SGHC sets aside arbitral award for breach of fair hearing rule and natural justice

In BZV v BZW and another [2021] SGHC 60, the Singapore High Court (the “Court”) allowed a party’s application to set aside an arbitral award on the basis that the tribunal had failed entirely to appreciate the correct questions it had to pose to itself, let alone apply its mind to determining those questions. The Court concluded that the high bar required to establish a breach of the fair hearing rule and natural justice have been met. We review the Court’s decision and provide our takeaways.

Background facts

The plaintiff (the claimant in the arbitration) and the defendants (the respondents in the arbitration) entered into a shipbuilding contract (“Contract”) where the plaintiff was the vessel buyer and the defendants the vessel builder. At the arbitration, the plaintiff made two claims against the defendants, namely:

  1. that the defendants had delayed in delivering the vessel (the “Delay claim”); and
  2. that the defendants breached the contract by delivering a vessel which had generators of a lower ingress protection rating (IP23) than that specified in the Contract (IP44) (the “IP44 claim”).

At the conclusion of the arbitration, the tribunal dismissed both the plaintiff’s claims as well as the counterclaim filed by the defendants. The plaintiff applied to the High Court to set aside the award, save for the part dismissing the defendants’ counterclaim on the basis that:

  1. the tribunal breached the rules of natural justice i.e. the rules of procedural fairness (section 24(b) of the International Arbitration Act (the “Act”)) and
  2. the tribunal dealt with matters beyond the scope of the parties’ submission (Article 34(2)(a)(iii) of the Model Law on International Commercial Arbitration (“Model Law”)).

The High Court’s decision

The Court allowed the plaintiff’s application on the basis that the tribunal breached the rules of natural justice, specifically the fair hearing rule (section 24 of the Act). The Court found that there was no discernible link between the arguments presented by the parties and the reasoning adopted by the tribunal, and that certain critical elements arising from the parties’ arguments had not been considered. Nevertheless, the Court also found that despite the deficiencies in the award, the tribunal had not dealt with matters beyond the scope of the parties’ submission (Art 34 of the Model Law).

In reaching its conclusion, the Court addressed the issue of whether the requisite elements to set aside an award under section 24(b) of the Act have been met, specifically:-

  1. Whether and which rule of natural justice was breached;
  2. The manner in which the rule of natural justice had been breached;
  3. Whether there was a connection between the breach and the making of the award; and
  4. Whether prejudice was caused to the plaintiff’s rights by the breach.

1. Whether and which rule of natural justice was breached

The plaintiff submitted that the tribunal breached the fair hearing rule, which requires each party to be given adequate notice of the case it must meet in the arbitration and a fair opportunity to be heard on that case.

2. The manner in which the rule of natural justice had been breached

The Court accepted and analysed two of the six grounds advanced by the plaintiff as to how the tribunal breached the fair hearing rule, namely that:–

  1. the tribunal adopted a chain of reasoning which had no nexus to the parties’ cases (in respect of the Delay claim and the IP44 claim); and
  2. the tribunal failed to apply its mind to an essential issue arising from the parties’ arguments (in respect of the Delay claim).

Notably, the Court declined to address grounds raised by the plaintiff that attempted to seek a review of the award on the merits.

In relation to the Delay claim, the Plaintiff’s case was that none of the four findings of fact that the tribunal had relied on to dismiss the Delay claim had any nexus to the cases which the parties had advanced in the arbitration. Notably, this was uncontested even by the defendants in relation to three of the four findings – the terms of the award contained no indication that the tribunal adopted as part of its chain of reasoning on the Delay claim any aspect of six of the seven defences raised by the defendants, understandably constraining the defendants in the arguments they could make.

As a result, the Court concluded that the chain of reasoning by which the tribunal arrived at its decision to dismiss the Delay claim had no nexus to any of the defendant’s defences. While the tribunal’s fourth finding (that the plaintiff had wrongfully prevented the defendants from obtaining a class certificate for the vessel) could arguably have had a nexus to one of the defences submitted by the defendants (that this resulted in the time for the defendants to deliver the vessel being set at large), the Court found that the tribunal failed completely to identify and apply its mind to the essential issue of causation that arose from the parties’ arguments, i.e. whether the plaintiff’s acts of prevention caused the defendants’ failure to deliver the vessel on time.

In relation to the IP44 claim, the Court analysed the three defences raised by the defendants in response to the plaintiff’s IP44 claim, and concluded that the tribunal’s chain of reasoning in dismissing the claim had no nexus to the defendant’s defences.

One of the defences raised by the defendants was that they were not in breach of the Contract by delivering IP23 rated generators. The Court found that the tribunal had made findings of fact that the defendants understood that they were under an obligation to upgrade the generators from IP23 to IP44, and this could only mean that the tribunal had rejected the defendants’ first defence. However, the tribunal also used the phrase “no breach by [the defendants] in supplying generators rated IP23”. The Court rationalised this by holding that for the award to be coherent and consistent, the phrase “no breach” had to be interpreted to mean “no liability to the plaintiff” instead. The phrase could not be interpreted literally as that would render the award internally inconsistent and incoherent in view of its finding of fact.

The defendants’ second defence was that the plaintiff was precluded by estoppel from insisting that the defendants deliver the vessel with generators rated IP44 instead of IP23. The tribunal relied on an email asserting that the IP23 generators were fit for purpose to conclude that the plaintiff had led the defendants to believe that the generators rated IP23 were adequate. However, the majority erroneously identified the email as being sent by the plaintiff’s representative, when in fact it had been sent by the defendants’ representative. The plaintiff sought a correction to the award, which the tribunal allowed. It amended the award by identifying the email as originating from the defendants, and also deleting sentences that established that the tribunal was relying on said email as a clear admission by the plaintiff that the generators rated IP23 were fit for purpose. The Court found that as a result of these deletions, the award had no nexus to the defendants’ estoppel defence – there was no finding, even on a generous reading, that the Plaintiff represented to the Defendants that generators rated IP23 were fit for any purpose.

Interestingly, the Court noted that had the tribunal declined to amend the award, as egregious an error of fact that would have left, the plaintiff’s setting aside application would have failed. The Court would have to give a generous reading to the award and accept that the plaintiff had indeed made a representation to the defendants. A tribunal’s error, no matter how fundamental, egregious or patent, and whether of fact or law – is no basis on which to set aside an award.

3. Whether there was a connection between the breach and the making of the award

On the third element, the Court concluded that it is plainly evident that the tribunal’s breach of natural justice on each claim was causally connected to the making of the award.

4. Whether prejudice was caused to the plaintiff’s rights by the breach

On the fourth element, the Court found that it was easily established that the breach was prejudicial to the Plaintiff’s rights. Had the tribunal applied its mind to the parties’ cases and the essential issues arising from the parties’ arguments on those cases, the tribunal would have found in favour of the plaintiff on both the Delay and IP44 claim. As a result, the tribunal’s breach of natural justice caused real prejudice to the plaintiff.

Takeaways

The Court’s approach illustrates the balance sought to be struck between giving effect to the finality of arbitral awards and providing a recourse to parties who may have received a fundamentally flawed award.

The Singapore courts’ non-interventionist approach towards maintaining the sanctity of arbitral awards is best exemplified by the Court’s readiness to allow even “fundamental, egregious or patent” errors of the tribunal to remain untouched, as errors of law or fact do not form a proper basis for the setting aside of awards.

