SINGAPORE HIGH COURT SETS ASIDE ARBITRAL AWARD FOR BREACH OF NATURAL JUSTICE

In the recent decision of JVL Agro Industries Ltd v Agritrade International Pte Ltd [2016] SGHC 126, the Singapore High Court set aside an arbitration award in favour of the defendant, Agritrade International Pte Ltd (“Agritrade”), on the basis that there had been a breach of the rules of natural justice.

In brief, the Court found (amongst other grounds) that:

  • The arbitral tribunal had reached its determination on the basis of an issue which Agritrade had not advanced in the proceedings; and
  • In doing so, the tribunal had failed to grant the plaintiff, JVL Agro Industries Ltd (“JVL“), a fair hearing.

This is a significant decision in Singapore, an arbitration-friendly jurisdiction where the local courts rarely intervene in the decisions of arbitrators.

 

The background

  • JVL entered into a series of 29 contracts to buy palm oil from Agritrade between July and November 2008.
  • In the second half of 2008, the market price of palm oil fell significantly below the parties’ contractually agreed prices.
  • JVL approached Agritrade to have a price-averaging arrangement (“PAA”) to allow JVL more time to discharge its contractual obligations and to average down the unit price of the palm oil. Meanwhile, JVL continued entering into new contracts with Agritrade to buy palm oil at the prevailing market price.
  • Eventually, JVL discharged almost all its purchase obligations, save for five (5) undischarged market price contracts (the “disputed contracts“).
  • By June 2010, the market price of palm oil had risen significantly. The parties were unable to agree on the prices to be reflected in the disputed contracts. As a result, JVL served a notice of default on Agritrade that it would purchase the remaining palm oil from the market and claim the difference against Agritrade.

 

The arbitration proceedings

  • In April 2011, JVL commenced arbitration against Agritrade at the Singapore International Arbitration Centre (“SIAC“).
  • JVL’s pleaded position was that Agritrade had failed to perform any of the disputed contracts despite promises to do so.
  • Agritrade’s main defences were that:
    • the PAA resulted in the disputed contracts being void for uncertainty (“Uncertainty Defence“); or
    • Even if the disputed contracts were not void, they had been mutually terminated (“Mutual Termination Defence”).
  • Agritrade abandoned its Mutual Termination Defence on the first day of the arbitration proceedings, resulting in its sole defence at the arbitration being the Uncertainty Defence.
  • Agritrade did not address the parol evidence rule at all in its defence. It was the tribunal that directed parties to address this issue.
    • The parol evidence rule provides that a party to a contract which has been reduced to writing cannot (unless one of a limited number of exceptions applies) rely on extrinsic evidence to vary, contradict, add or subtract from the contract.
  • The tribunal issued its award in October 2013, dismissing JVL’s claim with all three arbitrators agreeing that their decision turned on the issue of whether the PAA amounted to a collateral contract:
    • The majority found that the PAA amounted to a collateral contract that was capable of varying the parties’ obligations under the disputed contracts.
    • In a nutshell, the tribunal’s determination of Agritrade’s liability depended primarily on its determination of whether the PAA was a collateral contract falling within the exception of the parol evidence rule.

 

JVL’s application to set aside the award

Dissatisfied with the outcome, in January 2014, JVL applied to the Singapore High Court to set aside the arbitral award. JVL’s primary grounds were:

  • There was a breach of the rules of natural justice in the tribunal’s making of the award;
  • The arbitral tribunal’s decision on certain issues went beyond the scope of the arbitration; and
  • There was apparent bias on the part of the tribunal towards JVL.

Having heard the parties, the High Court suspended JVL’s application to set aside the award (i.e. exercising the Court’s power under Art 34(4) of the UNCITRAL Model Law), remitting the award back to the tribunal for it to consider whether it was necessary or desirable to receive further evidence or submissions on (amongst other things) whether the PAA amounted to a collateral contract. The tribunal declined to receive further submissions or evidence and rendered an addendum reaffirming its decision. JVL’s application to set aside the award resumed before the High Court after six (6) months.

 

The High Court’s decision

  • The Honourable Justice Vinodh Coomaraswamy observed that:
    • JVL and Agritrade failed to raise or address the parol evidence rule in their respective cases.
    • Although the parol evidence rule was addressed in the parties’ first exchange of written submissions (at the direction of the tribunal):
      • Agritrade chose not rely on the collateral contract defence as an exception to the parol evidence rule (“collateral contract exception”) despite having at least five (5) opportunities to do so; and
      • Neither party was directed to specifically address the collateral contract exception.
  • The Court allowed JVL’s application, holding that:
    • there was an insufficient nexus between the tribunal’s chain of reasoning and the cases advanced by the parties.
    • Significantly, the Court found that Agritrade’s defence was not merely silent on the collateral contract exception, but had implicitly rejected it.
    • As such, the majority of the tribunal had breached the rules of natural justice by depriving JVL of a fair hearing.
    • In particular, the Court found that the majority had exercised “unreasonable initiative” by impermissibly relieving Agritrade of the burden of establishing its defence.

