Singapore’s MinLaw launches Public Consultation on Amendments to International Arbitration Act

In June 2019, Singapore’s Ministry of Law (“MinLaw”) announced that it will be holding a public consultation on certain proposed amendments to the International Arbitration Act (Cap. 143A) (the “IAA”). This follows a written response provided on 1 April 2019 to a parliamentary question on whether MinLaw would consider reviewing the IAA to provide an avenue of appeal in relation to errors of law in arbitral awards.

We summarise the proposed amendments to the IAA – including 2 proposals from third parties – and provide brief comments.

1. Introducing a default mode of appointment of arbitrators in multi-party situations

Under the current IAA, the mode of appointment of arbitrators only applies to situations where there are two parties to the arbitration agreement. As multi-party arbitrations become increasingly more common, the proposed amendment provides for guidance under the IAA on the mode of appointment of arbitrators in multi-party cases.

2. Allowing parties to, by agreement, request the arbitral tribunal to decide on jurisdiction at a preliminary stage

At present, the IAA permits the arbitral tribunal to decide on the issue of jurisdiction either at a preliminary stage or when making the final award. The proposed amendment enables parties to jointly request the tribunal to decide on the issue of jurisdiction at a preliminary stage so that parties can enjoy savings in time and costs.

3. Recognising that an arbitral tribunal and the High Court have powers to enforce obligations of confidentiality in an arbitration

Confidentiality is one of the key features of arbitration. At present, parties and the tribunal have a duty of confidentiality under common law not to disclose confidential information obtained in the course of proceedings or to use them for any purpose other than in respect of the dispute. Most major arbitral institutions also have rules expressly providing for confidentiality in relation to all matters surrounding an arbitration. The proposed amendment to the IAA gives explicit recognition to the powers of the Court and the arbitral tribunal to enforce these duties of confidentiality.

4. Allowing parties to appeal to the High Court on a question of law in an award based on an opt-in mechanism

Currently, parties may only apply to the High Court to set aside an arbitral award on relatively limited grounds only – that is, on the grounds of fraud or corruption in the making of the award, or where there is a breach of the rules of natural justice, or where an award is in contravention of Singapore’s public policy.

The proposed amendment introduces an opt-in mechanism for parties to incorporate a right for them to appeal to the High Court on a question of law arising out of an arbitral award. This allows parties who prefer greater court supervision on issues of law to make a deliberate choice for curial supervision of such a nature. Parties who prefer the arbitral tribunal to have the final say on matters of law will remain unaffected as they can simply elect not to opt in to this new mechanism.

Apart from the 4 amendments proposed by MinLaw, 2 other third party proposals are up for consideration.

5. Allowing parties to agree to waive or limit the annulment grounds under the Model Law and the IAA

This is the mirror image of the 4th proposal above. Instead of broadening the grounds for setting aside an award, it seeks to further limit these grounds by giving parties the option to limit or waive, by agreement, the annulment grounds set out in section 24(b) of the IAA and article 34(2)(a) of the UNCITRAL Model Law (“Model Law”). Such an agreement can only be made after the award has been rendered.

6. Allowing the Court to have the power to order costs in certain arbitral proceedings

Presently, the High Court has no power to make an order on costs in respect of arbitral proceedings where an award has been set aside. This is problematic because the tribunal would usually be functus officio in such cases and will not be able to make any further orders on costs.

The proposal considers whether legislative amendments should be introduced to empower the High Court to make an order on costs after a successful application to set aside an award. The proposal also considers whether similar amendments should be made to the domestic Arbitration Act (Cap. 10).

Comment

  • In the past decade, Singapore’s popularity as an arbitral seat has gone from strength to strength. The authoritative Queen Mary University of London’s 2018 International Arbitration Survey ranked Singapore as the third most preferred seat and the Singapore International Arbitration Centre as the third most preferred arbitral institution in the world. The proposed IAA amendments represent MinLaw’s continued efforts to promote Singapore as a global dispute resolution hub of choice for savvy and well-connected commercial parties.
  • The proposal to give parties the power to appeal to the High Court against errors of law in an award is eye-catching. The opt-in mechanism is an important touch as it mitigates against potential criticism that the Singapore courts are seeking greater curial intervention in arbitral proceedings. Party autonomy is preserved as parties are at liberty not to incorporate this option to their arbitral proceedings if preferred.
  • Conversely, parties that prefer minimal curial intervention to arbitral proceedings will welcome the proposal to limit the grounds for annulling an award under section 24(b) of the IAA and article 34(2)(a) of the Model Law.
  • The proposal to allow the Court to make an order on costs in respect of arbitral proceedings where there has been a successful setting aside application is sensible and timely. Section 10(7) of the IAA already empowers the Court to make orders as to costs in respect of jurisdictional challenges, so there is no reason why such powers should not be extended to cases where the Court set asides an arbitral award.
  • The public consultation is being held from 26 June to 21 August 2019. All feedback is to be submitted to MinLaw by post or email on 21 August.

* This article may be cited as Wei Ming Tan and Pradeep Nair, “Singapore’s MinLaw launches Public Consultation on Amendments to International Arbitration Act”  (6 August 2019) (https://singaporeinternationalarbitration.com/2019/08/14/singapores-minlaw-launches-public-consultation-on-amendments-to-international-arbitration-act/)

+Also published on CMS Law-Now.

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Singapore High Court refuses to set aside arbitral award for alleged suppression of evidence

Introduction

Can an arbitral award be set aside on the grounds of fraud or breach of public policy on the basis that a successful party failed to call certain witnesses and/or failed disclose certain internal documents it did not consider relevant to the arbitration? This was the issue that confronted the Singapore High Court (the “Court”) in BVU v BVX [2019] SGHC 69.

Background

In response to spiralling food prices and growing concerns about scarcity, the South Korean government embarked on a project to secure long-term lines of food supply from international sources to supplement domestic food supply (the “Project”). The Defendant, a state-owned company, was appointed to spearhead the Project (the “Purchaser”). The Purchaser was introduced to the Plaintiff (the “Supplier”) which recommended that the Purchaser procure food from South America (the “Products”). After governmental approval was obtained, the Purchaser and Supplier formally entered into an agreement (the “Agreement”).

The material terms of the Agreement were as follows:

  1. The Supplier shall be the Purchaser’s “most preferred Supplier”;
  1. The Agreement would commence on 1 October 2012 for a period of 20 years (or until terminated in accordance with the termination clause);
  1. The Purchaser would use its “best commercially reasonable effort to order and purchase” the Products during the course of the Agreement in accordance with the forecast range which was defined to be a “[m]inimum of 1,000,000 tons in total per annum”;
  1. The Agreement was to be governed by the “rules of the Vienna Convention on Contracts for the International Sale of Goods” and that disputes arising out of or in connection with the Agreement were to be finally settled by Singapore-seated arbitration in accordance with the ICC Rules.

A few months after the Agreement was signed, the Purchaser informed the Supplier that it had entered into a Memorandum of Understanding with one of the Supplier’s competitors. Subsequently the Purchaser provided the Supplier with a forecasted range that was well below the forecast range in the Agreement and began a public tender process for the supply of Products (which it invited the Supplier to take part in).

The arbitration

The Supplier commenced arbitration against the Purchaser claiming USD 2.25m in damages plus interest for various breaches of the Agreement among other requests for relief. Before the oral hearings for the arbitration took place, the Purchaser indicated that it would only call one factual witness and not three other individuals who the Supplier had identified in its Statement of Claim as being involved in the negotiations for the Agreement. The Supplier applied to the arbitral tribunal for an order that the Purchaser procure the attendance of these three individuals as witnesses in the arbitration but this application was not successful.

The hearing proceeded with the Purchaser calling its sole factual witness, who was not involved in negotiations leading to the Agreement but who was, at the time of the arbitration, responsible for the purchase and sale of the Products and for monitoring the performance of the Agreement with the Supplier. The Purchaser also called on two expert witnesses to give their opinions on comparative and Korean Law.

The award was subsequently issued in favour of the Purchaser by the majority of the tribunal with one dissenting opinion.

On the balance of the parties’ arguments, the majority concluded, amongst other things, that a reasonable person in the same circumstances as the parties would not expect that the Purchaser’s obligation to use “best commercially reasonable effort” to purchase Products under the Agreement would require the Purchaser to act in contravention of Korean public procurement law. The majority further considered that the Purchaser had satisfactorily discharged its obligations under the Agreement by calling a public tender and inviting the Supplier to participate.