The grounds to set aside an arbitral award are limited, and require a high threshold to be met. An award cannot be challenged on the merits, and the Court usually gives a generous reading to the award – with benefit of doubt afforded to the tribunal having conduct of the matter. Nevertheless, if the tribunal is found to have breached the rules of natural justice, i.e. for failing to accord fundamental procedural fairness to the parties, then the award is susceptible to being set aside.

* This article may be cited as Os Agarwal and Wei Ming Tan, “SGHC sets aside arbitral award for breach of fair hearing rule and natural justice” (8 July 2021) (SGHC sets aside arbitral award for breach of fair hearing rule and natural justice | Singapore International Arbitration Blog)

+Also published on CMS Law-Now.

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The SIAC Annual Report 2020: Highlights and Takeaways

The Singapore International Arbitration Centre (“SIAC”) published its Annual Report 2020 recently, reporting another year of record growth in case load and expansion of its offices beyond Asia. In this article, we summarise some of the Report’s key highlights and takeaways.

Record increase in case load

SIAC reported 1,080 new cases filed in 2020 – more than double the previous year with 94% (1018 cases) international in nature and 6% (62) domestic. This was the first time that SIAC’s caseload crossed the 1000-case threshold and in the context of the last decade, it represents a more than five-fold increase over 10 years. Parties from 60 jurisdictions arbitrated USD 8.49bn in disputes, representing a 4.9% increase from the previous year. The average value for new case filings was USD 19.26 million and the highest sum in dispute for a single administered case just shy of USD 1bn.

Expansion beyond Asia

In 2020 SIAC launched a representative office in New York, its fifth office overseas and first outside of Asia. This appears to be a timely move as 2020 saw the biggest leap in foreign users coming from US parties, with 545 parties from the US – a 738 per cent increase from 65 in 2019. The US is now the second highest foreign user of the SIAC after long time top user, India (690) and before third-ranked foreign user, China (165).

Besides the US, there was also a significant increase in the number of parties from Switzerland, Vietnam and the Cayman Islands compared to 2019.

Sectors

The claims filed with SIAC spanned a broad range of sectors, with trade (64% of the overall cases), commercial, corporate and maritime/shipping leading the way. The rest of the claims came from a variety of other sectors, including construction/engineering, agriculture, arts/entertainment, aviation, banking/financial services, commodities, education, employment, energy, healthcare/ pharmaceuticals, hospitality/travel, insurance/reinsurance, IP/IT, media/broadcasting, mining, real estate, regulatory, sports, technology/science, telecommunications and treaty interpretation/rights.

Governing Laws

The governing laws for new cases referred to SIAC in 2020 remained extremely diverse, with laws of 20 different jurisdictions, including civil and mixed law jurisdictions, being applied. The laws of Singapore (76%), the United Kingdom (9%) and India (2%) continue to be the most applied.

Arbitrator Appointments

Of the 143 arbitrator appointments in 2020, 126 of these were sole arbitrators and 17 were appointed to three-member tribunals. 127 of the appointments were made under the SIAC Rules, 15 in ad hoc arbitrations, and 1 under other arbitral rules. Of the 143 SIAC appointed arbitrators, 46 (or 32.2%) were female. This appears to be a decrease from the prior year where 36.5% of the SIAC-appointed arbitrators were female. Gender diversity on the SIAC’s Court of Arbitration remains the same as the previous year, in terms of numbers, with 10 female members.

In terms of geographical diversity, of the 288 appointments, 35% and 27% were non-Singaporean arbitrators appointed by SIAC and by the parties respectively. 6% were non-Singapore arbitrators nominated by co-arbitrators.

Usage of Procedural Rules

  1. Challenges to arbitrators: A total of 4 challenges to arbitrators were decided by the SIAC Court of Arbitration in 2020, 3 of which were rejected and 1 upheld.
  2. Emergency Arbitrators: SIAC accepted all 20 applications received to appoint an Emergency Arbitrator in 2020, bringing the total number of applications accepted since the introduction of Emergency Arbitrator provisions in 2010 to 114.
  3. Expedited Procedure: Out of 88 requests for Expedited Procedure, 37 were accepted.
  4. Early Dismissal: Out of the 5 applications for the Early Dismissal of claims and defences received in 2020,2 were allowed to proceed (and both subsequently rejected), 1 was not allowed to proceed, and 2 are pending. The notably low rate of success in Early Dismissal applications appears to reflect the high legal threshold required for such applications to be allowed.
  5. Consolidation and Joinder: SIAC received 69 applications for consolidation and 6 applications for joinder, of which 36 and 2 respectively were granted as of 31 December 2020.

Other takeaways

In the midst of a pandemic, parties are increasingly activating dispute resolution options available to them and SIAC is well-positioned in a city state long seen as an arbitration-friendly centre for regional and global businesses looking for confidentiality, neutrality and the cross-border enforceability of awards. With years of consistent focus on growing its dispute resolution institutions and introducing legislation to facilitate such growth, Singapore has achieved status as a favoured dispute resolution ‘hub’, with SIAC being arguably one of its biggest success stories.

* This article may be cited as Os Agarwal, Wei Ming Tan, and Lakshanthi Fernando, “The SIAC Annual Report 2020: Highlights and Takeaways” (21 April 2021) (The SIAC Annual Report 2020: Highlights and Takeaways | Singapore International Arbitration Blog)

+Also published on CMS Law-Now.

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Singapore – standard costs to be awarded by default for failed award set-aside applications (BTN v BTP)

Arbitration analysis: A recent Singapore High Court case (BTN and Anor v BTP and Anor [2021] SGHC 38) confirmed the default position under Singapore law that unsuccessful applications to set aside an arbitral award will be awarded costs on a standard basis rather than on an indemnity basis. Costs on an indemnity basis will only be awarded in exceptional circumstances. An application for the court to fix the quantum of costs is not an opportunity for a party to request the court to switch the basis of the costs order from a standard to an indemnity basis.

What are the practical implications of this case?

This decision reaffirms the Singapore position that court applications that fail to set aside an arbitral award will be awarded costs on a standard basis by default. Costs on an indemnity basis will only be awarded in exceptional circumstances that warrant a departure from the usual course of awarding standard costs, such as when a party exhibits conduct outside of the norm, had acted in bad faith or abused the court’s process.

What was the background?

The plaintiffs’ application in HC/OS 683/2018 (“OS 683”) to set aside a partial arbitral award was dismissed with costs by the High Court. The plaintiffs’ appeal to the Court of Appeal was also dismissed. The Court of Appeal awarded the defendants fixed costs for the appeal – see New Analysis: Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy groun for setting aside awards (BTN v BTP).

The parties were unable to reach an agreement on the quantum of costs of OS 683. The defendants tried to persuade the Court of Appeal to order costs on an indemnity basis for OS 683, but the Court of Appeal declined to disturb the High Court’s costs order, which was on a standard basis.

The defendants argued for indemnity costs as they had to fend off unmeritorious proceedings in OS 683 that ought not to have been brought in the first place, bearing in mind that the parties had agreed to resolve their disputes in arbitration and to honour any award made in the arbitration.

