Developments in arbitration in Singapore: some innovation, some catching up

In developments that further increase the attractiveness of Singapore as an arbitration seat, the Singapore International Arbitration Centre (SIAC) has introduced new Arbitration Rules which allow for the early dismissal of unmeritorious claims and the Government has proposed legislation to allow third party funding of international arbitrations seated in Singapore.

In Brief

• The 6th Edition of the Singapore International Arbitration Centre
  Arbitration Rules (SIAC Rules 2016) came into force on 01 August 2016
• The key innovation in the SIAC Rules 2016 is the introduction of a
  procedure for the early dismissal of a claim or defence without legal
  merit or manifestly outside the jurisdiction of the tribunal.
• The SIAC Rules 2016 also contain comprehensive rules on the
  consolidation of multiple arbitrations and joinder of third parties
  which should help parties with multi-party and/or multi-contract
  disputes.

The Singapore Government has released proposed legislation to allow for third party funding of international arbitration's seated in Singapore

SIAC Rules 2016

The SIAC Rules 2016, which came into force on 01 August 2016, are significantly changed from the previous edition of the rules. Not only are there the four key new rules, Rule 6 Multiple Contracts, Rule 7 Joinder of Additional Parties, Rule 8 Consolidation and Rules 29 Early Dismissal of Claims and Defences, which are further described below, but there are amendments to the wording throughout. 

Unless the parties have agreed otherwise, the SIAC Rules 2016 will apply to all arbitrations which are commenced on or after 01 August 2016 regardless of when the arbitration agreement was entered into. Given the changes, arbitrators and parties will need to refresh their knowledge of the rules rather than rely on their familiarity with the old rules.

Improvements on existing procedures

Two of SIAC’s most popular procedures, the emergency arbitrator proceedings and the expedited procedures, have been enhanced.

In 2010 the SIAC was one of the first institutions to introduce emergency arbitrator proceedings. Since then provisions for emergency arbitrators have become commonplace. SIAC has reduced the time to appoint an emergency arbitrator from 1 business day to 1 calendar day and introduced a 14 day timeframe within which the emergency arbitrator should issue his or her order or award of interim relief.

The expedited procedures will now potentially apply to larger disputes with the threshold being raised from SGD5M to SGD6M. In reaction to the unsuccessful challenge to the expedited procedure made in AQZ v ARA [2015] SGHC 49 1, the SIAC Rules 2016 make it clear that the parties agree that if the SIAC President determines that the arbitration is to be conducted under the expedited procedure then this expedited procedure can override contrary terms set out in the arbitration agreement.

Innovative new procedure for the early dismissal of unmeritorious claims

One of the great advantages of court proceedings in some jurisdictions over arbitration is the availability of procedures for summary judgment or strike out. The availability of these procedures is particularly attractive to financial institutions or other companies with straightforward debt claims.

The innovative change in the SIAC Rules 2016 is the introduction of procedures for the early dismissal of a claim or defence. Under Rule 29 Early Dismissal of Claims and Defences a party may apply to the tribunal for the early dismissal of a claim or defence on the basis that it is manifestly without legal merit or that it is manifestly outside the jurisdiction of the tribunal.

Unusually the tribunal is given the discretion to decide if the application should proceed, presumably this is to stop parties abusing the procedure by making unmeritorious applications as a means of delaying the arbitration. Once the application is allowed to proceed, the tribunal is given 60 days to consider the application and make an order or award with reasons (although this can be in a summary form).

Rule 29 stipulates that the tribunal shall give the parties the opportunity to be heard but otherwise allows the tribunal the freedom to determine how to hear such an application. This gives tribunals the flexibility to design a procedure that is appropriate for the particular arbitration but it also means that there is uncertainty about how it will work in practice and whether due process concerns will be met.

It will be interesting to see whether the new procedure is as popular as past innovations like emergency arbitrators and expedited procedures and whether it brings the hoped for savings in time and costs. 

Catching up with HKIAC: new rules for consolidation, joinder and multi-contract disputes

Disputes, particularly in the construction industry, can often involve multiple contracts and multiple parties. Yet a traditional arbitration agreement only allows for arbitration of the dispute under that contract and between the parties to that contract. Institutions have grappled with how to ensure that disputes are resolved between all relevant parties expeditiously and consistently while also ensuring that the arbitral tribunal has the legitimate jurisdiction and power to do so. 

In 2013 the Administered Arbitration Rules of the Hong Kong International Arbitration Centre (HKAIC Rules 2013) led the way in Asia with comprehensive rules on the joinder of additional parties, consolidation of related arbitrations and arbitrations under multiple contracts. 

SIAC has now caught up with its own comprehensive regime 

Rule 7 Joinder of Additional Parties allows either the SIAC Court (prior to the appointment of the tribunal) or the tribunal to join one or more additional parties to a pending arbitration provided that either the additional party is prima facie bound by the arbitration agreement or all parties (including the additional party) have consented to the joinder. 