While the majority found that the Purchaser was not in breach of the Agreement, the dissenting arbitrator held that adverse inferences ought to be drawn in respect of the Purchaser’s decision not to produce its employees who were involved in the contractual negotiations of the Agreement and that the Purchaser was in breach of the Agreement because the parties had not anticipated that purchases under the Agreement would only be made by way of conducting public tenders.

Post-award applications before the Singapore High Court

After the award was issued, the Supplier’s Korean solicitors were able to reach out to one of the three witnesses who the Purchaser declined to call as a witness in the arbitration to give evidence in favour of the Supplier for the purpose of setting aside the Award (the “Witness”). The Supplier subsequently applied to the Court to set aside the award on the basis that as a result of the Purchaser’s failure to call the Witness to give evidence in the arbitration: (1) The award was induced or affected by fraud or corruption; and (2) The award is in conflict with the public policy of Singapore.

The Supplier then procured the issuance of a subpoena to the Witness to disclose certain categories of documents, which were all essentially the Purchaser’s internal documents (the Witness was unable to disclose these documents without a subpoena as he was subject to confidentiality obligations as an employee of the Purchaser). The Purchaser applied for the subpoena to be set aside. The Court then directed that the applications for setting aside the Award and the subpoena be heard together.

Decision

The Supplier’s application to set aside the Award

After a review of local cases, the Court observed that a high threshold had to be met for an award to be set aside for fraud or a contravention of public policy and that in order for the non-disclosure or suppression of evidence to warrant the setting aside of an award, three requirements have to be satisfied:

  1. It must be shown that there is deliberate concealment aimed at deceiving the arbitral tribunal;
  1. There must be a causative link between the deliberate concealment and the decision in favour of the concealing party; and
  1. There must not have been a good reason for the non-disclosure.

The Court ultimately found that the Supplier failed to make out all of the requirements above. We highlight the following key observations of the Court:

  • The disclosure obligations of a party in an arbitration are not as wide as those in common law jurisdiction court proceedings. In the latter case, there is a continuing obligation to disclose documents relevant and material to the case, including documents which have the potential to adversely affect the party’s own case or support the counterparty’s case.
  • Under the IBA Rules on the Taking of Evidence in International Arbitration (which governed the procedural aspects of the arbitration), the Purchaser was not under a general obligation to produce all documents that could be relevant and material to its case or to call particular witnesses unless it was seeking to rely on his or her testimony.
  • The Tribunal had already thoroughly considered the question of whether the Witness should be called to give evidence in the arbitration. By the Purchaser’s own admission, the Witness’s purpose was “to further corroborate” factual allegations – suggesting that the Witness’s testimony was not material but at best cumulative.
  • In any event, it appeared to the Court that the Tribunal had invited submissions from the parties on whether certain witnesses (including the Witness) should be called to give evidence and ultimately decided that it would not direct the witnesses to give evidence. In the circumstances, it seemed to the Court that the Supplier had simply been unable to persuade the Tribunal to secure the attendance of the Witness, as opposed to a case where the Purchaser had fraudulently suppressed the Witness’s evidence.
  • There is no obligation to call a particular witness in international arbitration and the decision to take the risk of having an adverse inference drawn (in the event the decision is made not to call a witness) is part of the adversarial process and not unconscionable conduct.

The Purchaser’s application to set aside the subpoena

The Court noted that the threshold for setting aside a subpoena, which is not easily surmountable, was crossed in the present case. Given the Court’s observations on the setting aside application, it concluded that the documents sought via the subpoena were legally irrelevant and/or unnecessary for the determination of the setting aside application. The Court also held that the subpoena was an abuse of process as it was an attempt by the Supplier to reopen the arbitrated dispute though a backdoor appeal on the merits.

Comment

  • In reiterating the high threshold for the setting aside of an arbitral award, the Singapore Courts are once again reaffirming its support of party autonomy and finality in international arbitration.
  • This case highlights the different disclosure regimes under common law litigation and international arbitration and the different disclosure obligations a party is subject to under each adjudication mechanism.
  • Parties should be mindful of their potential future disclosure obligations when deciding on a particular dispute resolution mechanism in their contracts. Had this dispute been subject to the exclusive jurisdiction of the Singapore Courts, both parties would have been obliged to disclose all relevant and material documents, even documents detrimental to their case and helpful to their counterparty’s case.
  • If the parties to a Singapore seated arbitration have concerns about the production of documents, they should seek curial assistance as soon as possible and while the arbitration is ongoing (under section 13 of the International Arbitration Act) as opposed to waiting until the outcome of the arbitration. The latter approach is likely to be perceived – as it was in this case – as an attempt to re-arbitrate the merits of the substantive dispute.

* This article may be cited as Pradeep Nair and Wei Ming Tan, “Singapore High Court refuses to set aside arbitral award for alleged suppression of evidence”  (30 July 2019) (https://singaporeinternationalarbitration.com/2019/08/13/singapore-high-court-refuses-to-set-aside-arbitral-award-for-alleged-suppression-of-evidence)

** Originally published on CMS Law-Now.

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Between a rock and a hard place: Singapore High Court lifts stay of court proceedings on non-commencement of arbitration

Introduction

Is a court entitled to lift a stay of proceedings in favour of arbitration if the conditions for lifting the stay have not been met? This is what the Singapore High Court (the “Court”) had to consider in Gulf Hibiscus Ltd v Rex International Holding Ltd and anor [2019] SGHC 15.

In a follow up to an earlier, related decision in 2017 (where the court gave its reasons for ordering a stay – discussed here), we examine the Court’s reasoning for lifting the stay and provide some key takeaways.

The parties

The plaintiff, Gulf Hibiscus Ltd (“Plaintiff”), is one of 3 shareholders of Lime Petroleum PLC (“Lime PLC”). The other shareholders are Rex Middle East Limited (“RME”) and Schroder & Co Banque SA (“Schroder”).

The first defendant, Rex International Holding Limited, is the ultimate holding company of RME. The second defendant, Rex International Investments Pte Ltd, is the intermediate holding company of RME, and a wholly owned subsidiary of the first defendant (the two defendants are collectively referred to as the “Defendants”).

Background

The Plaintiff commenced Suit No. 412/2016 (the “Suit”) against the Defendants in respect of alleged wrongs committed by the Defendants and their associated companies in relation to a joint venture.

The dispute concerns a Shareholders’ Agreement (the “SHA”) which governed the relationship between the Plaintiff, RME, Schroder and Lime PLC. Clause 25.2 of the SHA provides a tiered dispute resolution mechanism, (1) starting with amicable resolution, (2) followed by negotiations between the principal officers of each shareholder, and (3) finally arbitration under the existing Rules of International Arbitration of the International Chamber of Commerce (the “ICC Rules”).

The Defendants sought a stay of the Suit, which the Assistant Registrar (“AR”) granted on the basis of the court’s inherent jurisdiction to stay proceedings in the interest of case management. The Plaintiff appealed but the Court affirmed the AR’s decision and allowed the stay on (among other things) the condition(s) that:

If the tiered dispute resolution under cl. 25.2 of the SHA is not triggered by any of the parties to the SHA within three months from the date of this judgment and an arbitration is not commenced within five months from the date of this judgment, the parties shall be at liberty to apply to the court to lift the stay.

The Plaintiff’s case

In April 2018, the Plaintiff applied to lift the stay based on the non-satisfaction of the events specified in the condition(s) of stay.

First, the Plaintiff argued that RME had failed to take “all reasonable endeavours to resolve the matter amicably” and had in fact obstructed its resolution. The Plaintiff alleged that RME failed to take the negotiations seriously, and foreclosed the amicable settlement of the dispute before changing its position subsequently, showing a lack of sincerity. The Plaintiff further alleged that the Defendants had breached cl. 25.2 of the SHA by nominating someone other than the Chairman of RME to attend the negotiations between the principal officers of the parties.

Second, the Plaintiff argued that since arbitration had not commenced within five months from the date of judgment, the stay ought to be lifted.

The Defendants’ case

The Defendants argued that the stay should not be lifted as the conditions for lifting the stay were not met.

First, the Defendants emphasised that RME had issued a notice under cl. 25.2 of the SHA on 23 November 2017 (i.e. within 3 months of the date of the judgment) inviting the Plaintiff to attend a meeting to resolve the dispute. As such, since the first of the two contemplated events had occurred, the Plaintiff was not entitled to apply to lift the stay.