The defendants asked the court not to apply the costs guidelines contained in Appendix G of the Supreme Court Practice Directions (“the Costs Guidelines”). The Costs Guidelines are derived from party and party costs on a standard basis. The defendants urged the court to adopt the Hong Kong approach in assessing the quantum of costs on an indemnity basis. The Hong Kong approach adopts a default rule that indemnity costs will be granted when an arbitral award is unsuccessfully challenged in court proceedings unless special circumstances can be shown.

The plaintiffs argue that there is no basis whatsoever to depart from an award of costs on a standard basis and the Costs Guidelines should apply. The Hong Kong approach is diametrically opposed to the Singapore approach, which places the burden of proof for proving exceptional circumstances on the party seeking indemnity costs, not the other way around.

What did the court decide?

The court dismissed the defendants’ application for indemnity costs in OS 683.

First, it was impermissible for the defendants to try to re-argue the basis of the High Court’s costs order in OS 683 in order to try to obtain a higher quantum of costs.  All the defendants were permitted to do was to persuade the court not to follow the range of costs in the Cost Guidelines.

Second, the court held that the defendants failed to show exceptional circumstances that warrant an order for indemnity costs. A critical requirement for indemnity costs is the existence of some conduct that takes the case out of the norm. An application that turns out to be unmeritorious is not necessarily an unarguable case that hints of bad faith or reflects no more than an attempt to delay or impede payment.

The court found that the plaintiffs had conducted their case in an economical way without undue prolongation of hearings or submissions.

The defendants, on the other hand, instructed senior counsel at the last minute to defend the defendants in the second hearing. This speaks of the following: (1) the defendants thought that the plaintiffs’ jurisdictional challenge was arguable in the defendants’ opinion; and (2) a freshly appointed senior counsel would invariably go over the arguments covered by the defendants’ original counsel in the first hearing. The last-minute involvement of the senior counsel was likely to have extended the second hearing somewhat.

Accordingly, the court held that the plaintiffs are to pay the defendants’ costs of and in relation to OS 683 on a standard basis.

*This article may be cited as Wei Ming Tan, “Singapore – standard costs to be awarded by default for failed award set-aside applications (BTN v BTP)” (24 February 2021) (Singapore—standard costs to be awarded by default for failed award set-aside applications (BTN v BTP) | News | LexisNexis)

+First published by LexisPSL.

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Amendments to Singapore’s International Arbitration Act to Enhance Statutory Regime

In September 2020, Singapore’s Ministry of Law (“MinLaw”) proposed the International Arbitration (Amendment) Bill (the “Bill”) to introduce two new features to the International Arbitration Act (Cap. 143A) (“IAA”).

The Bill was passed on 5 October 2020 and the amendments came into force on 1 December 2020.

We look at the two new features in detail and provide our takeaways on their likely impact on the international arbitration regime in Singapore.

Default process for appointment of arbitrators in multi-party proceedings

The first amendment to the IAA provides for a default mode of appointment of arbitrators in multi-party arbitrations. It sets out the processes and timeframes that should be adopted when appointing a three-member tribunal. To apply this provision, the agreement of parties must not specify any appointment procedure in a situation where there are more than two parties to a dispute.

Before the introduction of the Bill, the IAA only addressed the process for default appointment of a three-member arbitral tribunal in situations where there are two disputing parties. It did not address situations where there are more than two parties involved in a dispute.

The new section 9B of the IAA sets out how the default appointment procedure will operate:

  • The claimants will be required to jointly appoint an arbitrator and state their choice in the request for the dispute to be referred to arbitration, or the Notice of Arbitration (“NOA”).
  • The respondents must jointly appoint an arbitrator and inform the claimants of the appointment within 30 days from the date of receipt of the request for dispute to be referred to arbitration, or NOA.
  • The 1st and 2nd arbitrators must then nominate a 3rd arbitrator within 60 days from date of receipt of the request for dispute to be referred to arbitration by the last respondent. The 3rd arbitrator shall be the presiding arbitrator.
  • Where the 1st and 2nd arbitrators are unable to agree on the appointment of the 3rd arbitrator within the specified period of time, the appointing authority must, upon the request of any party and having regard to all relevant circumstances, appoint the 3rd arbitrator.
  • If either the claimants or the respondents are unable to appoint their arbitrator within the specified period, the appointing authority must, upon the request of any party, appoint all three arbitrators. In doing so the appointing authority may re-appoint or revoke any appointment already made and designate one of the three arbitrators as the presiding arbitrator.

The new amendment brings Singapore’s IAA in line with the current procedures set out in the rules of the world’s leading arbitral institutions, such as the Singapore International Arbitration Centre (SIAC), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Hong Kong International Arbitration Centre (HKIAC).

All of the above institutional rules provide, in some form or other, for the appointing authority to have the power to select all three arbitrators in a three-member tribunal where the parties fail to select a co-arbitrator among themselves.

The introduction of this new statutory regime for the default appointment of a three-member tribunal in multi-party arbitrations reduces delays and inefficiencies in the conduct of arbitral proceedings.

High Court’s and tribunal’s power to enforce confidentiality obligations

At present, parties and tribunals have a duty of confidentiality at common law not to disclose confidential information obtained in the course of proceedings or to use them for any purpose other than the dispute.

The second amendment explicitly recognises the powers of the arbitral tribunal and the High Court to enforce obligations of confidentiality, by making orders or giving directions where such obligations exist. The amendment’s focus is not on codifying such obligations of confidentiality, but to strengthen the parties’ ability to enforce these obligations.

In particular, sections 12(1)(j) and 12A(2) of the IAA empower both the arbitral tribunal and the High Court to make orders for enforcing confidentiality obligations when:

  1. The parties to the arbitration agreement have agreed to the same in writing, whether in the arbitration agreement or any other document;
  2. Under any written law or rule of law; or
  3. Under the rules of arbitration (of an arbitral institution or otherwise) agreed or adopted by the parties.

Takeaways

The amendments to the IAA bring Singapore’s legislative framework in line with important innovations in the global international commercial arbitration regime.

The provision for the default appointment of arbitrators in multi-party arbitrations increases the efficiency of the arbitral process for Singapore seated arbitrations. This addresses an important lacuna in the IAA in a scenario that is increasingly more common in disputes involving international commercial contracts.

The confidentiality amendment strengthens Singapore’s commitment to party confidentiality in arbitral proceedings by statutorily recognising the powers of the High Court and arbitral tribunal to enforce obligations of confidentiality.

Both changes are welcome developments that will cement Singapore’s reputation as a global dispute resolution hub of choice for savvy users. 

* This article may be cited as Wei Ming Tan and Dami Cha, “Amendments to Singapore’s International Arbitration Act to Enhance Statutory Regime” (14 December 2020) (Amendments to Singapore’s International Arbitration Act to Enhance Statutory Regime | Singapore International Arbitration Blog)

+Also published on CMS Law-Now.

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Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy ground for setting aside awards (BTN v BTP)

Arbitration Analysis: This decision clarifies the scope of the public policy ground for setting aside of arbitral awards. In dismissing the appellants’ application to set aside a partial award, the court makes it clear that arbitral decisions invoking the doctrine of res judicata remain final and binding on parties, notwithstanding arguments to the effect that a party is deprived of its right to a hearing as a result.

BTN and another v BTP and another [2020] SGCA 105

What are the practical implications of this case?