 

Key takeaways

This decision is unlikely to open the floodgates. It affirms the trite legal principles that:

  • there should be a sufficient nexus between the reasoning which the tribunal adopts and the cases advanced by the parties. [In this case, neither party had advanced the collateral contract issue.]
  • each party should be given a fair and reasonable opportunity to present its case. [The court found that JVL had been deprived of a reasonable opportunity to present its case, particularly on an issue that turned out to be the determinative issue in the tribunal’s ultimate award, i.e. the collateral contract issue.]
  • an arbitral tribunal has the power to undertake inquisitorial processes under s. 12(3) of the International Arbitration Act (Cap. 143A). Once issues have been raised by the tribunal, the tribunal can incorporate those issues into its reasoning provided that the parties have been given the opportunity to address such issues. [In this case, the tribunal had raised the collateral contract exception on its own accord (possibly to avoid an “unattractive” outcome) and adopted a chain of reasoning that had no connection with the cases advanced by either party.]

Ultimately, this decision validates Singapore as a neutral, fair seat where the Courts – while known for their pro-arbitration stance – will adopt a robust approach when there has been a clear breach of the rules of natural justice. The courts at the seat of the arbitration proceedings have supervisory jurisdiction over the arbitration process and the parties should be secure and confident that such powers will be exercised when required.

 

With thanks to Lakshanthi Fernando.

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An overview: How do the key changes to the SIAC Rules compare with some of the other major arbitral institutions?

 

SIAC (2016 rules) ICC LCIA HKIAC
Consolidation of multi-contract disputes
Joinder of parties and non-parties

(Non-parties disallowed)

Early dismissal of claims/ defences

Delocalising the Seat of Arbitration

(Default seat is London if parties have not agreed; Parties can subsequently request another seat)

(Default seat is Hong Kong if parties have not agreed)

Remedy against non-paying party for unpaid deposits

Expedited procedure may be heard solely on documentary evidence

(Expedited procedure unavailable)

(Appears to be silent)

Emergency arbitration proceedings (appointment of arbitrator in 1 day)

(Appointment within 2 days)

(Appointment within 3 days)

(Appointment within 2 days)

Arbitrator’s appointment can be challenged; A reasoned decision to any challenge will be given and a fee is payable

(The former arbitrator’s fees are not fixed)

With thanks to Lakshanthi Fernando.

Posted in Arbitration, Asean, Dispute Resolution, Hong Kong, ICC, London, SIAC, Singapore | Leave a comment

SIAC 2016 Rules: The key changes

On 1 July 2016, the Singapore International Arbitration Centre (“SIAC“) published the latest revised set of SIAC Rules (“SIAC 2016 Rules“), which will come into effect on 1 August 2016. The SIAC 2016 Rules are available here.

The SIAC’s draft revised rules were released for public comment on 18 January 2016. In a previous blog post, we highlighted some of the key proposed changes relating to Multiple Contracts and Consolidation, Joinder of Additional Parties and the enhanced Emergency Arbitration Proceedings, which have since been finalised.

An Overview of the Key Changes

A. Consolidation of multi-contract disputes (Rules 6 and 8):

Rule 6 [Multiple Contracts]

  • At the time of arbitration proceedings, the claimant can choose to either:
    • File a Notice of Arbitration in respect of each arbitration agreement invoked and concurrently submit an application for consolidation of the arbitrations under Rule 8.1; or
    • File a single Notice of Arbitration in respect of all the arbitration agreements invoked, including:
      • A statement identifying each contract and arbitration invoked; and
      • A description of how the applicable criteria under Rule 8.1 are satisfied.

Note: By filing a single Notice of Arbitration, the claimant is deemed to have:

  • commenced multiple arbitrations (one for each arbitration agreement invoked); and
  • applied to consolidate all such arbitrations under Rule 8.1.

Rule 8 [Consolidation]

  • Complements Rule 6.
  • Prior to the constitution of the Tribunal, a party may apply for two or more pending arbitrations to be consolidated into a single arbitration, subject to any of the following criteria being satisfied:
    • The parties’ consent;
    • The claims are made under the same arbitration agreement; or
    • The compatibility of the arbitration agreements and the disputes arise out of:
      • the same legal relationship(s); or
      • contracts consisting of a principal contract and its ancillary contract(s); or
      • the disputes arise out of the same transaction or series of transactions.
  • After the constitution of the Tribunal, a party may apply to consolidate two or more pending arbitrations into a single arbitration. The same criteria as above applies with some additions:
    • The same Tribunal should have been constituted in each of the arbitrations; or
    • There is no Tribunal constituted in the other arbitration(s).

Who does a party apply to?

  • The Court of Arbitration of SIAC (“SIAC Court“) [if application is made before the Tribunal is constituted]; or
  • The Tribunal [after the Tribunal has been constituted].

Why is this significant?

  • Previous SIAC Rules were silent on the administration of multi-contract disputes.
  • SIAC 2016 Rules provide a streamlined process for managing disputes arising out of or in connection with multiple contracts/arbitration agreement.

B. Joinder of Additional Parties (Rule 7):

  • Parties and non-parties may apply to be joined in a pending arbitration.
  • Joinder application may be made before or after the Tribunal is constituted.
  • Criteria to be considered:
    • The additional party to be joined is prima facie (i.e. on the face of it) bound by the arbitration agreement; or
    • All parties (including the additional party) consent to the joinder.

Why is this significant?

  • Previous rules (SIAC 2013 Rules) only allowed a third party to be joined to the arbitration if the third party:
    • was a party to the arbitration agreement; and
    • provided written consent to be joined.

