37.2 was complied with or not. Not only [wa]s there an unqualified reference to mediation through the respective committees, the process [wa]s clear and defined” (see paragraph [97]).

However, notwithstanding that the formal procedure had not been complied with to the letter, the High Court held that the clause had been complied with effectively. The High Court was satisfied on the basis of the affidavit evidence adduced that “there were several rounds of high-level meetings between [the relevant parties] to resolve the Payment Dispute. The parties have had their attempts at negotiations and in that respect, the object of [Clause] 37.2 has been met” (see paragraph [110]).

Accordingly, the High Court did not have to resolve the question as to whether it had the power to order a stay or adjournment of the arbitration proceedings for parties to comply with the preconditions in the multi-tier clause. Somewhat disconcertingly, the High Court remarked that Lufthansa had “not cited any authority which suggest[ed] that the court ha[d] the power to grant a stay or order an adjournment of the arbitration, and that such power should be exercised in the present circumstances” (see paragraph [103]).

Conclusion

The comments of the English Court of Appeal in the context of an acrimonious case involving 2 litigants in person might seem somewhat far removed from the concerns that parties might have in the context of commercial international arbitration. However, the issues are similar. These include (a) the (probable) futility of making acrimonious and unwilling parties negotiate or mediate a settlement as well as (b) the power of the Court to order a halt to proceedings (whether court or arbitration).

We welcome our readers’ views and comments on multi-tier clauses and their experiences with such clauses.