This decision clarifies the scope of the “public policy” ground for the setting aside of arbitral awards. The appellants contend that they were deprived from litigating on a vital component of their defence in an arbitration because the arbitral tribunal had determined that the matter before it was res judicata.

Whilst recognising that litigants adversely affected by the res judicata doctrine would often consider themselves to have been “unfairly deprived of their right to a hearing”, the court ultimately found that the doctrine of res judicata has long been part of the law of Singapore and its invocation is neither unusual nor should ever be described as “shocking the conscience or wholly offensive to informed members of the public”. 

The decision also clarifies the applicability of the res judicata doctrine in arbitral decisions – whether it goes toward a tribunal’s jurisdiction or the admissibility of a claim.

The court found that, even if an arbitral tribunal were to erroneously apply the res judicata doctrine in its award, this would not be a basis for setting aside the award. Errors of law or fact made in an arbitral decision are final and binding on parties and may not be appealed against or set aside on public policy grounds.

Only a decision on a tribunal’s jurisdiction is subject to a de novo independent review by the courts. Since an arbitral decision made on the basis of res judicata is a decision on admissibility, not jurisdiction, it is not subject to review.

What was the background?

The respondents, BTP and BTQ, are individuals. The first appellant, BTN, is a Mauritian company and the owner of the second appellant, BTO, a Malaysian company. The respondents were substantial shareholders in BTO and another holding company (“the Group”).

Pursuant to a Share Purchase Agreement (“SPA”) with BTN, the respondents sold their shares of the company and BTN assumed 100% control of the Group. Employed under certain Promoter Employment Agreements (“PEAs”), the respondents stood to gain an Earn Out Consideration of US$35m if they were dismissed without cause.

BTO purported to dismiss the respondents “With Cause”. Dissatisfied, the respondents went to the Malaysian industrial Court (“MIC”) and obtained MIC Awards which found that they had been dismissed without cause. Due to the appellants’ own internal reasons, they did not participate in the MIC proceedings.

The respondents commenced arbitration against both BTO and BTN for the Earn Out Consideration. In its partial award (“Partial Award”), the tribunal found in the respondents’ favour and held that the appellants were precluded by the MIC Awards from arguing that the respondents were terminated with cause (“Res Judicata Issue”).

The appellants applied to the High Court to set aside the Partial Award but failed. This was their appeal to the Court of Appeal against the High Court’s decision.

What did the court decide?

The appellants contended that:

(i) the tribunal committed a breach of natural justice in making the Partial Award;

(ii) the Partial Award is contrary to the public policy of Singapore; and

(iii) the tribunal’s decision on the Res Judicata Issue meant that it had failed to decide matters contemplated by and/or falling within the submission to arbitration.

No breach of natural justice in making Partial Award

The court held that the tribunal did not commit any breach of natural justice in making the Partial Award because it was not based on any facts in dispute. The Partial Award was clearly within the scope of the parties’ agreement for the tribunal to determine “all issues necessary to resolve whether the findings of the MIC are binding on both appellants”.

There was no breach of natural justice in the arbitral proceedings as the parties had submitted both the Construction and Res Judicata Issues to the tribunal for determination. Both appellants were given the opportunity to make submissions and did avail themselves of that opportunity through appointed counsel.

Partial Award was not contrary to Singapore’s public policy

The court held that the Partial Award did not contravene public policy since the doctrine of res judicata has long been a part of Singapore law and its invocation in the Singapore courts is not unusual.

The tribunal had decided the Res Judicata Issue in favour of the respondents, holding that the MIC Awards precluded the appellants from reopening arguments as to whether the respondents’ termination was “With Cause” under the SPA.

Even if the tribunal’s decision on the Partial Award was erroneous (which was not the case here), this would not have been a ground to set aside the Partial Award. As such, Singapore’s public policy would not have been engaged. 

The appellants’ contention that the respondents had breached the arbitration agreements in the PEAs by seeking recourse in the MIC proceedings was dismissed. The appellants failed to invoke the arbitration process during the MIC proceedings or to seek to restrain the further conduct of the MIC proceedings. Since the arbitration clauses were not invoked by either appellant, the respondents’ actions in bringing the MIC proceedings could not be impugned.

Error of law preventing tribunal from exercising its mandate

The appellants advanced a relatively novel argument that, if an award rests on an error of law by reason of which the tribunal was unable to exercise its mandate and determine the merits of the parties’ positions, such an award would be contrary to Singapore’s public policy.

The appellants argued that the tribunal’s decision on the Res Judicata Issue was such an error of law. The tribunal should not delegate or reserve matters submitted to it to another to decide.

The court disagreed, and held that determinations of res judicata issues go toward the admissibility of a claim, not a tribunal’s jurisdiction to hear a case. There was no good reason why erroneous decisions on res judicata should be treated any differently from other errors of law. Contrary to the appellants’ contention, the court found that the Res Judicata Issue was an issue that the tribunal had been specifically tasked to adjudicate on.

Tribunal’s decision on Res Judicata Issue not a failure to decide matters

The appellants argued that in holding that the MIC Awards precluded them from raising the issue of With Cause termination in the arbitration, the tribunal had abdicated its duty to decide that issue.

The court rejected this outright, and reiterated that the tribunal was specifically tasked to decide on the Res Judicata Issue, i.e. whether the MIC’s findings were contractually binding and had res judicata effect. The tribunal determined these issues in accordance to the parties’ agreement.

+First published on LexisPSL on 4 November 2020.

*This article may be cited as Wei Ming Tan, “Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy ground for setting aside awards” (4 November 2020) (Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy ground for setting aside awards (BTN v BTP) | Singapore International Arbitration Blog)

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Rights of representation in international arbitration: are you being heard?

A recent decision of the Singapore High Court declined to set aside a Singapore International Arbitration Centre (“SIAC”) award where the applicant asserted that the Tribunal had improperly excluded its General Manager from acting as co-counsel. This decision contains important guidance on the qualified nature of a party’s right to be heard, and re-emphasises the “light touch” taken by the Singapore courts in relation to reviewing arbitral awards. 

CGS v CGT

The applicant commenced an expedited SIAC arbitration in June 2018. In August 2018 it dismissed its initial legal counsel and was to be represented by its General Manager (the “GM”).

Paragraph 6 of the first Procedural Order (“PO1”) provided that, “[w]here a Party was represented by Counsel, communications with the Tribunal shall be with Counsel instead of the Party’s representatives”. Subsequently the applicant appointed new legal counsel (“Legal Counsel”) for the substantive hearing, during which, its Legal Counsel clarified that the GM intended to participate but would “solely” address the Tribunal for its Opening Statement.

Due to PO1, the GM was omitted from certain email communications with the Tribunal leading up to the hearing. At the hearing, the GM was “interrupted” during Opening Statement when the Tribunal requested a better explanation of an aspect of the claim, and was prevented from asking a question of a factual witness by the Tribunal.

The applicant subsequently applied to set aside the award on the basis that (i) the arbitral procedure was not in accordance with the agreement of the parties; (ii) the applicant was unable to present its case; and (iii) a breach of the rules of natural justice had occurred, and the applicant’s rights were prejudiced.

Exclusion from Email Correspondence

The Honourable Judicial Commissioner Andre Maniam held that there was no protocol for communications agreed between the parties, and that PO1 was not the parties’ “agreed procedure” for the purposes of a setting aside application under the Model Law. The Judge also held that PO1 did not infringe the parties’ right to representation, and the Tribunal could reasonably direct that there be only one line of communication between each party and the Tribunal.