Rule 8 Consolidation allows either the SIAC Court (prior to the appointment of the tribunal) or the tribunal to order consolidation of multiple arbitrations. To ensure that the tribunal will have jurisdiction and that consolidation only occurs when it will be effective, the following criteria need to be satisfied:

• All parties have agreed to the consolidation
• All the claims in the multiple arbitrations are made under the same arbitration agreement, or
• All the arbitration agreements are compatible and either (a) the disputes arise out of the same legal relationships; (b) the disputes arise out of contracts consisting of a principal contract and its ancillary contract(s); or (c) the disputes arise out of the same transaction or series of transactions.

The tribunal can only make an order for consolidation, other than when all parties have agreed, if either the same tribunal has been constituted in each of the arbitrations or no tribunal has been constituted in the other arbitrations. Given this, parties need to consider consolidation early in the arbitration.

In addition, Rule 6 Multiple Contracts offers the claimant a number of different procedural choices when there are disputes arising out of or in connection with more than one contract and the claimant wishes to apply for consolidation. The claimant can file a notice of arbitration for each contract and simultaneously apply for consolidation under Rule 8. Alternatively the claimant can file a single notice of arbitration and explain how the criteria in Rule 8 are satisfied and this will be deemed to be an application to consolidate multiple arbitrations.

Third Party Funding for Singapore seated arbitrations

Currently neither Hong Kong nor Singapore allow third party funding for litigation or arbitration except in very limited circumstances. Third party funding, in which a third party provides funding to the claimant in return for a share of the proceeds, is regarded as illegal and contrary to public policy in these jurisdictions based on the common law doctrines of champerty and maintenance.

Both jurisdictions have made moves to change this position in relation to international arbitration given that other well-known arbitration seats such as London, Paris and Geneva do allow third party funding. 

In October 2015 the Hong Kong Law Reform Commission released a consultation paper proposing the introduction of third party funding for arbitration taking place in Hong Kong. Now Singapore has gone further with the release of draft legislation and regulations to allow third party funding for international arbitrations and connected mediations and court proceedings.

A regime will also be put in place to permit third party funders to operate in Singapore and offer third party funding contracts to interested parties. The proposed amendments to the Civil Law Act will clarify that such contracts are not contrary to public policy or otherwise illegal.

Consistent with the IBA Guidelines on Conflict of Interest in International Arbitration 2014, the Singapore government also proposes legislation to ensure that legal practitioners are under a duty to disclose the existence of a third party funding contract and the identity of the third party funder to the Court or tribunal and to every other party to the proceedings, as soon as is practicable. Legal practitioners and law practices will also be prohibited from having interests in relevant third party funders and from receiving referral fees and commissions.

We expect the legislation and regulations to be put in place in early 2017.

Conclusion

The SIAC Rules 2016 offer some welcome improvements on the previous 2013 edition of the SIAC Rules, in particular the innovative procedure for early dismissal and the rules on consolidation. Hopefully there will be more time before the next edition of the rules so as to allow the new procedures to be tested in practice. 

Competition between international arbitration institutions and seats and feedback from the users of international arbitration is driving the introduction of innovation and the adoption of ideas from one jurisdiction to another. Emergency arbitrators have become standard even though there is very little jurisprudence on the validity and enforceability of emergency arbitrator awards.2   We shall see if the early dismissal procedure is adopted worldwide prior to the resolution of the legal question as to whether it offers sufficient opportunity for a party to present its case.

The moves to allow third party funding are welcome given that Singapore is looking to continue to attract disputes to the seat that have no connection with Singapore, some of which come from legal cultures with different approaches to these issues. 

Given these developments the future of arbitration in Singapore looks healthy.

1 In the arbitration, the SIAC President agreed to an application that the arbitration be conducted pursuant to the expedited procedure before a sole arbitrator, although the arbitration agreement specified that the arbitration should be before a three person tribunal. The plaintiff argued, unsuccessfully, that the arbitration should be set aside as the arbitral tribunal and the arbitral procedure were not in accordance with the arbitration agreement.

2 Hong Kong and Singapore have legislated to allow for the enforcement of emergency arbitrator awards.

This article is a joint article by Simmons & Simmons and JWS Asia Law Corporation, Singapore.

JWS Asia is a boutique Singapore law practice that provides a one-stop service to the asset management and investment funds sector in Singapore, offering a full range of legal services to clients across all stages of development - from fund structuring formation and marketing, to advisory services such as licensing, corporate structuring, transactional and dispute resolution services.

JWS Asia offers clients deep local knowledge combined with access - through our "best friends" referral relationship - to the wide network and global expertise of Simmons & Simmons, a leading international law firm.

Authors:

Amanda Lees (Simmons & Simmons Asia LLP)
T +65 6831 5635
E Amanda.Lees@simmons-simmons.com

Shaun Lee (JWS Asia Law Corporation, Singapore)