C. Early dismissal of Claims and Defences (Rule 29):

  • A claim or a defence may be dismissed early if it is “manifestly”:
    • without legal merit; or
    • outside the jurisdiction of the Tribunal.
  • Application is to be made to the Tribunal.
  • The Tribunal has the discretion whether to allow it.
  • If the Tribunal allows an application for early dismissal to proceed, it must issue an order or Award:
    • with reasons (which may be in summary form); and
    • within 60 days of filing of the application [unless (in exceptional circumstances) the Registrar extends the time].

Why is this significant?

  • While early dismissal proceedings are common in court litigation, SIAC is the first major commercial arbitration centre to introduce such a procedure.

D. Seat of the Arbitration delocalised (Rule 21):

  • If the parties have not / are unable to agree on the seat of the arbitration, the Tribunal shall determine the seat having regard to all the circumstances of the case.

Why is this significant?

  • Previously, if the parties have not or were unable to agree on the seat, the seat was (by default) Singapore [unless the Tribunal determined otherwise].
  • Parties who do not expressly state the seat of arbitration in their arbitration clauses should take note of this change.

[As covered in a previous post, the seat of the arbitration is important for a number of reasons, for instance the seat determines the procedural law and the courts which have supervisory jurisdiction over the arbitral proceedings.]

E. Remedy against a Non-Paying Party (Rule 27):

  • The Tribunal has the power to issue an order or award for the reimbursement of unpaid deposits towards the costs of the arbitration.

Why is this significant?

  • The previous rules (SIAC 2013 Rules) merely allowed the Tribunal to issue an award for unpaid costs of the arbitration.
  • The new rule addresses a significant practical issue for parties (usually the Claimants) who need to pay the required deposits towards the costs of the arbitration when a counterparty fails or refuses to pay its share.

F. Expedited Procedure (Rule 5):

  • The amount in dispute (i.e. the aggregate of the claim, counterclaim and any defence of set-off) for the expedited procedure to be invoked has been increased from S$5,000,000 to S$6,000,000.
  • The Tribunal now has the discretion to determine whether an Expedited Procedure case can be decided on the basis of documentary evidence only as long as this is done in consultation with the parties.

Why is this significant?

  • Previously, the parties’ agreement was required for an Expedited Procedure case to be decided based only on documentary evidence (i.e. without a hearing).
  • The increase of the monetary threshold will enable more cases to benefit from the expedited procedure.
  • The Tribunal’s expanded discretion on dispensation of a hearing may increase the efficiency and speed at which a decision is made.

G. Emergency Arbitration Proceedings (Rule 30; Schedule 1; and Schedule of Fees):

  • New timeline for appointment of Emergency Arbitrator: Within 1 day (instead of 1 business day) of receipt of application for emergency interim relief and payment of administration fee and deposits.
  • New time limit for issuance of interim award / award: Within 14 days from the date of Emergency Arbitrator’s appointment [unless, in exceptional circumstances, the Registrar extends time].
  • Fixed fees: S$ 25,000 (unless the Registrar determines otherwise).

Why is this significant?

  • Faster relief.
  • Certainty on fees.

H. Challenge of Arbitrators (Rules 14 to 16; and Schedule of Fees):

  • A fixed “challenge fee” of S$8,000 (or S$8,560 for Singapore parties) is set; and
  • A reasoned decision of the SIAC Court will be issued.

Previously, there was:

  • no fee payable for submitting a notice of challenge; and
  • no requirement for the SIAC Court to provide reasons for its decision.

Why is this significant?

  • In our view, the requirement to pay a “challenge fee” may discourage frivolous or unmeritorious applications designed to delay the proceedings.
  • Greater clarity for the parties on the reasoning behind any decision by the SIAC Court on such challenges.

Conclusion

With the launch of the 6th edition of its rules (the last version being only 3 years ago), the SIAC has once again showcased its proactive and robust approach to refreshing, reviewing and streamlining its procedures to meet the commercial demands of its users.

With thanks to Lakshanthi Fernando.

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Tackling law and jurisdiction in Asia deals

Transactional lawyers can spend a lot of time negotiating liability clauses, indemnities, warranties and termination rights.  However, governing law and jurisdiction often ends up being a short debate towards the end of the negotiation about “home territory”, without clear justification on either side for a particular approach. Disputes lawyers can recall countless occasions where they have seen all of the effort on liability, indemnities, warranties and termination rights defeated by a poorly-drafted governing law and jurisdiction clause. In fact, when it comes to Asia deals, we think it might just be the most overlooked boilerplate clause of all.

So how should you negotiate a governing law and jurisdiction clause in an Asia transaction? Here are our top tips.

What are the pitfalls?