Further, the Judge held that if the applicant considered its rights to have been infringed it should have raised its objection or applied to vary PO1 immediately, instead of raising the issue in a set-aside action. In circumstances where the applicant considered there to have been a fatal failure in the process, it ought to have complained and not simply press on with the hearing.

The Judge also noted that fairness of the procedure must be judged against what the parties contemporaneously communicated to the Tribunal. In the present case, the Legal Counsel had, in fact, acknowledged the Tribunal’s request to follow paragraph 6 of PO1 by email. Therefore, the Judge was of the view that there was no reason for the Tribunal to think that paragraph 6 of PO1 was objectionable. 

The Judge also found no merit in the applicant’s allegation that the omission of the GM from certain correspondence led to a document being served out of time, and so no prejudice was suffered by the applicant.

Conduct of the Hearing 

The respondent argued that rule 23.1 of the SIAC Rules (“any party may be represented by legal practitioners or any other authorised representatives”) required the parties to choose between either being represented by legal practitioners, or by other authorised party representatives (such as the GM). While rejecting the respondent’s argument and holding that rule 23.1 of the SIAC Rules does allow for representation by both legal counsel and non-legally qualified representatives, the Judge nevertheless dismissed the applicant’s complaint that it was unable to “present its case as intended”.

The applicant’s complaint was based on the grounds that the GM was interrupted in the Opening Submissions, and was also prevented from asking a question of a witness.

After reviewing the transcripts of the hearing, the Judge held that the alleged interruption was in fact “entirely innocuous” and that “it would be a sad day if such a complaint sufficed to set aside an arbitral award”. The Judge also ruled that the GM had only been granted permission to assist in the Opening Statement, and not with interrogation of witnesses.

Therefore, the Judge held that the Tribunal had been reasonable and fair in holding the applicant to what it had represented as being the GM’s role for the hearing. It was, in the Judge’s view, “fanciful and entirely speculative” for the applicant to argue that the GM had participated more extensively as co-counsel.

Conclusion

This case is an important reminder that the Singapore courts will not set an award aside lightly. Parties who choose to arbitrate in Singapore agree to give the Tribunal wide and flexible discretion to determine its own procedures and processes.

This case also reinforces that a party’s rights to be heard and to present its case are not absolute. While a party must be given a fair and reasonable opportunity to be heard, what is fair and reasonable will depend on the particular circumstances of each case. The Judge held that the Tribunal is entitled to make procedural decisions to give the parties a reasonable right to present their case, after weighing the competing considerations.

Finally, the decision emphasises how critical it is for parties to raise their objections on procedural unfairness (or anything else which may lead to an award being impugned) in a timely manner with the Tribunal. Where a party fails to do so, it cannot expect a sympathetic reception from the courts by belatedly trying to set aside the award based on the objections which should have been raised earlier.

References: CGS v CGT [2020] SGHC 183.

* This article may be cited as Jeremie Witt, Kelvin Aw, Lynette Chew, David Wright, Lakshanthi Fernando and Dami Cha, “Rights of representation in international arbitration: are you being heard?” (22 October 2020)

+Also published on CMS Law-Now.

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Arbitration Clause in Settlement Agreement Triggers a Stay of Court Proceedings on Case Management Grounds

In the case of PUBG Corp v Garena International I Pte Ltd and others [2020] SGCA 51 (“PUBG”), the Singapore Court of Appeal had to decide whether or not to grant a stay of the parties’ ongoing court proceedings (“Court Proceedings”) in favour of a subsequent arbitration arising out of a settlement agreement that was entered into between the parties in the midst of the Court Proceedings (“Settlement Agreement”). In the arbitration proceedings, the validity of the Settlement Agreement was the main issue to be determined by the tribunal.

In particular, the Court of Appeal had to decide whether or not to stay the Court Proceedings on “case management” grounds – a ground that was first recognised and developed in Singapore by Tomolugen Holdings Ltd and anor v Silica Investors Ltd and or appeals [2016] 1 SLR 373 (the “Tomolugen”). In essence, a “case management stay” was developed under case law whereas a “mandatory stay” is based on statute at Section 6(1) of the International Arbitration Act. A “mandatory stay” is granted where an arbitration is the proper forum to resolve the parties dispute and not the court (i.e. where the same issue that has been brought under court proceedings is in fact subject to an arbitration). In contrast, a “case management stay” is applicable to the situation where the particular issue to be resolved under the arbitration proceedings is different from that raised in the court proceedings. If the court is of the view that determination of the arbitrable issue would supersede or compromise the existing issues under the court proceedings, the court can grant a stay of the court proceedings albeit there being no overlapping issue between the arbitration and the court proceedings.

The Court of Appeal in PUBG found that the validity issue of the Settlement Agreement had to be resolved first by way of arbitration proceedings before proceeding with the Court Proceedings because a valid settlement between the parties would have the effect of dispensing the existing Court Proceedings – i.e. the arbitral tribunal’s ruling on the Settlement Agreement would have the effect of superseding or compromising the parties’ original claims under the Court Proceedings. Accordingly, in PUBG,a stay of the Court Proceedings was granted on case management grounds in favour of the arbitration proceedings arising from the Settlement Agreement. We discuss the Court of Appeal’s reasoning in detail and the implications of the decision in PUBG below.

Factual Background of PUBG

The Appellant initially commenced the Court Proceedings against the five Respondents alleging copyright infringement. Subsequently, the Court Proceedings were suspended in light of the Appellant’s proposal for the Settlement Agreement. After delaying the execution of the Settlement Agreement for a considerable amount of time, the Respondents finally accepted the settlement terms. However, the Claimant protested that it could no longer accept the Settlement Agreement, and argued that the Settlement Agreement was no longer valid.

The Settlement Agreement contained an arbitration clause which provided for “any dispute, controversy, claim or difference of any kind” arising in connection with the Settlement Agreement to be resolved by arbitration (the “Arbitration Clause”). The Respondents commenced an arbitration proceeding against the Appellant (the “Arbitration”), contending that the Appellant had acted in breach of the terms of the Settlement Agreement by alleging that the Settlement Agreement was not valid. The Respondents also applied for a stay of the Court Proceedings on case management grounds, pending the resolution of the Arbitration.

The High Court Judge granted a stay of the Court Proceedings on case management grounds in favour of the Arbitration. When the Appellant appealed against the decision, the Court of Appeal upheld the High Court’s decision and held that the Court Proceedings had to be stayed until the issue relating to the validity of the Settlement Agreement was resolved by the Arbitration.

Court of Appeal’s Decision in PUBG

In reaching its decision, the Court of Appeal recognised that there essentially existed two seemingly distinct disputes, (i) the dispute on infringement of intellectual property rights (i.e. the “primary” dispute under the Court Proceedings), and (ii) the dispute onthe validity of the Settlement Agreement (i.e. a “secondary” dispute under the Arbitration). However, the Court of Appeal ultimately took the view that such analysis of the parties’ dispute would not capture the “real essence” of the situation. The Court of Appeal was of the opinion that if there was a valid settlement that would effectively compromise the underlying claims of the parties, then the Court Proceedings could not proceed. Accordingly, the Court of Appeal held that the validity of the Settlement Agreement had to be resolved first. The Court of Appeal noted that, if the Settlement Agreement were held to be valid, this would supersede the original cause of action altogether. Hence, the question of whether the settlement exists between the parties had to be tried as a preliminary issue.