Second, the Defendants argued that the Court should not exercise its discretion to lift the stay as this would effectively permit the Plaintiff to circumvent the arbitration agreement in cl. 25.2 of the SHA. The Defendants submitted that the stay was granted on the basis that the Plaintiff’s right to choose whom to sue and where was a first order concern subject to two other higher-order concerns as identified in the case of Tomolugen Holdings Ltd and anor v Silica Investors Ltd and other appeals [2016] 1 SLR 373. The two higher-order concerns are the (1) prevention of the Plaintiff’s circumvention of the arbitration agreement and (2) the court’s inherent jurisdiction over case management.

The Defendants argued that their submission to arbitration did not require them to commence the arbitration. It would not make commercial sense for the Defendants to commence the arbitration when they sought no positive relief. Pursuing a negative claim under the ICC Rules would be “onerous” as the Defendants would be required to pay a non-refundable filing fee and the attendant arbitration costs.

The Court’s decision

The Court concluded that both parties had not moved the case along through arbitration as expeditiously as possible. As such, on 30 April 2018, the Court gave the parties notice that the stay would be lifted on 31 May 2018, unless arbitration was commenced by then or another order of court was granted.

The Court’s reasoning

The Court recognised that the present case was different from the run-of-the-mill case management stays, in that if the Defendants – who desired for the stay to continue – had to initiate arbitration, they would have to pursue a negative case.

That being said, the case management stay could not continue indefinitely. The court was entitled to exercise its discretion to lift the stay where there has been “undue delay”. Granting liberty to the parties to apply to the court to lift the stay did not preclude the court from exercising its inherent power to manage its processes to “ensure the efficient and fair resolution of disputes”. The court could exercise its discretion even if the conditions of the stay were not met – though this would be the exception rather than the norm.

In particular, where the resolution of the dispute is in fact stymied by the continuation of the stay, the court can and should reconsider the terms of the stay. It is not in the interests of justice that case management stays remain indefinitely or for prolonged periods.

Takeaways

  • This is an interesting case study in which the court has been asked to make a difficult choice between “permitting” a plaintiff to circumvent an arbitration agreement, or to allow a longstanding dispute to remain unresolved as a result of an existing stay.
  • As the Court repeatedly emphasised, it is the exception rather than the norm for the court to lift a stay where the conditions of the stay have not been met. This decision should not be taken as the court exercising its discretion carte blanche to lift a case management stay. Each case should and will be considered by its particular facts.
  • In lifting the stay, the Court considered that the “overriding objective was one of ensuring the resolution of an extant dispute”. The Court’s primary concern was that an existing dispute which has “ground to a halt” should not “remain hanging”.
  • The Defendants have been given leave to appeal to the Court of Appeal. It remains to be seen if the Court of Appeal will take a similar approach as the High Court in this instance.

* This article may be cited as Wei Ming Tan, “Between a rock and a hard place: Singapore High Court lifts stay of court proceedings on non-commencement of arbitration” (15 February 2019) (https://singaporeinternationalarbitration.com/2019/02/15/between-a-rock-and-a-hard-place-sghc-lifts-stay-of-court-proceedings-on-non-commencement-of-arbitration/)

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The Hong Kong International Arbitration Centre reveals its new rules for 2018

by Nicolas Wiegand, Mariel Dimsey and Sherlin Tung*

On 1 November 2018, the Hong Kong International Arbitration Centre’s (hereafter, “HKIAC”) new arbitration rules (hereafter, “2018 Rules”) came into effect. The 2018 Rules apply to all arbitrations in which: (i) a Notice of Arbitration is submitted on or after 1 November 2018; and (ii) where the arbitration agreement provides for the 2018 rules to apply or for arbitration “administered by HKIAC” or words to similar effect, unless the parties explicitly agree otherwise.

Key changes

The 2018 Rules contain a number of changes, primarily implemented to enhance the efficiency of arbitral proceedings and, at the same time, provide for greater flexibility in order to better address parties’ needs and react to the complexity of modern disputes that can result from multi-contract and multi-party situations.

Streamlining of the arbitral procedure through early determination

The 2018 Rules introduce an early determination procedure. The purpose of this procedure is to ensure the efficiency and expeditiousness of the arbitral proceedings.

The early determination procedure empowers the arbitral tribunal, upon a party’s motion, to decide cases in a summary manner on the basis that such point is manifestly without merit or manifestly outside the arbitral tribunal’s jurisdiction, or on the assumption that even if submitted points of law or fact are assumed to be correct, no award could be rendered in favour of the submitting party (Article 43). The procedure is similar to initiatives in other Rules (e.g. Article 41(5) of the ICSID Rules, Article 29 of the SIAC Rules or Article 39 of the SCC Rules). The early determination procedure helps to streamline arbitration proceedings in order to promote efficiency of time and costs as the arbitral tribunal has the ability to decide on an issue that can either end an arbitration early or help speed up the rest of the arbitration by narrowing the list of issues in dispute.

Disclosure of third party funding

The 2018 Rules reflect the recent legislative changes in Hong Kong clarifying that parties are permitted to seek third party funding to fund their claims and implementing conditions to promote the transparency of proceedings and avoid potential conflicts of interest.

The 2018 Rules require all parties to an arbitration to disclose any third party funder’s identity (Article 44.1). This disclosure is important because the third party funder’s identity can be a relevant concern in determining whether an arbitral tribunal is impartial and independent. For example, if an arbitrator is repeatedly appointed by (different) parties funded by the same third party funder, or if an arbitrator has acted as counsel in another dispute whereby its client is funded by the same third party funder, these factors could be relevant in assessing the existence of bias. By requiring parties to disclose the use of third party funding, the 2018 Rules not only expressly recognize the permissibility of third party funders in arbitration proceedings but also ensure transparency in the proceedings and help to ensure that the described conflicts of interest are avoided.

Promotion of settlements through alternative dispute resolution

Recognizing parties’ needs for fast and sustainable resolution of disputes, Article 13.8 of the 2018 Rules gives the arbitral tribunal express authority to suspend the arbitration proceedings if the parties agree to attempt resolution through alternative settlement methods such as mediation.

By formalizing the arbitral tribunal’s ability to suspend arbitration proceedings while the parties attempt to settle, the 2018 Rules emphasize the importance of alternative dispute resolution methods. With the promotion of these methods, parties are encouraged to find a flexible solution for their dispute at lower costs even after the commencement of the arbitration. Article 13.8 also allows the parties to resume the arbitration proceeding at a later stage upon one party’s request.

Addressing multi-party and multi-contract disputes

Following the trend of other arbitral institutions, the HKIAC has addressed the rising complexity of international arbitration proceedings by including improvements on how to deal with multi-party and multi-contract situations.

The 2018 Rules allow a party to commence one single arbitration based on multiple agreements between multiple parties. Article 29 allows for a party to commence one single arbitration even if such arbitration agreements were entered into between different parties if the issues in dispute arise out of the same questions of law or fact, claimant’s relief sought against the multiple respondents relates to the same transaction or series of transactions, and the respective arbitration agreements are compatible. This new rule promotes efficiency of time and costs by removing the additional step of requiring a party to commence multiple arbitrations and then having to file an application for consolidation.

The 2018 Rules also introduce the mechanism of concurrent proceedings as another option – with less restrictive requirements – available to parties. For multiple arbitrations where: (i) the composition of the arbitral tribunal is the same; and (ii) a common question of law or fact exists; the arbitral tribunal is given the discretion and power to decide how to deal with related arbitration proceedings, such as holding the hearings concurrently, holding the hearings consecutively, or suspending one (or more) arbitration proceedings until another proceeding is decided. This new mechanism can lead to substantial cost savings, for example by lower travel expenses, legal costs, and experts’ costs as well as by reducing administrative work and coordination efforts for hearings.

Effective legal protection by faster emergency procedures

While the emergency arbitration procedure was introduced with the 2013 Rules, the 2018 Rules expand the availability of the emergency arbitrator process to the parties while at the same time shortening the entire process. These amendments to the emergency arbitrator procedure support the urgent nature of such proceedings while at the same time enhance the legal protections afforded to parties who have agreed to resolve their disputes under the HKIAC Rules.

The 2018 Rules allow for a party to file an application for emergency relief up to seven (7) days before a Notice for Arbitration is submitted. This affords a party legal protection under arbitration even before a formal Notice of Arbitration is filed to address situations when the status quo is imminently threatened or has unexpectedly deteriorated. However, the requirement to submit a formal Notice of Arbitration within seven (7) days thereafter emphasizes the provisional nature of such procedure.

The 2018 Rules now also require the HKIAC to appoint an emergency arbitrator within 24 hours after receipt of both the application and the application deposit (para 4 of Sch. 4). This shortening of the deadline to appoint an emergency arbitrator is also in line with the urgent nature of the need for emergency arbitrator proceedings.