Here are some points to watch out for:

  1. Postponing the discussion for later in the negotiation. This needs to be tackled up-front, as it may affect your whole approach to the remainder of the negotiation. It is one of the first clauses a litigator will look at in the event of a dispute, and it should be one of the first clauses to be dealt with in a negotiation.
  2. Always pushing for your own local law and courts. The single biggest misconception where cross-border Asia deals are concerned is to assume that to secure your home law and courts is a “win”. It’s usually not. A contract that is subject to your home law and courts might run into serious enforceability issues in many jurisdictions in Asia, where foreign judgments are not always enforced. Let’s say you’re a UK company signing a partnership deal with an Indonesian counterparty. You might assume that English law and English courts would be a big win, whereas the reality is that even if you get a favourable judgment in the English courts, that might be worth no more than the paper it is written on when you try to enforce it through the Indonesian courts. So what is the solution? The most effective dispute resolution mechanism, and increasingly the market practice, is to go with arbitration. Why? Because arbitral awards are usually enforced in countries that have signed up to the New York Convention (and that is 156 countries, including most in Asia) and arbitration (which is confidential in nature) is fast becoming the regional standard, although other options are also available and a strategic approach is needed.
  3. Accepting any element of a dispute resolution clause that relies on an agreement to agree. A good example is a clause that requires the parties to agree upon the venue and/or number of arbitrators. This is usually a bad idea as it is unlikely for parties to agree on anything once a dispute has arisen and it is difficult to advise on contract drafting and interpretation if the governing law has not been agreed. It’s best not to leave these kinds of decisions to be made later – avoid the risk of being held hostage.
  4. Getting drawn into a “my law” versus “your law” debate. Inevitably in international contract negotiations, there will be some trickier conversations about laws and jurisdictions that are perceived to be less attractive than others.  Unfortunately, this is a necessary conversation which must often be dealt with in a sensitive and delicate manner. Without naming them here, there are jurisdictions whose court processes are best avoided. Equally, we have seen offence caused when an international company suggests that the laws of their local partner are unreliable (which is a particularly difficult argument to make when that international company has chosen to do business in the country in question). Try to keep the discussion constructive and “win-win” for both parties by considering the following:
    1. Could a neutral law (e.g. English or Singapore law) be better for both parties?
    2. Could a neutral forum (e.g. arbitration in Singapore or London) be better for both parties?
    3. What is the market practice in the region?
    4. Could arbitration work better for reasons of confidentiality?

What is best practice?

Just as there is no one-size-fits all commercial contract, there is no one-size-fits-all governing law and jurisdiction clause.  However, there are some basic rules to follow to get you off on the right foot.

  1. If the parties are in the same jurisdiction: Unless it is a trickier jurisdiction (see above), the courts of that country are usually ok and the governing law of that country is usually ok.  However, you should still consider whether it would be best to opt for a neutral law and/or arbitration e.g. if you prefer disputes to be confidential, or if the counterparty is a state-owned enterprise and you prefer to draw a line between it and the local courts.
  2. If the parties are in different jurisdictions: Neutral law is usually the best compromise. Singapore law, Hong Kong law and English law are popular choices.  Do bear in mind that selecting the courts of one or other of the jurisdictions might be a bad idea when it comes to enforceability (see our second common pitfall, above).
  3. Specialist contracts.  The two rules above apply to common commercial contracts (e.g. licences, services, franchises and joint ventures).  However, there are certain specialist contracts (e.g. contracts with consumers, contracts relating to real estate and employment contracts) where special rules may apply.  Contacts with consumers should normally be governed by the laws of the jurisdiction where the consumer is based and the local courts should usually have jurisdiction to resolve disputes.  Clauses that require consumers to go to court overseas may be struck down as unfair (e.g. under consumer protection legislation).  Employment contracts are similarly usually governed by local laws and local courts (or employment tribunals if they exist) will usually hear any related disputes.  Finally, contracts involving land are usually governed by the laws of the relevant jurisdiction where the rights in land exist.

Practical takeaways

Any organisation is wise to build a contractual protocol for governing law and jurisdiction clauses. This can be done in six easy steps:

Step 1: Identify your key territories and build a matrix of positions – consider your preferred, fallback and dealbreaker positions for each territory.

Step 2: Build a clause library which covers all of your preferred and fallback positions, mapped to the matrix from Step 1.

Step 3: Building country and/or regional template contracts – for example, consider whether local laws might require a translation of the contracts in order for it to be enforceable.

Step 4: Consult with local lawyers in key territories on approach(es) and market / best practices, and get their input on your matrix and clause library.

Step 5: Capture data and review (preferably on at least a yearly basis). For example, if you’ve agreed to Singapore law and arbitration as a fallback in >50% of cases, consider whether to build it into your template so as to save time on negotiation.

Step 6: Have a plan for the unexpected with an appropriate internal sign-off process. Remember, this really could be the most important clause in the contract.

With thanks to Lakshanthi Fernando and Matthew Hunter.

*Originally posted on Connected Asia

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SINGAPORE CONFIRMS STATUS AS ASIA’S MOST SOUGHT-AFTER DISPUTE RESOLUTION HUB

Singapore has once again confirmed its status as Asia’s leading dispute resolution hub.

The ICC 2015 Report

The International Court of Arbitration of the International Chamber of Commerce (“ICC“) announced strong growth in Asia in 2015, with Singapore retaining her ranking as the number one seat of ICC Arbitration in Asia.