The Court of Appeal also held that the correct forum to determine the validity of the Settlement Agreement would be the Arbitration pursuant to the Arbitration Clause contained in the Settlement Agreement. The Court of Appeal stated that as long as the court is presented with what appears on its face to be a valid arbitration agreement, the court should allow any dispute that falls within such arbitration agreement to be determined by the arbitral tribunal.

In coming to its decision, the Court of Appeal also considered the following points relating to granting a stay of court proceedings on case management grounds.

First, the Court of Appeal cautioned that the Appellant could not seek to improve its own position by disregarding the Settlement Agreement and seeking to continue with the Court Proceedings on the ground that the issues that were being dealt with under the Court Proceedings and the Arbitration did not overlap. Even in such a case, the court could still exercise its inherent discretion to stay the court proceedings on case management grounds, as long as the issues that are being dealt with under the arbitration proceedings have a superseding effect on the issues of the original court proceedings. In this case, since a finding that the Settlement Agreement was valid under the Arbitration would have the effect of dispensing with the need to continue with the Court Proceedings, the Court of Appeal granted the stay.

Second, the Court of Appeal noted that the validity of the Settlement Agreement was not raised by the Appellant in the Court Proceedings. If the Appellant had raised the validity issue of the Settlement Agreement in the Court Proceedings, the Respondents could have applied for a mandatory stay under s 6 of the International Arbitration Act (rather than a case management stay). This is because in such a scenario, the issue to be determined under the Arbitration and the Court Proceedings would be identical, and resolution of that issue pursuant to the Arbitration would be mandatory pursuant to the parties’ Arbitration Clause. As discussed above, a mandatory stay is granted when the parties’ dispute, which was supposed to be subjected to the arbitration agreement, has instead been brought under court proceedings. On the other hand, a case management stay could be granted even when the issues that are being determined by the court do not overlap with the issues that are being handled by the arbitration tribunal. The purpose of a mandatory stay is to uphold the parties’ agreement to arbitrate their dispute, while the purpose of a case management stay is to ensure that the fair and efficient resolution of the parties’ dispute as a whole is achieved. However, as the subject matter of the Arbitration Clause (i.e. the validity of the Settlement Agreement) was only raised in the Arbitration and not in the Court Proceedings, the more appropriate stay that the Respondents could apply for was a stay on case management grounds.

Third, where the court is tasked with exercising its inherent power to grant a stay on case management grounds, the Court of Appeal found that the principles laid out in Tomolugen were relevant. In Tomolugen, it was held that the court should “take the lead in facilitating the fair and efficient resolution of the dispute as a whole”. Therefore, when granting a stay on case management grounds, the courts would have to balance three “higher-order concerns”: (1) preserving the plaintiff’s right to choose whom to sue and where, (2) upholding agreements to arbitrate, and (3) preventing an abuse of process. However, the Court of Appeal cautioned against applying the principles laid out in Tomolugen in a “mechanical” way. Instead, the court’s inherent power to grant a case management stay of court proceedings should be “exercised with due sensitivity and regard to the facts and in particular, the nature of the overlapping issues”.

Implications

The decision in PUBG has implications that parties must consider carefully. Namely, if two parties are engaged in a Singapore court proceedings but later execute a settlement agreement midway through the court proceedings, one party may invoke the arbitration clause contained in the settlement agreement and seek a stay of the original court proceedings on case management grounds.

Therefore, the parties should be wary of the effect that their settlement agreement (in particular, the arbitration clause contained therein) might have on their original court proceedings. If the arbitral tribunal’s ruling on the settlement agreement has the effect of superseding or compromising the parties’ original claims, then the Singapore courts are likely to grant a stay of the original court proceedings in favour of the pending arbitration for case management grounds. Hence, parties should be alert to the fact that their rights to resolve their original dispute under the court proceedings can be held in abeyance pursuant to a “case management stay” until their dispute on the settlement agreement (reached midway through the court proceedings) is resolved by way of an arbitration, even if the issue to be arbitrated was never raised in the court proceedings.

* This article may be cited as Dami Cha, “Arbitration Clause in Settlement Agreement Triggers a Stay of Court Proceedings on Case Management Grounds” (10 June 2020)

+Also published on CMS Law-Now.

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SGCA clarifies applicable standard of review in dismissal of winding-up proceedings in favour of arbitration

The coronavirus pandemic has left companies increasingly concerned about the possibility of winding-up as a result of a failure to pay debts. In a situation where a party’s disputed debt is subject to an arbitration clause, the debtor may wish to seek a stay or dismissal of any winding-up applications commenced against it before the court in favour of arbitration.

This issue came to the fore in the decision by the Singapore Court of Appeal (the “CA”) in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33. In particular, the CA examined the applicable standard of review that a debtor needs to satisfy in order for the court to order a stay or dismissal of winding-up proceedings.

Decided by a coram of five Court of Appeal judges, the CA resolved an apparent inconsistency in the applicable standard of review, concluding that in the situation where the debt was subject to an arbitration clause, the debtor only needs to meet the lower prima facie standard as opposed to the triable issue standard.

Background facts

The appellant, AnAn Group (Singapore) Pte Ltd (“AnAn”), entered into a global master repurchase agreement (the “Agreement”) with the respondent, VTB Bank (Public Joint Stock Company) (“VTB”). Under the Agreement, AnAn was required to maintain sufficient collateral for VTB. The Agreement also contained an arbitration clause to the effect that any dispute arising out of or in connection with the Agreement would be referred to arbitration.

AnAn failed to meet its obligations under the Agreement and VTB initiated winding-up proceedings against AnAn on the basis of a statutory demand for a debt of approximately USD 170 million.

In the High Court, AnAn argued that the winding-up proceedings should be stayed in favour of arbitration in accordance with the parties’ arbitration agreement. AnAn also argued that there was an event of frustration or force majeure and that the amount claimed was overstated.

Holding himself bound by the CA’s decision in Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268 (albeit reluctantly), the High Court Judge ruled in favour of VTB and ordered the winding-up of AnAn.

AnAn appealed against the High Court’s decision on the basis that:

  1. the appropriate standard of review where a dispute is governed by an arbitration agreement is the prima facie standard of review; and
  2. the threshold had been crossed in the current case.

The applicable standard

It is well established that a debtor “need only raise triable issues in order to obtain a stay or dismissal of [a] winding-up application” in litigation proceedings. The CA was faced with the issue of whether this same standard, i.e. the “triable issue” standard, would apply where the debt in question was subject to an arbitration agreement. After conducting a comprehensive survey of developments across a multitude of jurisdictions including England, Hong Kong and Malaysia, the CA clarified the applicable standard in Singapore.

In holding that the applicable standard of review was the prima facie standard, the CA pronounced that winding-up proceedings will ordinarily be stayed or dismissed as long as:

  1. there is a valid arbitration agreement between the parties, and
  2. the dispute falls within the scope of the arbitration agreement, provided that the dispute is not being raised by the debtor in abuse of the court’s process.