The 2018 Rules also set a cap on the emergency arbitrator’s fees in an effort to lower costs and promote efficiency of emergency arbitrator proceedings.

Efficiency by technology

The 2018 Rules expressly recognize the evolution of technology and its impact on the time and costs of arbitral proceedings. With the rise in cross-border disputes, arbitrations are becoming more “international” with parties and evidence based in locations worldwide. The geographic locations of such parties and evidence often result in an increase in costs and time in arbitration proceedings.

Article 13.1 of the 2018 Rules expressly requires the arbitral tribunal to consider an effective use of technology (such as skype video conferencing) when adopting suitable procedures for the conduct of arbitration. Article 3.1 of the 2018 Rules introduces an option for parties to communicate by uploading communications to a secured online repository, making communication safer and more efficient.

Formal deadlines for rendering awards

Taking time-effectiveness one step further, the HKIAC has introduced a default three-month time limit from the closure of arbitral proceedings for the arbitral tribunal to render its arbitral award. The time limit can only be extended by agreement of the parties or, in appropriate circumstances, by the HKIAC (Article 31.2).

By establishing a deadline for the arbitral tribunal to render an award, the 2018 Rules give the parties certainty on when they can expect to receive an award since, subject to party agreement or extraordinary circumstances, the arbitral tribunal is obligated to render such award within a set period of time.

Comment

The 2018 Rules reaffirm the HKIAC’s status as one of the world’s leading arbitral institutions, and in particular, in Asia, with its innovative developments addressing not only international standards but also key market trends. The amendments and improvements ensure that the HKIAC rules remain state-of-the-art and reinforce Hong Kong’s status as an arbitration-friendly jurisdiction and an arbitration hub in the region.

The full text of the 2018 Rules is available on the HKIAC website: www.hkiac.org.

*Originally published on CMS-Law Now.

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Singapore High Court rejects application to adjourn enforcement of foreign arbitral award

by Wei Ming Tan, Aaron Yoong and Chen Lixin*

Introduction

In the recent decision of Man Diesel & Turbo SE v I.M. Skaugen Marine Services Pte Ltd [2018] SGHC 132, the Singapore High Court (“HC”) rejected an application to adjourn the enforcement of an arbitral award that was also the subject of a setting aside application in Denmark, the seat of the arbitration.

This case is the first of its kind in Singapore and provides clarity as to when litigants can seek an adjournment of proceedings to enforce a foreign arbitral award.

Background of the case

The dispute arose out of two agreements governed by Danish law for the supply of engine-propeller shipsets by Man Diesel & Turbo SE (“Plaintiff”) to I.M. Skaugen Marine Services Pte Ltd (“Defendant”).

Following technical issues with two engine shipsets delivered by the Plaintiff, the Defendant refused to pay for the remaining two propeller shipsets. The Plaintiff thus commenced arbitration proceedings in Denmark, claiming damages and specific performance. The Defendant counterclaimed for damages and restitution of sums paid out as down-payment.

The final award (“the DIA Award”) was decided mostly in favour of the Plaintiff by a majority of a three-member tribunal in the Danish Institute of Arbitration (“DIA”). The Plaintiff then obtained ex parte leave of court to enforce the DIA Award in Singapore pursuant to section 29 of the International Arbitration Act (Cap. 143A) (“IAA”) and Order 69A of the Rules of Court (“the ex parte Leave Order”).

Unfortunately, further disputes arose regarding the expected performance of the DIA award. This resulted in the Defendant filing an application with the Danish Court to set aside the part of the DIA Award in the Plaintiff’s favour, and also commencing a new arbitration against the Plaintiff in the DIA.

Shortly after, the Defendant filed an application in the HC seeking to:

  1. Primarily, challenge the enforcement of the Award on the grounds that:
    1. the Defendant was unable to present its case (s 31(2)(c) IAA); and
    2. the DIA Award was contrary to the public policy of Singapore (s 31(4)(b) IAA); and
  2. Alternatively, stay and/or adjourn the enforcement of the Award pending the determination of the Defendant’s setting aside application in the Danish Court (s 31(5) IAA).

In response, the Plaintiff filed a cross-application for an order for security amounting to the sums due under the Award should an adjournment of the enforcement proceedings be granted.

The decision of the HC

Framing of prayers

As a preliminary point, the HC took issue with the manner in which the Defendant had framed its alternative prayer. In its view, to seek a stay and/or adjournment only upon failure of a challenge to enforcement “ignores the language” and “gives no regard” to the two-stage regime required under s 31(5) IAA.

Section 31(5) of the IAA provides:

Where, in any proceedings in which the enforcement of a foreign award is sought by virtue of this Part, the court is satisfied that an application for the setting or the suspension of the award has been made to a competent authority of the country in which, or under the law of which, the award was made, the court may –

(a) if the court considers it proper to do so, adjourn the proceedings or, as the case may be, so much of the proceedings as relates to the award; and

(b) on application of the party seeking to enforce the award, order the other party to give suitable security.

Specifically, the two-stage regime entailed:

  • First, an application by the award-creditor for leave to enforce the award, following which, the leave order is served on the award-debtor.
  • Secondly, an option for the award-debtor to resist the award enforcement. This stage effectively ends if the court rejects the challenge and enters judgment on the foreign award.

As enumerated by the wording of s 31(5) IAA, the court only has the power to adjourn the case at the second stage of the enforcement, i.e. before judgment is entered on the foreign award. Beyond that, the award debtor can only seek a stay of the execution order.

This crucial distinction meant that notwithstanding the structure of the Defendant’s prayers, the HC proceeded to examine the adjournment issue.

Adjournment of proceedings

Undertaking an extensive review of s 31(5) IAA, the HC concluded that its “permissive nature” accorded the court with “wide statutory discretion” in deciding an adjournment application. In particular, the court considers pertinent factors such as:

  • The bona fides of the application to set aside or whether it is simply a delaying tactic; and
  • The length of adjournment and the resulting consequences or prejudice likely to occur.

The HC also noted that the provision of security often dovetails with the issue of adjournment and should be considered together. Unsurprisingly, the factors to be considered for an application for security are related to those for adjournment, including:

  • The strength of the argument on the invalidity of the award, “as perceived on a brief consideration by the enforcing court”; and
  • The ease of enforcement of the award.

It bears mentioning that the approach as to assessment on strength eschews determinative threshold tests such as “a serious issue to be tried” and “real prospect of success”. It is instead decided on a sliding scale as between “manifest validity” and “manifest invalidity” of the award.

Applying its framework as above, the HC ultimately declined to grant the Defendant’s application for adjournment, affirming the ex parte Leave Order.

This was because:

  • The Defendant failed to demonstrate that the setting aside application in Denmark was meritorious on any of the three grounds raised;
    • In particular, the HC rejected a key argument raised by the Defendant, namely, that the Tribunal had violated the procedural rules in the Rules of Arbitration Procedure of the DIA by disallowing the Defendant’s counterclaim and related evidence. The HC was not satisfied that the Tribunal’s decision amounted to “a denial of procedural justice”, as it was within the Tribunal’s discretion to reject additional materials that were produced at the last minute and would have delayed the progress of the arbitration.
  • Given that the Danish proceedings would only be completed in 2019/2020, the delay would be too long and cause prejudice to the Plaintiff; and
  • There was evidence demonstrating that the Defendant’s assets could be dissipated upon further delay.

Key takeaways

Lessons for future litigants: As the first case in Singapore to consider the merits of an application to adjourn enforcement proceedings pursuant to s 31(5) IAA, this decision illustrates the importance of an awareness of the appropriate stage at which an adjournment can and should be sought.

In particular, the HC showed that it would be robust in ensuring that unmeritorious adjournment applications are not being taken out as a delay tactic against the enforcement of an arbitral award.

The court’s methodology: Despite the HC’s willingness to oversee the enforcement process in limited circumstances, implicit in the judgment is the importance of promoting the enforceability of awards. Indeed, the HC’s attitude of striking a careful balance is reflected through:

  • The HC’s repeated emphasis to focus on the circumstances for an adjournment of proceedings, and a brief consideration on the strength of the argument on invalidity; and
  • The reliance on a sliding scale and “practical justice” as indicative of a refusal to undertake an overly-punctilious examination of issues.

Degree of proof for dissipation of assets: Interestingly, the HC noted that a party seeking provision of security need not show that the risk of dissipation of assets is of the same degree as that required under a Mareva injunction.