Key takeaways:

  • Singapore has been consistently ranked as the number one seat of ICC arbitration in Asia for the last 5 years.
  • Singapore has been ranked in the top 5 most preferred seats of ICC Arbitration in the world for the last 10 years.
    • In 2015, Singapore was the 4th most preferred seat globally for ICC Arbitration, with more than 6% of new ICC cases last year naming Singapore as the seat of arbitration.
  • An increase in the number of foreign parties choosing Singapore as a seat for arbitration.
    • In over 71% of Singapore-seated arbitrations filed in 2015, one or more of the parties was not Singaporean.
    • In almost 50% of these cases, a non-Singapore arbitrator was appointed.
  • The ICC recorded the second-highest number of new cases in its 93-year history.
    • 801 cases were filed in 2015.
    • The average monetary value of disputes submitted to the ICC in 2015 rose to US$84 million, with the largest dispute valued at over US$1 billion. The aggregate value of all disputes pending before the Court at the end of 2015 stood at US$286 million.

The Seat of Arbitration – Why is it important?

The choice of the seat is important for the following reasons:

  • The seat determines the law of the arbitration procedure and the courts of the seat have supervisory jurisdiction over the arbitral proceedings (including the right to intervene in the proceedings).
  • The law of the seat governs key issues such as how an award may be challenged, and whether an arbitrator has jurisdiction to hear a particular case.
  • Parties usually go to the courts of the seat to seek interim relief.
  • “Arbitration-friendly” seats tend to give parties a high degree of procedural autonomy, thereby facilitating the smooth progress of the arbitral process.

Points to note:

  • Identification of the seat is one of the most important features of an arbitration clause.
  • The seat of the arbitration can differ from the venue of the arbitration [i.e. location where the hearings may take place].
  • When choosing a seat, it is important to consider:
    • The effect of the local law of the seat on the conduct of the arbitration and the enforceability of the ultimate award; and
    • Whether the local courts are “arbitration-friendly” [for e.g. in less arbitration-friendly countries, the courts can have wider powers / discretion to control the arbitration process and tend to be more interventionist].

Comment

The ICC and SIAC statistics for 2015 reaffirm Singapore as the forum of choice for dispute resolution in Asia, with the Financial Times (FT) recently pronouncing that Singapore is becoming a world leader in arbitration.

As the FT noted, Singapore has a growing menu of options for sorting out disputes without litigation. Apart from ICC Arbitration, parties seeking to adjudicate their disputes in Singapore are spoiled for choice. Depending on their preferred choice of dispute resolution mechanism, parties can now elect to have their cases heard at the Singapore International Arbitration Centre (SIAC), the Singapore International Mediation Centre (SIMC), and the newly established Singapore International Commercial Court (SICC). Each of these institutions boasts a well-respected panel of arbitrators, mediators and judges of international calibre, from which parties can choose.

In the 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration, Singapore was named as the most improved arbitral seat. The survey is a positive endorsement of Singapore’s formal legal infrastructure, as it is based on factors such as: the neutrality and impartiality of the legal system; the national arbitration law; and its track record for enforcing agreements to arbitrate and arbitral awards.

The survey respondents also voted the SIAC as the second most improved arbitral institution, a testament to the quality of its administration and its reputation and recognition by the international community for its “internationalism“.

Posted in Arbitration, Asean, ICC, SIAC, SICC, SIMC, Singapore | 1 Comment

ARB-MED-ARB: THE FUTURE OF DISPUTE RESOLUTION?

What is Arb-Med-Arb?

Preserving relationships and maintaining confidentiality during a dispute has increasingly become a priority for savvy commercial parties.

Parties are therefore constantly exploring fresh avenues of Alternative Dispute Resolution (“ADR“) in order to minimise legal costs, preserve commercial relationships and achieve an expeditious resolution.

The Singapore International Arbitration Centre (“SIAC“) has collaborated with the Singapore International Mediation Centre (“SIMC“) to offer parties the Arb-Med-Arb Protocol (“AMA Protocol“), an attractive ADR option.

Under the AMA Protocol, parties who have commenced arbitration are to refer their dispute to mediation. If the mediation is successful, parties can then record their settlement agreement before the arbitral tribunal as an enforceable consent award.

The Stages

The AMA Protocol is relatively straightforward and easy to follow:

  1. Party A commences arbitration by filing a Notice of Arbitration (“NOA“) against Party B under the auspices of the SIAC.
  2. Party B files a Response to the NOA.
  3. The arbitral tribunal (“Tribunal“) is constituted.
  4. The Tribunal stays the arbitral proceedings and the dispute is referred to mediation under the SIMC.
  5. The SIMC mediation is to be completed within 8 weeks from the mediation commencement date.
  6. If the dispute is settled at mediation, parties can request that the Tribunal record their settlement in the form of a consent award.
  7. If the dispute is not resolved at mediation, the arbitral proceedings will resume.

Benefits of AMA

  1. The AMA process combines the advantages of mediation and arbitration into one to provide parties with an affordable and potentially expeditious ADR option.
  2. AMA allows parties to enjoy the confidentiality that arbitration provides, whilst retaining the flexibility of mediation so that parties can preserve their commercial relationships. This has taken on additional relevance in the present legal landscape as many contemporary contracts contain multi-tiered dispute resolution clauses obligating parties to use their “best endeavours” to resolve disputes before resorting to legal proceedings.
  3. The AMA Protocol provides parties with the option of recording their settlement agreement as a consent award, which is treated as an arbitral award and enforced in the same manner. This aids in the enforcement of settlement agreements as SIAC awards are recognised under the New York Convention.
  4. Mediation can help parties to avoid the pitfalls of interlocutory applications that frequently arise in arbitration / court proceedings, and to focus instead on the crux of the dispute and parties’ commercial interests.
  5. Under the AMA Protocol, the arbitrator(s) and mediator(s) are separately and independently appointed under the relevant arbitration and mediation rules to avoid issues of potential conflict of interests.
  6. SIMC’s mediators are independently certified by the Singapore International Mediation Institute (SIMI). The SIMC’s panel of mediators therefore meets the requisite high professional standards required to mediate complex cross-border disputes. The SIMC also has a panel of technical experts who can assist mediators in cases involving highly technical issues.