The CA reasoned as follows:

  1. Coherence in law

The CA concluded that adopting the prima facie standard, which is a “lower standard of review” in a situation where the dispute or the debt is subject to arbitration would promote coherence in the law.

In particular, the CA shared the view expressed by the English Court of Appeal in Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2015] Ch 589 (“Salford”) that parties to an arbitration agreement should not be encouraged to present a winding-up application as a tactic to pressure the alleged debtor to make payment on a debt that is disputed or which may be extinguished by a legitimate cross-claim.

Therefore, in resisting a winding-up application, the debtor would simply have to demonstrate on a prima facie basis that there is an arbitration clause, and that the dispute is caught in that clause. If the higher triable issue standard was to be applied, this would encourage the abuse of the winding-up jurisdiction of the court, which would not be the appropriate forum to adjudicate on disputed claims that are subject to arbitration.

  1. Party autonomy

The CA also opined that the triable issue standard when applied in the context of arbitrable disputes would offend against the principle of party autonomy, which is the “cornerstone underlying judicial non-intervention in arbitration”.

This was because the triable issue standard is one that requires a thorough examination of evidence, which would require the court to consider the merits of the defences. This would inevitably lead to displacement of the decision-making capacity of the arbitral tribunal in respect of the dispute. Hence, substantive prejudice may be caused to the parties if their choice of dispute resolution is not strictly adhered to.

The CA also noted that a party does not lose his genuine desire for recourse to arbitration just because his case may appear weak, and the courts should not undercut the bargain of the parties by examining the merits of the debtor’s defences irrespective of whether the debt is pursued by way of a court action or a winding-up application.

Exception to the prima facie standard

The CA observed that the prima facie standard would be subject to an overarching restriction – namely, that the court will not grant a stay of the winding-up proceedings notwithstanding that the prima facie standard has been met if the application for a stay amounts to an abuse of process.

The CA emphasised that the threshold for abusive conduct is “very high” and provided the following non-exhaustive examples:

  1. Where the debt is admitted as regards both liability and quantum;
  2. Where the debtor has waived or may be estopped from asserting his rights to insist on arbitration, such as where the parties have agreed subsequently that disputes may be resolved by litigation; and
  3. Where the debtor company is seeking to stave off substantiated concerns which justify the invocation of the insolvency regime. Examples include instances when assets have gone missing and there is an urgent need to appoint independent persons to investigate with a view of recovering the company’s assets, or when there is a proper basis to conclude that there had been fraudulent preferences or the need to engage the avoidance provisions in the Bankruptcy Act.

The CA also added that in cases where the applicant creditor can demonstrate legitimate concerns about the solvency of the debtor company as a going concern, and no triable issues are raised by the debtor-company, the court would be prepared to grant a stay of the winding-up proceedings. The creditor will then be given liberty to apply to the court to proceed with the winding up if, for example, it can be shown that the debtor company has no genuine desire to arbitrate the dispute and is taking active steps to stifle the arbitration.

Application

Having determined the applicable standard of review, the CA held that there was clearly a prima facie dispute in this case. It was uncontroversial that AnAn had disputed the debt amount that was due and owing, and that this dispute was governed by the arbitration clause in the Agreement.

The CA was also satisfied that there was no abuse of process on AnAn’s part. While AnAn’s arguments on frustration and force majeure (which were not pursued in the CA proceedings) were “misconceived or legally unsustainable”, that did not mean that AnAn made such arguments in bad faith. Further, while AnAn could have raised its objections earlier in the proceedings and could have fleshed out its case on the quantification of the debt amount in greater detail before the High Court Judge, this delay was not sufficient to show an abuse of process. The CA also considered it crucial that AnAn did not at any time expressly admit to its liability for the debt amount.

Accordingly, the CA reversed the High Court’s decision and dismissed the winding-up application. The CA considered ordering a stay inadequate, as a stay of the winding-up application would in itself carry severe consequences for AnAn (e.g. stifling critical capital injections into the company).

Takeaways

Following the CA’s decision, debtor companies (faced with a default on debts due to a force majeure event or otherwise) now have greater clarity on their rights in seeking a stay or dismissal of winding-up proceedings commenced against them based on a disputed debt that is subject to an arbitration clause. Conversely, creditors are now likely to be more circumspect in commencing winding-up proceedings in the face of an arbitration clause so as to avoid having their application stayed or dismissed.

The CA had to exercise a fine balance between any misuse by debtors of the prima facie standard to stay or dismiss winding-up proceedings on the one hand, and the possibility of abuse by creditors unliterally choosing the insolvency route to bypass their obligation to refer the dispute to arbitration on the other.

In deciding that the prima facie standard was the applicable standard of review, the CA took an arbitration-friendly approach in holding that any potential misuse by the debtor of the prima facie standard can be addressed by the abuse of process control mechanism. This would ensure that party autonomy is respected and preserved, and that the courts do not run the risk of displacing the arbitral tribunal’s role in adjudicating disputes that should have been subject to arbitration.

The CA decision is likely to have major implications for many companies in the face of the coronavirus pandemic, which has had a debilitating effect on the global economy. The decision safeguards against “trigger-happy” creditors who may attempt to use the commencement of winding-up proceedings to pressure debtor companies into unfavourable settlement agreements. At the same time, creditors pursuing legitimate debts have the assurance that debtor companies without a bona fide case would be caught by the abuse of process mechanism.

* This article may be cited as Wei Ming Tan, Dami Cha and Pradeep Nair, “ASGCA clarifies applicable standard of review in dismissal of winding-up proceedings in favour of arbitration” (30 April 2020)

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The SIAC Annual Report 2019: Findings and Takeaways in the light of COVID-19

In its recently released Annual Report 2019 (the “Report”), the Singapore International Arbitration Centre (“SIAC”) continues to report strong growth and positive numbers. We provide a summary of the Report’s findings and a few key takeaways, particularly in light of the COVID-19 pandemic and the unique challenges it is likely to present.

Record case filings and sum in dispute

2019 has been another watershed year for SIAC, with the arbitral institution reporting a record 479 new case filings in the past year. This was a significant increase from 2018, which had a total of 402 new case filings. Of the new cases filed, 87% (416) were international in nature; 13% (63) were domestic cases.

The total sum in dispute also rose by 14.6% to USD 8.09 billion from 2018. The average value of the new cases filed was USD 30.99 million, with new SIAC-administered cases valued at an average of USD 27.86 million. The highest sum in dispute for a single administered case was USD 1.41 billion.

Top users of SIAC

India emerged as the top foreign user of SIAC in 2019, contributing 485 cases to SIAC’s existing caseload. Whilst China (76) and the United States (65) remained in the ranks of top foreign users, countries like the Philippines (122), Brunei (49) and Thailand (39) joined these rankings for the first time, demonstrating SIAC’s growing appeal in the Asia Pacific region. SIAC’s top foreign users came from a mix of common and civil law traditions, belying Singapore’s status as a common law jurisdiction.

The geographical origin of parties for new cases remained extremely diverse, with parties coming from 59 jurisdictions ranging across the Americas, Africa, Europe, Asia Pacific and the Middle East.

Parties also filed their claims across a wide range of sectors, including corporate, trade, commercial, construction / engineering, maritime / shipping, banking / financial services (including cryptocurrency and blockchain), employment, insurance / reinsurance, IP / IT, media / broadcasting and real estate, to name a few. Corporate (140) and trade (100) accounted for the most cases, with the construction / engineering (76) and commercial (77) sectors following closely behind.