  • The HC’s preference for a lower standard is certainly correct when viewed in light of the more severe consequences of granting a Mareva injunction.
  • This lower threshold promotes the enforceability of awards and is consistent with Singapore’s pro-arbitration stance.

+This article may be cited as Wei Ming Tan, Aaron Yoong and Chen Lixin, “Singapore High Court rejects application to adjourn enforcement of foreign arbitral award” (31 July 2018) (https://singaporeinternationalarbitration.com/2018/07/31/singapore-high-court-rejects-application-to-adjourn-enforcement-of-foreign-arbitral-award/)

*This article is part of a joint initiative by CMS Holborn Asia and the Society of International Law (Singapore) based at Singapore Management University (SMU) School of Law.

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Another record-breaking year for the Singapore International Arbitration Centre

On 7 March 2018, the Singapore International Arbitration Centre (“SIAC”) announced the release of its 2017 Annual Report (the “Annual Report”). The Annual Report sets out detailed statistics for yet another record-breaking year for SIAC in terms of both new cases handled by the SIAC as well as the total number of SIAC-administered cases (SIAC’s third year-on-year increase since 2014 and the highest number of new case filings and administered cases in SIAC’s 27-year history).

Key Takeaways

  • New records:
    • Highest number of cases filed: 452 (32% increase from 2016 and a 67% increase from 2015) – SIAC has seen its new case filings increase by more than 5 times over the last decade.
    • Highest number of administered cases: 421 (37% increase from 2016 and a 72.5% increase from 2015).
  • Increasing international reach:
    • 83% of the new cases were international in nature (i.e. where one or both parties were not Singaporean) compared to 80% in 2016.
    • Cases involved parties from 58 jurisdictions (compared to 56 jurisdictions in 2016).
    • Significant increase in the number of parties from Germany (68 in 2017 compared to 5 in 2015), Japan (27 in 2017 compared to 13 in 2016), Switzerland (72 in 2017 compared to 15 in 2016), the United Arab Emirates (“UAE”) (34 in 2017 compared to 13 in 2017) and the United States of America (“USA”) (70 in 2017 compared to 42 in 2016).
    • Top 5 foreign users were India, China, Switzerland, USA and Germany in that order (parties from India and China remained the top 2 foreign users of SIAC respectively with Switzerland (3rd place), Germany (5th place), UAE (7th place) and Japan (joint 9th place) being new entrants in the list of top 10 foreign users).
  • Increasing use of SIAC procedures:
    • All 19 Emergency Arbitrator applications in 2017 were accepted. This is an increase from 6 Emergency Arbitrator applications in 2016 (all of which were accepted).
    • SIAC introduced the Early Dismissal (“ED”) procedure in 2016, making SIAC the first among the world’s major international commercial arbitration centres to adopt such a procedure. In 2017, SIAC received 5 ED applications – 4 applications were allowed to proceed with 1 application pending as of 31 December 2017.
    • Increase in both the number of Expedited Procedure (“EP”) applications (107 in 2017 compared to 70 in 2016) as well as in the percentage of applications accepted (51% acceptance rate in 2017 compared to 40% in 2016).
  • Singapore law remains 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 (12% rise from 2016).
    • Slight increase in English law as the governing law of choice (2% increase from 2016).

Continued growth and thought leadership

In August 2017, SIAC announced the opening of its second representative office in India (after its Mumbai representative office, which was established in 2013) in the International Financial Services Centre in Gujarat International Finance Tec-City (GIFT IFSC). The opening of a second SIAC office in India will deepen SIAC’s existing ties with the legal and business communities in India.

SIAC’s commitment to improving the arbitral process for users is further evident in SIAC’s proposal on cross-institution co-operation for the consolidation of international arbitration proceedings.

Our summary and comments on SIAC’s proposal can be accessed here.

With thanks to Lakshanthi Fernando.

* This article may be cited as Pradeep Nair, “Another record-breaking year for the Singapore International Arbitration Centre”  (2 April 2018) (https://singaporeinternationalarbitration.com/2018/04/02/another-record-breaking-year-for-the-singapore-international-arbitration-centre/)

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Costs and Duration: A Comparison of the HKIAC, LCIA, SCC and SIAC Studies

by Wei Ming Tan,  Shriram Jayakumar and Jolyn Khoo*

Introduction

As cross-border contracts involving multi-jurisdictional parties become the norm, more players have entered the arena to offer legal services for parties opting to resolve their disputes by way of international arbitration. The Mumbai Centre for International Arbitration, for instance, was set up as recently as 2016 to cater to India’s growing market and is part of the government’s efforts to promote the country as a regional dispute resolution centre.

Apart from geography, the costs and duration of arbitral proceedings are key factors that determine parties’ choice of arbitral institution. This study compares the recent cost and duration studies conducted by four arbitral institutions to see who comes out trumps.

The HKIAC Study

The Hong Kong International Arbitration Centre (“HKIAC”) recently released an updated report on the costs and duration of cases administered by HKIAC (the “HKIAC Study”). The data set included 62 arbitrations administered under the 2013 HKIAC Administered Arbitration Rules where the final award was issued between 1 November 2013 and 31 December 2017.

Key statistics from the HKIAC Study:

  1. The mean arbitration costs of an HKIAC arbitration is USD 117,045, whereas the median arbitration costs is USD 62,537.
  2. The mean duration of an HKIAC arbitration is 16.2 months, while the median duration is 14.3 months.

HKIAC is unique in offering parties an option of paying the arbitral tribunals’ fees by an hourly rate or by reference to an ad valorem system (i.e. based on the value of the dispute). Interestingly, the HKIAC Study reveals that the costs of arbitration are cheaper under the ad valorem system even though “[t]he vast majority of HKIAC tribunals are paid on an hourly rate basis”.

The LCIA Study

In October 2017, the London Court of International Arbitration (“LCIA”) also updated their report on the costs and duration of cases administered by LCIA (the “LCIA Study”). The data set included 224 arbitrations administered under the LCIA Rules that reached a final award between 1 January 2013 and 31 December 2016.

Notable statistics from the LCIA Study are as follows:

  1. The median arbitration costs of an LCIA arbitration is USD 97,000.
  2. The median duration of an LCIA arbitration is 16 months.

The LCIA Study also compared the median costs of arbitrations commenced under four other arbitral institutions, namely:

  1. the HKIAC;
  2. the International Chamber of Commerce (“ICC”);
  3. the Stockholm Chamber of Commerce (“SCC”); and
  4. the Singapore International Arbitration Centre (“SIAC”).

These statistics were derived from the website costs calculator or costs schedule of the respective arbitral institutions.

Based on these statistics, the LCIA Study concluded that LCIA had the lowest median arbitration costs, with the lowest tribunal fees and administrative charges. SCC had the second lowest arbitration costs, followed by SIAC. HKIAC and ICC were equally expensive, although the HKIAC statistics were based on an estimate of the maximum arbitration costs while the ICC statistics were based on an average.

The LCIA Study noted that while the figures for LCIA arbitrations are derived from actual LCIA arbitrations, the figures for other institutions are estimates which are subject to substantial caveats.

The SCC Study

Previously, the SCC and SIAC had released similar reports. The SCC’s latest report on costs and duration was released in February 2016 (the “SCC Study”). It considered 80 cases administered by the SCC under the 2010 SCC Arbitration Rules where an award had been issued between 2007 and 2014.

Key statistics from the SCC Study include:

  1. The median arbitration costs of an SCC arbitration for sole-arbitrator cases and three-arbitrator cases is EUR 33,096 and EUR 167,021 respectively.
  2. The median duration of an SCC arbitration is 13.5 months.

The SIAC Study

SIAC released its costs and duration study in October 2016 (the “SIAC Study”). It considered 98 cases administered by the SIAC under the 2013 Arbitration Rules of the SIAC, where the award had been issued between 1 April 2013 to 31 July 2016.

Key statistics from the SIAC Study:

  1. The mean arbitration costs of an SIAC arbitration is USD 80,337, whereas the median total costs is USD 29,567.
  2. The mean duration of an SIAC arbitration is 13.8 months, while the median duration is 11.7 months.

Comparing the Cost and Duration Studies of the Arbitral Institutions

The LCIA and SCC Studies did not release mean figures for duration and costs, noting that there were several outliers which skewed the data.

Comparing arbitration costs

Table 1 compares the median arbitration costs for the four arbitral institutions, distinguishing between sole-arbitrator and three-arbitrator cases, with the exception of the HKIAC which does not make this distinction.