Model Clause

The SIMC and SIAC provide parties with Arb-Med-Arb Model Clauses that could be incorporated into their contractual agreements.

FAQ

Q: Are parties free to select the mediator(s) of their preference or are there any restrictions placed on the choice of mediators?

A: Yes. Parties are free to decide on their mediator(s) of choice from SIMC’s panel of mediators or any other mediator. If they cannot agree, a mediator will be appointed by the SIMC.

At last count, the SIMC’s panel of mediators consists of more than 65 mediators across multiple jurisdictions, with expertise in different areas of commercial practice, language skills and mediation styles. The aim is presumably to provide parties with the most appropriate mediator for their case.

 

Q: Are there any restrictions on the number of mediators that parties/the SIMC can appoint?

A: There is no prescription as to the number of mediators parties may wish to appoint. Notwithstanding so, generally, a single mediator is jointly appointed by the parties. If parties cannot agree, the SIMC will appoint a mediator on their behalf.

 

Q: How would mediation affect the timelines of an arbitration?

A: No impact. Once the mediation commences, the arbitral proceedings will be stayed.

If no final settlement is reached at mediation, the arbitral proceedings will resume.

 

Q: Must the AMA Clause be contained in the original contract between parties? Can parties choose to adopt the AMA Protocol later on down the road?

A: The AMA Clause does not necessarily need to be contained in the original contract between parties.

Parties can also adopt the AMA Protocol after a dispute has arisen. Both parties’ consent would be required.

Other Highlights

  • Since its launch in November 2014, the SIMC has received nine (9) cases, where the disputed sums range from just under SGD 1.5 million to more than SGD 600 million. These cases cover multiple sectors, including construction, oil and gas, shipping, aviation and sale/supply of goods and services.
  • The parties involved include companies from Singapore, the Cayman Islands, Germany, India, Korea, Laos, Macau, Malaysia, Myanmar, Taiwan, Thailand, the United States and Vietnam.
  • Three (3) of the nine (9) cases have been commenced under the AMA Protocol. Of these, two (2) cases proceeded for SIMC mediation after the commencement of arbitration; the other case went through the AMA process after the AMA clause in the parties’ original contract was triggered.

 

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SIAC ISSUES DRAFT RULES: KEY PROPOSED CHANGES

SIAC released draft revised rules for public comment on 18 January 2016.

The latest revision to the 2013 SIAC Arbitration Rules  aims to introduce “state-of-the-art” changes to take into account recent developments in international arbitration practice and the evolving needs of SIAC’s users.

An Overview of Key Proposed Changes

  • Multi-contract arbitration (Draft Rule 4) : A claimant may commence a single arbitration concerning disputes arising out of or in connection with multiple contracts subject to:
    • The parties’ consent; or
    • The compatibility of the arbitration agreements.
  • Joinder and Intervention (Draft Rule 7): Additional parties may be added upon the application by a party or non-party to the arbitration prior to the appointment of any arbitrators provided:
    • The additional party is a party to the arbitration agreement; or
    • If the additional party is not a party to the arbitration agreement, all parties including the additional party, consent to the joinder.
  • Consolidation (Draft Rule 8): Two or more pending arbitrations may be consolidated upon a party’s application where:
    • All parties consent to the consolidation; or
    • All the claims are made under the same arbitration agreement; or
    • The arbitration agreements are compatible.
  • Decision on Challenge (Draft Rule 16.1): If an arbitrator is challenged, the SIAC Court of Arbitration or Registrar hearing the challenge may request for the parties and the arbitrator to provide comments and/or submissions and may set a schedule for these comments and/or submissions to be made.
  • Replacement of Arbitrator (Draft Rule 17.3): The SIAC’s President may remove an arbitrator at his own initiative if the arbitrator does not conduct or participate in the arbitration:
    • With due diligence; and/or
    • In a manner that ensures the fair, expeditious and economical determination of the dispute.
  • Party Representatives (Draft Rule 22):
    • The Registrar and/or Tribunal may require proof of the authority of any party representatives;
    • Any party seeking to add to or change its representatives shall notify all parties promptly in writing; and
    • Any party seeking to change or add to its representatives after the full constitution of the Tribunal shall ensure that it does not engage a representative that may impact the composition of the Tribunal and/or the finality of any award that will be made by the Tribunal.
  • Tribunal’s commitment to closure of proceedings and draft award delivery (Draft Rule 30.1):
    • The Tribunal shall declare the proceedings closed no later than 30 days after the last hearing concerning matters to be decided in the award or the filing of the last Tribunal-directed submissions;
    • The Tribunal’s declaration of the closure shall be copied to the parties and the Registrar; and
    • If the Tribunal re-opens the proceedings (before any award is made), its shall seek a 30-day extension of the timeline to close the proceedings, if necessary .
  • Confidentiality of awards (Draft Rule 30.10):
    • The consent of the parties and the Tribunal is required before the publication of any award (the requirement that the names of the parties and other identifying information should be redacted remains).
  • Confidentiality of deliberations and discussions (Draft Rules 37.1 and 38.1):
    • The Tribunal’s deliberations shall be confidential.
    • The SIAC Court of Arbitration’s discussions and deliberations shall be confidential, unless the Court decides otherwise.
  • Waiver of right to object (Rule 39.4):
    • If a party proceeds with the arbitration without raising any objection to:
      • a failure to comply with any provision of the SIAC Rules or any other rules applicable to the proceedings; or
      • any direction given by the Tribunal; or
      • any requirement under the arbitration agreement relating to the Tribunal’s constitution; or
      • the conduct of the proceedings;