Arbitrator appointments

SIAC made a total of 159 arbitrator appointments in 2019. 145 of these appointments were for sole arbitrators and the other 14 were three-member tribunals. The majority of arbitrator appointments (138) were made under the SIAC Rules. The rest of the arbitrators were appointed for ad hoc arbitrations or under other Rules.

Another 138 arbitrators were nominated by parties in 2019 and confirmed by SIAC.

The arbitrators appointed by SIAC were geographically diverse and came from 25 different countries. SIAC is a strong proponent of gender diversity and female arbitrators accounted for 36.5% of the total appointed arbitrators. 30.3% of SIAC’s Court of Arbitration members are women, and women constitute 60% of SIAC’s Management and Secretariat.

Usage of procedural rules

Over the past decade, SIAC has introduced a number of innovative procedures designed to facilitate increased efficiency and flexibility in the resolution of disputes. Unsurprisingly, these have been widely adopted by users. Some highlights from the Report as follows:

  • The Emergency Arbitrator (“EA”) provisions have proved very popular since their introduction in the SIAC Rules 2010. In 2019, 10 EA applications were received and all 10 were accepted by SIAC. 94 EA applications have been made by parties since its introduction in 2010.
  • The Expedited Procedure (“EP”) was likewise introduced in 2010 as a time and costs-saving measure for parties. In 2019, 61 such requests were received out of which 32 were accepted. SIAC has received 534 EP applications since its introduction in 2010.
  • SIAC was one of the world’s first major arbitral institutions to introduce an Early Dismissal (“ED”) procedure in 2016. 8 ED applications were received in 2019. 5 ED applications were allowed to proceed – 1 application was granted, 2 rejected, and the other 2 are pending. Since its introduction in 2016, 30 ED applications have been filed, 18 allowed to proceed and 9 granted. The limited number of ED applications granted reflect the stringent threshold requirements that need to be met in order for a claim or defence to be dismissed at an early stage of the proceedings.
  • SIAC also introduced its consolidation and joinder provisions in 2016. In 2019, 53 applications for consolidation were received and 31 applications were granted by end 2019. 10 applications for joinder were received and 4 have been granted as at the end of 2019.

Governing laws

The governing laws of 20 jurisdictions were applied in disputes referred to SIAC in 2019. Of these, Singapore law (41%) was the most commonly applied, followed by that of India (24%) and the United Kingdom (16%).

Interestingly, the governing laws of a number of civil law and mixed law jurisdictions were also applied, including China, France, Indonesia, the Netherlands, the Philippines, Thailand and Vietnam.

Key takeaways

SIAC has enjoyed another bumper year in 2019, particularly with respect to the number of new cases filed and the value of the disputes being heard. The impressive numbers from the Report demonstrate a consolidation of SIAC’s position as one of the top arbitral institutions globally.

While there are many encouraging signs, the COVID-19 pandemic threatens to herald in a new economic downturn, not to mention creating new challenges on how disputes are to be adjudicated under the ‘new normal’. As the pandemic evolves, so have the measures taken by SIAC to adapt to these changes.

Although SIAC’s offices have been closed from 7 April 2020, it remains fully operational with all staff telecommuting in accordance with the Singapore government’s enhanced ‘circuit-breaker’ measures. Parties who wish to commence proceedings been requested to file their Notices of Arbitration via email; applications for emergency interim relief are likewise to be filed via email. All payments to SIAC are to be made via electronic bank transfers only. The Maxwell Chambers, SIAC’s usual venue for oral hearings, have also set up Virtual ADR Hearing solutions to replace in-person hearings.

Depending on the duration of the global pandemic, SIAC’s continued success in 2020 and beyond may depend largely on how the institution continues to innovate in respect to the conduct of its procedural hearings. The more successful SIAC is in implementing hearing procedures that are conducive to users kept apart by ‘safe distancing’ rules, the more confidence users are likely to have in referring their disputes to SIAC.

Given the agility with which SIAC has responded to users’ needs and concerns over the years, it would be interesting to see how the institution further innovates and responds to the challenges presented by the current crisis.

* This article may be cited as Wei Ming Tan, “The SIAC Annual Report 2019: Findings and Takeaways in the light of COVID-19” (15 April 2020) (https://singaporeinternationalarbitration.com/2020/04/15/the-siac-annual-report-2019-findings-and-takeaways-in-the-light-of-covid-19/).

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Arbitrability of IP disputes in Singapore – recent amendments to the AA and the IAA

Pursuant to the passing of the Intellectual Property (Dispute Resolution) Bill in August 2019, amendments have been made to, amongst others, the Singapore Arbitration Act (“AA”) and the International Arbitration Act (“IAA”) to clarify the arbitrability of intellectual property rights (“IPR”) disputes in Singapore. These changes came into effect on 21 November 2019.

The Key Amendments

By way of section 52B of the AA and section 26B of the IAA, both statutes now expressly stipulate that the subject matter of an IPR dispute is capable of settlement by arbitration.

Under the newly amended AA and IAA, “IPR” is defined to cover various IP-related rights, including patents, trade marks, registered designs and copyrights, amongst others. The list was deliberately kept non-exhaustive so as to allow for the flexibility of including new kinds of IPRs that may arise in future.

An IPR dispute is defined to include:

  • a dispute over the enforceability, infringement, subsistence, validity, ownership, scope, duration or any other aspect of an IPR;
  • a dispute over a transaction in respect of an IPR; and
  • a dispute over any compensation payable for an IPR.

Significantly, the arbitrability of IPR disputes under the amended AA and IAA will not be forfeited simply because a law of Singapore or elsewhere: (i) gives jurisdiction to a specific entity to decide the IPR dispute; and (ii) does not mention possible settlement by arbitration.

In relation to enforcement of arbitral awards, however, the amended AA and IAA do not consider a third-party licensee or third-party holder of a security interest in respect of the IPR (or any person claiming through or under the same) as a party to the arbitral proceedings. Therefore, such parties are not entitled to rely on the judgment enforcing the award and only the parties themselves or any persons claiming through or under them would be able to rely on the same. In other words, the judgment only has effect on the parties (in personam), and is not enforceable against the whole world (in rem).

Impact of the Amendments

With the amendments to the AA and IAA, the arbitrability of IPR disputes is now statutorily recognised in Singapore. This is a notable shift away from the past misconception that IPR disputes can only be adjudicated by national authorities or national courts. This serves to make arbitration a more attractive option for IP disputes users and will invariably enhance Singapore’s reputation as an arbitration hub of choice for savvy users.

Notwithstanding the statutory amendments, however, there still exists a limitation to the arbitrability of IPR disputes – namely, that arbitral awards obtained under the same will remain binding only on parties, and not third parties.

Despite the aforesaid limitations, the clarifications made to the arbitrability of IPR disputes are a welcome development. In particular, the amendments to the AA and IAA will provide the flexibility to accommodate different types of IPRs in various jurisdictions and new types of IPRs / IP-related disputes that may arise in the future.

* This article may be cited as Lakshanthi Fernando, Wei Ming Tan and Dami Cha, “Arbitrability of IP disputes in Singapore – recent amendments to the AA and the IAA” (30 December 2019)

+Also published on CMS Law-Now.

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