Arbitration costs include the tribunal’s fee and the arbitral institution’s registration and administration fees. For ease of cross-institutional comparison, the SCC figures in Table 1 are translated into USD values based on historic exchange rates as of February 2016.*

Table 1: Median Arbitration Costs for Sole and Three Arbitrator Cases
Arbitral Institution Median Arbitration Costs for All Cases Median Arbitration Costs for Sole-Arbitrator Cases Median Arbitration Costs for Three-Arbitrator Cases
HKIAC USD 62,537
LCIA USD 97,000 USD 60,000 USD 200,000
SCC USD 36,037*

(EUR 33,096)

USD 181,864*

(EUR 167,021)

SIAC USD 29,567 USD 27,941 USD 80,230

As evident from Table 1:

  • SIAC remains the most cost-competitive option for both sole-arbitrator and three-arbitrator cases. For three-arbitrator cases in particular, SIAC remains significantly cheaper than LCIA and SCC where the costs extend to six-digit figures.
  • Notably, there is a significant disparity between the estimated cost of an SIAC arbitration from the LCIA Study and the statistics from the SIAC Study.
    • As the statistics from the SIAC Study are based on actual arbitration costs derived from real cases, these statistics may be a more accurate indicator.

Comparing duration of proceedings

Table 2 compares the mean and median duration of arbitrations administered by the four arbitral institutions, with the exception of LCIA and SCC which do not provide mean figures. Duration of arbitration is measured from the commencement of the arbitration to the rendering of the award.

Table 2: Mean and Median Duration
Arbitral Institution Mean Duration (months) Median Duration (months)
HKIAC 16.2 14.3
LCIA 16
SCC 16.2 13.5
SIAC 13.8 11.7

From Table 2:

  • Based on the data, SIAC arbitrations are the most efficient in comparison to the other arbitral institutions.
    • The median duration of an SIAC arbitration is the shortest at 11.7 months.
    • The SCC also has a comparable median duration of 13.5 months.
  • However, the SIAC and SCC Studies were released in 2016, while the HKIAC and LCIA Studies are based on more recent statistics.
    • A possible explanation may be a recent increase in more complex arbitration cases, which require more time to resolve.

Methodology

The arbitral institutions use different systems to compute their arbitration costs. The LCIA uses an hourly rate system. In contrast, the SIAC and SCC adopt the ad valorem system, which fixes the costs of an arbitration on the value of a claim and within limits specified by the institution’s costs scales. As mentioned, HKIAC allows parties the option between paying the fees by an hourly rate or the ad valorem system, although most parties choose the former.

Forecasting Future Changes

While the LCIA and HKIAC arbitral institutional rules remain largely unchanged since the publication of the above studies, the SCC Rules and SIAC Rules have introduced new features with a view to facilitating a more efficient arbitration process. The impact of the new rules would not have been taken into account in the SCC and SIAC studies.

The 2017 SCC Rules only entered into force on 1 January 2017. The default provision on the number of arbitrators was changed from a three-arbitrator tribunal to one that gives the SCC board flexibility to decide on the number of arbitrators based on complexity, value in dispute and other circumstances. Article 39 of the 2017 SCC Rules also allows parties to make requests for the tribunal to decide certain issues of fact or law by way of summary procedure, if the relevant requirements are met.

Similarly, the 6th edition of the SIAC’s Arbitration Rules only came into effect on 1 August 2016. These rules introduced early dismissal rules and enhanced provisions relating to Emergency Arbitrator and Expedited Procedure, which are expected to improve the efficiency of SIAC arbitrations.

As such, the median duration of SIAC and SCC arbitrations, which are already shorter in comparison to LCIA and HKIAC arbitrations, are likely to improve.

Key Takeaways

  • Based on a comparison of the four studies, the costs and duration of arbitral proceedings are ostensibly most attractive when administered by SIAC.
    • Unsurprisingly, in its recently released Annual Report 2017, SIAC announced a new record for the highest number of new case filings and administered cases in 2017, with 452 new cases filed by parties from 58 countries in 6 continents – a 32% increase from the number of cases filed in 2016.
  • While other factors such as the scale of disputes before the respective tribunals may explain this difference, the analysis provides parties with a better idea of the time and expense that are likely to be incurred when using different arbitral institutions.
  • With arbitral rules being amended to reflect evolving commercial realities – as is the case with the SCC and SIAC – the effect such amendments can have on the costs and duration of arbitrations should be closely monitored.

+This article may be cited as Wei Ming Tan, Shriram Jayakumar and Jolyn Khoo, “Costs and Duration: A Comparison of the HKIAC, LCIA, SCC and SIAC Studies” (13 March 2018) (https://singaporeinternationalarbitration.com/2018/03/13/costs-and-duration-a-comparison-of-the-hkiac-lcia-scc-and-siac-studies/)

*This article is part of a joint initiative by CMS Holborn Asia and the Society of International Law (Singapore) based at Singapore Management University (SMU) School of Law.

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SGCA grants Senior Indian Advocate ad hoc admission to argue arbitration-related applications

by Wei Ming Tan, Kartik Singh & Aaron Yoong*

Introduction

In a reversal of the High Court’s 2017 decision, Singapore’s Court of Appeal (“CA”) recently granted unprecedented ad hoc admission for Harish Salve (“Mr Salve”) – a Senior Advocate of the Indian Bar – to be admitted to argue foreign law issues in applications to set aside an ICC arbitral award.

This is the first time the Singapore courts have granted foreign counsel other than Queen’s Counsel admission to argue a case before the local courts.

Background to the appeal

The dispute arose out of a Share Purchase and Subscription Agreement (“Agreement”) between Daiichi Sankyo Company, Limited (“Respondent” or “Daiichi”) and certain shareholders (“Sellers”) of Ranbaxy Laboratories Limited (“Company”).

The Respondent intended to purchase the shareholding of the Sellers for the purpose of gaining a controlling interest in the Company. The Agreement was governed by Indian law and contains an ICC arbitration clause designating Singapore as the seat of the arbitration.

The Respondent commenced arbitration proceedings alleging fraudulent misrepresentation and concealment by the Sellers of on-going investigations by the US regulatory authorities against the Company. In a 2-1 split decision, the SIAC arbitral tribunal decided in favour of the Respondent (“Award”). The Respondent then commenced enforcement proceedings in India and Singapore.

On 18 May 2016, the Respondent was granted leave by the Singapore courts to enforce the Award in Singapore. In response, the Sellers took out two applications to set aside the Award – one by a group of 15 (fifteen) adult and corporate sellers, the other by 5 (five) minor sellers. Collectively, the Sellers made two concurrent applications for Mr Salve to gain ad hoc admission as foreign counsel. Mr Salve had already been appointed by the Sellers as lead counsel to resist the Indian enforcement proceedings.

The Singapore High Court (“HC”) dismissed the applications for Mr Salve’s admission. You can read our blog post on the earlier High Court decision here.

The governing framework

The statutory framework governing ad hoc admission of foreign counsel can be found in section 15(1) of the Legal Profession Act (Cap. 161, 2009 Rev. Ed.) (“the Act”). To be admitted, the foreign counsel must:

  1. be an appointed Queen’s Counsel in the UK or the equivalent in any jurisdiction;
  2. not ordinarily reside in Singapore or Malaysia but intends to come to Singapore for the purpose of appearing in the case; and
  3. possess special qualification or experience for the purposes of the case.

Even if the above requirements (“the mandatory requirements”) are satisfied, the court retains the discretion to refuse admission, pursuant to paragraph 3 of the Legal Profession (Ad Hoc Admissions) Notification 2012 (S 132/2012) (“Notification Matters”). In exercising its discretion, the Notification Matters lists the following for the court’s consideration:

  1. the nature of the factual and legal issues;
  2. the necessity of a foreign senior counsel;
  3. the availability of any Senior Counsel or other advocate and solicitor with appropriate experience; and
  4. whether the court considers the admission of the foreign senior counsel to be reasonable.

The decision of the CA

Mandatory Requirements

It was undisputed that Mr Salve satisfied the requirements stated in s 15(1)(a) and (b) of the Act. The question was whether he had “special qualifications or experience for the purposes of the case” pursuant to s 15(1)(c) of the Act.

In this regard, the CA took great pains to emphasise the importance of framing the legal issues prior to undertaking an analysis. In its view, the framing of the legal issues must strike a level of particularity to avoid being both unduly restrictive or unhelpfully vague, whilst remaining neutral.

Accordingly, the CA re-framed the issues to as follows:

  • What damages should be awarded for fraudulent misrepresentation under Indian law;
  • What constitutes consequential damages under Indian law; and
  • What constitutes the law and public policy of India in relation to the contractual capacity of minors and their liability for contracts made on their behalf?