the party is deemed to have waived its right to object.

Emergency arbitration:

  • Seat of Emergency Arbitration (Draft Schedule 1, Rule 3):
    • If the parties have agreed on the seat of arbitration, this shall also be the seat of the proceedings for emergency interim reliefs.
    • In the absence of an agreement, the seat of emergency interim relief proceedings shall be Singapore, without prejudice to the Tribunal’s power to determine a more appropriate seat based on the circumstances of the case.
  • Expanded powers for Emergency Arbitrators (Draft Schedule 1, Rule 7):
    • Emergency Arbitrators shall have the power to award preliminary orders (in addition to interim reliefs).
  • Expanded scope of Registrar’s power (Draft Schedule 1, Rule 13):
    • The Registrar may shorten any time limits for interim and emergency relief proceedings.
  • Emergency Arbitrator’s fees (Draft Schedule of Fees, Clause 2):
    • The Emergency Arbitrator’s fees and expenses are capped at S$25,000 unless the Registrar determines otherwise.*

The public consultation period ended on 29 February 2016. The revised verson of the SIAC Arbitration Rules is expected to be effective in mid-2016.

On 1 February 2016, SIAC released its draft Investment Arbitration Rules for public consultation. This is a significant step by the SIAC to create a comprehensive set of specialised rules for investor-state arbitrations and a potential alternative to the ICSID and UNCITRAL Rules.

* The Emergency Arbitrator’s fees (excluding expenses) were previously capped at 20% of a Sole Arbitrator’s maximum fees.

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SIAC’S ANNUAL REPORT 2015: KEY TAKEAWAYS

On 25 February 2016, SIAC released its 2015 case statistics, revealing its record growth and the increasing use of Singapore law as the governing law of choice.

Key takeaways

  • Record growth:
    • Highest number of cases filed: 271 (22% increase from 2014 and over 300% increase over the last 10 years)
    • Highest number of administered cases: 244
    • Highest total sum in dispute: S$ 6.23 billion (24% increase from 2014)
  • Increasing international reach:
    • 271 new cases involving parties from 55 jurisdictions
    • 84% of the new cases were international in nature (i.e. where one or both parties were not Singaporean) compared to 81% in 2014
    • 42% of the new cases had no connection with Singapore
    • Top 5 foreign users were India, China, South Korea, USA and Australia in that order (India overtook China and the USA to be the biggest contributor to new SIAC cases in 2015)
  • Continued domestic relevance:
    • Singaporean parties continued to be the largest contributor of new cases
    • One-third of these cases involved companies that are the Singapore subsidiaries of international companies
  • More contracts with choice of law clauses:
    • In 95% of new cases filed, parties had included a choice of law clause in the underlying contract (5% increase from 2014)
    • Only 5% of new cases did not have a specified choice of law (compared to 10% in 2014)
  • Singapore law is the governing law of choice:
    • Singapore law continues to be the most popular choice of governing law followed by English law
    • Increase in Singapore law as the governing law of choice (10% rise from 2014)
    • Decline in English law as the governing law of choice (4% decline from 2014)

Revised Model Clause

In an effort to provide greater convenience, flexibility and certainty to contracting parties, SIAC harmonised its previous Model Clauses and released a revised Model Clause on 1 September 2015. SIAC’s Expedited Procedure Model Clause has been similarly updated.

Future growth

In January 2016, SIAC announced the launch of a representative office in the China (Shanghai) Pilot Free Trade Zone. Together with its existing overseas offices in Mumbai and Seoul, the SIAC continues to position itself for wider growth in significant Asian markets.

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Chartered Institute of Arbitrators Centenary London Conference Principles

The Chartered Institute of Arbitrators (CIArb) has plenty to be proud of – with over 13,000 members in more than 120 countries, CIArb has established itself as a leading global institution that supports the promotion, facilitiation and development of all forms of private dispute resolution. Its current Patron is none other than The Honourable the Chief Justice Sundaresh Menon, Chief Justice of Singapore.

CIArb celebrates its centenary year in 2015. To mark the occasion, conferences and events have been lined up around the world with a focus on looking ahead. The CIArb Singapore Centenary Conference, entitled “The Age of Innovation: Addressing The Perils & Promises of Arbitration”, will be held at the Marina Bay Sands on 3rd & 4th September. Find out more about the Conference here and register soon because seats are limited.