The CA ultimately found that Mr Salve had the requisite experience to address these issues because:

  1. his curriculum vitae demonstrated deep expertise and experience in the relevant area of law;
  2. in contrast to the HC’s reasoning, it was unnecessary to demonstrate specific experience with the actual issues in consideration;
  3. Mr Salve had adduced further substantiation that corroborated his expertise in commercial and contractual disputes in India; and
  4. being the Solicitor-General of India for three years, he would have had considerable experience in Indian public policy.

Notification Matters

The CA found that the factors listed in the Notification Matters had been satisfied such that it would exercise its discretion in favour of granting Mr Salve ad hoc admission.

This was because:

  • the relevant issues of Indian law and policy were complex and unsettled such that substantial disagreements had arisen both between the arbitral tribunal, and “high calibre” Indian experts relying on numerous legislation and case authorities;
  • an Indian lawyer with substantial experience in the law and policy of the country would naturally be of greater assistance than local counsel; and
  • the court must have the most complete picture in disputes involving challenge to jurisdiction of arbitral tribunal governed by complex foreign law.

The Court’s Decision

Having re-framed the issues, the CA acknowledged the complexity of the Indian law issues and concluded that the court would be more assisted by Indian counsel than local counsel.

Further, given that the governing law of the arbitration was foreign law but the seat was Singapore, admission of foreign counsel would aid the court in having “the most complete picture of foreign law and policy”, especially in relation to the Sellers’ challenge of the tribunal’s jurisdiction.

Key Takeaways

The Court’s paramount objective: In granting Mr Salve ad hoc admission, the CA emphasised that it is paramount that the court has “what the court needs to assist it in achieving a correct and just result in the case before it”. The touchstone for the admission of foreign senior counsel must be on the basis of need, and not desirability or convenience.

To this end, the matters relevant to the court are:

  1. whether foreign law is central to the issue in dispute;
  2. whether the experts on foreign law are diametrically opposed or opposed to a significant degree;
  3. whether there are adequate independent written materials to help the court find its way through the issues of foreign law;
  4. whether the issues of foreign law go towards the jurisdiction of the tribunal; and
  5. whether the court may have to come to a view on foreign law in an uncertain situation.

The SICC regime vs. the domestic regime: Interestingly, the CA appears to subtly endorse the Singapore International Commercial Court (“SICC“) regime for permitting foreign counsel to make submissions on issues of foreign law as opposed to the domestic regime, which provides for foreign law to be proved as an issue of fact.

  • According to the CA, by allowing foreign counsel to make submissions on foreign law, the SICC framework permits these issues to be “presented in a holistic manner by counsel who can apply techniques of legal reasoning in their submissions and analysis”.
  • The CA’s observation is particularly timely given the recent amendments to the Supreme Court of Judicature Act (“SCJA“) clarifying the SICC’s jurisdiction over arbitration-related proceedings. Read our discussion here for more on how the SCJA amendments affect the SICC.

Consistency with Act’s amendment: The admission of Mr Salve was also consistent with the amendment of the Act in 2012, which, according to Law Minister Mr K Shanmugam, was aimed at “giving flexibility to clients” in view of the growth of Singapore’s international arbitration industry and the corresponding increase in arbitration proceedings governed by or involving foreign law.

Alternative solution: A potential alternative to the ad hoc admission of foreign counsel may be to engage such foreign counsel via the Amicus Curiae scheme. This would avail the courts of foreign counsel’s expertise whilst maintaining the court’s trust in the proficiency of local counsel.

Other developments: In other developments to this ongoing legal saga, the Delhi High Court has on 31 January 2018 allowed Daiichi’s application to enforce the ICC Award valued at US$550 million in India. Justice Jayant Nath rejected the objections raised by the Singh brothers that the Award was not in line with Indian law or public policy. The decision may be subject to further appeal to a two-member panel of the Delhi High Court or to India’s Supreme Court.

+This article may be cited as Wei Ming Tan, Kartik Singh and Aaron Yoong, “SGCA grants Senior Indian Advocate ad hoc admission to argue arbitration-related applications” (26 February 2018) (https://singaporeinternationalarbitration.com/2018/02/26/sgca-grants-senior-indian-advocate-ad-hoc-admission-to-appear-before-court/)

*This article is part of a joint initiative by CMS Holborn Asia and the Society of International Law (Singapore) based at Singapore Management University (SMU) School of Law.

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Singapore passes bill for Singapore International Commercial Court to hear arbitration-related matters

By Wei Ming Tan & Kartik Singh*

Introduction

On 9 January 2018, Parliament passed the Supreme Court of Judicature (Amendment) Bill 2017 (the “Amendment”) giving the Singapore International Commercial Court (“SICC”) jurisdiction to hear international commercial arbitration-related court proceedings. The Amendment clarifies that the SICC can hear matters related to, among others, the enforcement or setting aside of arbitral awards that are traditionally referred to the High Court for adjudication.

About the SICC

The SICC was established in 2015 to address the need for a neutral venue for international commercial litigation for parties with little or no connection to Singapore but require a jurisdiction with strong rule of law, well-regarded and experienced judges, and high quality, efficient legal professional services.

The SICC is a division of the High Court and the High Court can on its own motion transfer appropriate cases to the SICC. To-date, 17 international cases governed by issues of foreign law have been transferred from the High Court to the SICC.

Why the Amendment matters

The Amendment crystallises the SICC’s position as an attractive international court and further cements Singapore’s reputation as a premier international dispute resolution hub in Asia.

Parties who deal with cross-border commercial transactions are increasingly choosing international arbitration as their dispute resolution mechanism of choice. With the Amendment, the SICC presents parties with a new and unique adjudication option to resolve their arbitration-related disputes.

The SICC allows foreign counsel to make submissions in offshore cases (i.e. cases with no substantial connection to Singapore) that relate to questions of foreign law. This allows for faster and more cost-efficient proceedings by removing the need for foreign law experts to testify to the content of foreign law.

However, as the Amendment concerns arbitration-related applications under Singapore’s International Arbitration Act (“IAA”), only Singapore-qualified counsel can represent parties who have submitted their cases to the SICC. Senior Minister of State Indranee Rajah has however noted that “the amendments in the bill are part of [an] ongoing endeavour” so this may yet be subject to change in the future. Exceptionally, a Queen’s Counsel or equivalent may apply for ad hoc admission to the Singapore Bar to represent parties in such cases.

Comment / Future implications for the SICC

  • The Amendment confirms the SICC’s jurisdiction to hear IAA-related disputes, giving parties who have opted for Singapore-seated arbitration an added option in dispute resolution mechanism.
  • This is likely to lead to even more cases being transferred from the High Court to the SICC. Along with Singapore’s recent legalisation of third party funding for international arbitration-related proceedings, this will no doubt enhance the SICC’s profile as an international commercial court of choice, particularly for parties in Asia.
  • It remains to be seen whether the Amendment will result in the SICC hearing Singapore-seated investment arbitration matters. In Sanum Investments Ltd v Government of Lao People’s Democratic Republic [2016] SGCA 57, the Court of Appeal found that the IAA covers investment arbitration cases and that Singapore courts are both “competent” and “obliged” to consider relevant treaty law issues. To this end, an investment arbitration matter seated in Singapore, but with a foreign law element, may well be appropriately brought before the SICC’s internationalised bench.
  • The SICC has recently added even more distinguished jurists to its already formidable bench: this includes Lord Neuberger (former President of the UK Supreme Court), Sir Jeremy Cooke (former judge of the English Commercial Court), Robert French (former Chief Justice of the High Court of Australia) and Beverly McLachlin (former Chief Justice of Canada).
  • The SICC’s ability to attract such legal luminaries to join its bench can only bode well for its future development. As it is, the SICC’s first ever judgment was praised as a “masterclass” and the SICC has also been feted as “a key contributor to international construction law jurisprudence”.
  • The speed at which the SICC issues its judgments (usually between 1 – 3 months from the end of the hearing) is another feature that will prove attractive to commercial parties who desire an expeditious resolution to their disputes.

This article may be cited as Wei Ming Tan and Kartik Singh, “Singapore passes bill for Singapore International Commercial Court to hear arbitration-related matters” (22 January 2018) (https://singaporeinternationalarbitration.com/2018/01/22/singapore-passes-bill-for-singapore-international-commercial-court-to-hear-arbitration-related-matters/)

*This article is part of a joint initiative by CMS Holborn Asia and the Society of International Law (Singapore) based at Singapore Management University (SMU) School of Law.

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Towards reducing the complexity, cost and time of arbitral proceedings: SIAC’s proposal on cross-institution consolidation

by Wei Ming Tan and Pradeep Nair

Introduction

On 19 December 2017, the Singapore International Arbitration Centre (“SIAC”) announced its proposal on cross-institution co-operation for the consolidation of international arbitral proceedings (“SIAC’s proposal”). SIAC’s proposal, which is the brainchild of Mr Gary Born, President of the SIAC Court of Arbitration, is detailed in a memorandum accessible here.

Briefly, SIAC’s proposal involves co-operation among various leading international arbitral institutions for the adoption of a joint protocol that would permit the cross-institution consolidation of arbitrations subject to different institutional rules. We discuss the rationale behind SIAC’s proposal and challenges facing its implementation.

SIAC’s proposal

Consolidation provisions are currently found in most leading institutional rules. Such provisions allow for interrelated disputes to be resolved in a single proceeding. However, existing consolidation provisions do not provide a means to consolidate arbitrations that are subject to different institutional rules. Whilst one SIAC arbitration can be consolidated (in the appropriate circumstances) with another SIAC arbitration, this would not be the case if the other arbitration is administered by a different institution.

In its proposal, SIAC seeks to remedy this shortcoming through institutional co-operation, in particular, by proposing the development of a consolidation protocol that arbitral institutions can adopt and incorporate into their arbitration rules for the purpose of administering consolidated arbitrations.

The need for a cross-institution consolidation protocol

Given the increasingly complex nature of contemporary business transactions, SIAC has observed that, in many cases, related contracts in a single project or set of transactions contain agreements to arbitrate under different institutional arbitration rules. As the disputes arising out of these related contracts or transactions cannot be consolidated under existing institutional rules, disputes which are otherwise related are precluded from being heard together. This limitation curtails the ability of arbitration to meet the needs of users seeking an effective and efficient dispute resolution mechanism.

How would the consolidation protocol work?

Any consolidation protocol would need to primarily deal with two (2) matters:

(1) the decision to consolidate; and

(2) the administration of the proceedings and the rules adopted.

I.  The decision to consolidate

While consolidation provisions across arbitral institutions share common features, they have significant differences. Given these differences, SIAC has proposed two (2) options for cross-institution consolidation:

Option 1: Arbitral institutions to adopt a consolidation protocol that sets out a new, standalone mechanism for addressing the timing of consolidation applications, the appropriate decision-maker and the applicable criteria to determine if arbitral proceedings are sufficiently related to warrant cross-institution consolidation. SIAC proposes that a joint committee consisting of members of the Courts or Boards of arbitral institutions to be mandated to decide such applications.

Option 2: Arbitral institutions to adopt a consolidation protocol providing that one institution would determine any cross-institution consolidation based on its own consolidation rules. The consolidation protocol would set out objective criteria to determine which arbitral institution would be authorised to decide a particular cross-institution consolidation application.

While Option 2 has the benefit of simplicity (as it would obviate the need to agree on new consolidation provisions), SIAC posits that Option 1 may be more attractive to arbitral institutions and users as it militates against the substantial discretion conferred on a particular institution if a single institution were to decide.

Assuming that a new, standalone mechanism is devised, SIAC has flagged out various matters that the protocol must address:-

  1. Identifying a decision-maker: SIAC proposes that it would be preferable for the consolidation protocol to vest exclusive decision-making power in a joint committee comprising of one member from each arbitral institution.
  2. Standard for consolidation: SIAC has invited views on mutually acceptable grounds for consolidation under the consolidation protocol. At present, the leading arbitral rules contain different, albeit overlapping, grounds for consolidation. Additionally, SIAC suggests that the arbitral institutions agree on whether parties would be permitted to commence a single proceeding in relation to multiple contracts.
  3. Timing of the application and existing tribunal appointments: Whether consolidation would be allowed in cases where different arbitrators have been appointed in separate proceedings. Agreement is also necessary on whether the parties’ ability to appoint arbitrators for consolidated proceedings should be constrained.
  4. Partial consolidation: Whether partial consolidation of arbitral proceedings should be permissible (presently, SIAC is the only major arbitral institution to provide for this in its 2016 Rules).
  5. Reasoned decisions: Whether the institutions (either the joint committee or single institution) will issue reasoned decision(s) on consolidation application. Whilst this may increase costs and cause some delay, reasoned decisions would enhance transparency and the legitimacy of decision-making.

II.  The administration of consolidated proceedings and the rules adopted

SIAC proposes that arbitral institutions agree on either:

(1) a new set of rules for consolidated proceedings; or

(2) a set of objective criteria to ascertain which institution should administer the proceedings under its own rules.

While acknowledging that the first option would have strategic benefits, SIAC has highlighted the significant practical challenges to devising a new set of rules between institutions.

SIAC goes on to suggest that these complexities can be avoided by adopting the second option (i.e. choosing one institution on the basis of an agreed set of objective criteria). SIAC sets out its suggested criteria as follows:

  1. Number of cases: where there is an odd number of arbitrations, the institution with the larger number of proceedings will retain administration authority.
  2. Aggregate value of disputes: the institution with the highest aggregate value of the quantum in dispute will administer the consolidated proceeding.
  3. Time of commencement of arbitrations: proceedings to be consolidated into the arbitration that commenced first.
  4. Subject matter of the dispute: institutions could agree on a division of cases based on the type of dispute. SIAC acknowledges that this criterion is likely to be unattractive as it would limit the ability of institutions to expand their respective portfolios.
  5. Nationality and domicile of the parties: that consolidation be based on the top users for each arbitral institution by nationality (for e.g. SIAC to focus on cases involving parties in Asia whilst ICC focuses on disputes involving American and European parties). That said, SIAC acknowledges that this criterion may be unattractive, as institutions would not want to fetter their geographical reach.

Incorporation of the consolidation protocol

SIAC proposes that arbitral institutions amend their respective rules to incorporate the consolidation protocol, thus giving the protocol the same contractual force as other provisions of institutional rules.

By expressly selecting a set of institutional rules, parties would be consenting to the application of the consolidation protocol.

To ensure that parties are well informed and adapted to the rules, SIAC proposes that the consolidation protocol could be made to apply to arbitration agreements concluded after the date of the protocol and that the protocol could operate as an opt-in mechanism for a transition period.

Comment

Benefits of SIAC’s proposal

The benefits of cross-institution consolidation are readily apparent:

  1. As commercial transactions become increasingly globalised and complex, more parties are now involved in different aspects of a project. This has led to a rise in related contracts which may not have consistent dispute resolution clauses providing for the same arbitral institutions to administer interrelated disputes. SIAC’s proposal tackles this issue head-on and provides a bold solution to a long-standing and unresolved challenge faced by users of arbitration.
  2. Cross-institution consolidation of arbitrations would be a step forward in reducing the complexity, cost and time of arbitral proceedings.
  3. Having interrelated disputes resolved together is likely to enhance the overall quality of decision-making.

Challenges with implementation

There are inevitable difficulties associated with the implementation of SIAC’s proposal:

1. The consolidation protocol may be (incorrectly) perceived as an infringement on party autonomy to determine and utilise their institution and arbitration rules of choice.

1.1 In our view, SIAC’s proposal(s) that: (i) arbitral institutions amend their rules to incorporate the consolidation protocol; (ii) the consolidation protocol applies to arbitration agreements concluded after the date of the protocol; and (iii) the protocol operates as an opt-in or opt-out mechanism addresses this.

2. The protocol may introduce uncertainty as to which rules would ultimately apply to disputes arising out of a contract where a party designates arbitral rules incorporating the consolidation protocol. The decision as to how the consolidated proceeding will be administered will not be known to the parties beforehand, as it would be determined by the objective criteria set out above.

3. Practically, it may be in an arbitral institution’s interest to retain the conduct of an arbitration without ceding the same to another arbitral institution.

3.1 That said, from a commercial perspective, SIAC’s proposal offers significant benefits to arbitration users and is a welcome one.

SIAC has invited comments from users and other arbitral institutions on its proposal by 31 January 2018. Comments can be sent to consolidationconsult@siac.org.sg.

With thanks to Lakshanthi Fernando.

* This article may be cited as Wei Ming Tan and Pradeep Nair, “Towards reducing the complexity, cost and time of arbitral proceedings: SIAC’s proposal on cross-institution consolidation”  (10 January 2018) (https://singaporeinternationalarbitration.com/2018/01/10/towards-reducing-the-complexity-cost-and-time-of-arbitral-proceedings-siacs-proposal-on-cross-institution-consolidation/)

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