At the London Centenary Conference that was held from 1 – 3 July, CIArb launched and debated draft Principles which distil 10 key characteristics that are necessary for an effective, efficient and “safe” seat for conducting international commercial arbitration. The Principles relate to:

  1. Law
  2. Judiciary
  3. Legal Expertise
  4. Education
  5. Right of Representation
  6. Accessibility and Safety
  7. Facilities
  8. Ethics
  9. Enforceability
  10. Immunity

CIArb recognises that the Principles touch on potentially complex issues and hopes to further refine and define these principles in time. In many ways, what CIArb has done will help States, professional bodies and other arbitration stakeholders to focus on the most important issues that need to be addressed in order for international arbitration to flourish in any particular jurisdiction. In the ASEAN region, this of course has particular relevance for States such as Myanmar that are still in the early stages of developing what many would hope to be a reliable and investor friendly international arbitration framework (see our previous post on Myanmar’s Draft Arbitration Bill).

In a previous post, I offered a few reasons why Singapore has managed to establish itself as a preferred venue for international arbitration, not just within Asia, but globally. The CIArb Centenary London Conference Principles provide a very useful reference or yardstick against which Singapore’s success as a seat for international arbitration can be mapped.

Interestingly, in his Patron’s Address at the London Centenary Conference, The Honourable the Chief Justice Sundaresh Menon, Chief Justice of Singapore shared very candidly about how the international arbitration landscape in Singapore had steadily developed over the years. I hope to share some thoughts on this subject in a subsequent post.

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The rise and rise of Singapore: Singapore as a preferred venue for international arbitration

Could Singapore become the most popular destination for international arbitration? LexisPSL’s Stephanie Boyer recently interviewed me to get my thoughts on the subject. The full interview with LexisPSL can be found here.

With a revised International Arbitration Act and a modern, well-respected arbitral institution, is Singapore en route to being the most popular arbitral centre?

Singapore has already developed a strong reputation within the international business community as a preferred venue for international arbitration, not just within Asia, but globally. The sensible revisions to the International Arbitration Act over the years and the high quality of the Singapore International Arbitration Centre (SIAC) have certainly contributed to Singapore’s success in this regard, but there are also several other factors which must not be overlooked. For example, many parties that conduct business internationally value Singapore as a neutral venue that is free of corruption. They have confidence in the level of professional service and efficiency within Singapore, particularly within the legal industry. The fact that many of the world’s largest banks and multinational corporations (MNCs) have their regional headquarters or a significant presence in Singapore gives them further reason to want to seat their arbitrations in Singapore.

What message do recent appointments to Singapore give, such as Judith Gill QC’s move?

We’ve seen this trend developing over the years. There has been a marked increase in the number of high-quality arbitration practitioners who ply their trade in Singapore across a sizeable number of international and local firms. All of this has contributed to:

  • businesses having better access to talented arbitrators and arbitration counsel based in Singapore
  • Singapore further enhancing its position as an international arbitration hub
  • an increasingly competitive environment in which arbitration practitioners in Singapore are learning to operate–more and more businesses will start to look at how arbitration practitioners differentiate themselves through their areas of focus and the quality of their work

What limitations does Singapore have as an arbitral centre?

Businesses tend to think regionally when selecting a venue for arbitration. For example, European parties involved in a project based entirely within Europe would usually prefer to hear arbitration disputes in Paris or Geneva. To that extent, Singapore may not necessarily attract such disputes and, you could say, that this acts as a limitation of sorts. Having said that, each year the SIAC still manages to attract a significant number of disputes involving parties, projects or matters that have no connection with Singapore. In 2013, almost 50% of new cases filed at the SIAC fell within this category. This shows just how much regard businesses have for the SIAC and Singapore as an arbitral venue.

Furthermore, the recent trend is for businesses in Asia and South-East Asia to feature in both inbound and outbound investments across a variety of commercial sectors. This has contributed to the growing number of arbitrations seated in Singapore–and the trend looks set to continue.

How does the court’s attitude impact on Singapore as an arbitral centre?

In order for arbitration to be successful in any jurisdiction and for parties to rely on it as a speedy and cost-effective form of dispute resolution, it is crucial that arbitration practitioners and arbitrators maintain high-quality standards. Parties must also have confidence that the judiciary is fully supportive of arbitration. Singapore is fortunate to have a strong and arbitration-savvy judiciary that has developed a reputation and track record for being non-interventionist when it comes to the arbitration process. At the same time, parties have confidence that valid arbitral awards will be enforced. The court’s attitude to arbitration has been critical in allowing arbitration to thrive in Singapore.

How do you see this trend developing?

I think that over the next few years, Singapore will continue to grow its reputation not just as an arbitral centre, but also as a global dispute resolution hub. The recently launched Singapore International Commercial Court (SICC) will attract high-value international commercial disputes. When considered together with the Singapore International Mediation Center (SIMC) and the SIAC, the collective offering sends a very strong signal to the international business community that Singapore is serious about enhancing its already stellar reputation as a hub of dispute resolution. In practical terms, for international businesses, the SICC gives them yet another Singapore-branded dispute resolution option to consider. I think that in time, the likes of the SICC and the SIMC will ultimately grow the pie for dispute resolution practitioners in Singapore.

Moving forward, I expect that in line with the growing trend for international technology and media businesses to target the immense market potential within the ASEAN region and in India, we will soon start to see more disputes from the technology and media sectors being determined through arbitration in Singapore.

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