International Arbitration Practice in Singapore: New Developments, and some Insights from a Practitioner

Michael de Venecia*

I. Introduction

Despite the global COVID-19 pandemic, the international arbitration scene in Singapore continues to grow.[1]  As the world recovers from it, Singapore will likely continue on this trajectory in the future. Singapore is one of the leading centres of International Commercial Arbitration, and it continuously refines its laws to maintain that status.[2]

II. New developments in Singapore law with regards to International Commercial Arbitration

A. Damages for breach of Arbitral Agreement

A dispute can be referred to arbitration if there is a valid arbitral agreement between the parties and the dispute falls within the scope of the arbitral agreement.[3] If a party decides to refer the matter to the court, the usual remedy available to the other party includes a stay of proceedings in favour of arbitration and anti-suit injunctions.[4] Indemnity costs are usually awarded in favour of the party who received a favourable outcome of the stay of proceedings and anti-suit injunction.  Other costs in respect of losses suffered, arising from the breach of arbitration agreement, would be shouldered by one  of the parties. There is a strong and growing support based in Singapore’s current legal principles for the possibility of allowing a claim for damages arising out of a breach of arbitration agreement. However, the Singapore courts are yet to make a concrete position about such remedy.[5]

B. Response to delaying tactics and abuse of due process

The court in China Machine New Energy Corp v Jaguar Energy Guatemala LLC [2020] 1 SLR 695 expressed its displeasure the delaying tactics of parties (especially the  unsuccessful parties) in Arbitration proceedings. It stressed that the parties should raise their procedural concerns while the arbitration proceedings are ongoing. The parties should not wait until an award is delivered.[6]

China Machine New Energy Corporation (‘CMNC’) entered a construction contract with Energy Guatemala LLC (‘Jaguar’). CMNC was the builder and Jaguar was the owner of the proposed structure. Continuous delay to the construction works lead to Jaguar terminating the contract and commencing an arbitration in Singapore where Jaguar was claiming damages associated with the delay. The tribunal awarded in favour of Jaguar, stating that Jaguar had validly terminated the contract and ordered CMNC to pay the estimated cost of completion of the project. On appeal CMNC raised the issue of whether it was denied a full opportunity to respond over the claimed cost of completion of the works post-termination. In addition to its decision that the evidence failed to establish a breach of CMNC’s right to be heard, the Court of appeal stressed that parties must give the tribunal an opportunity to address any due process issue during the arbitration itself rather than raise it afterwards when they receive an unfavourable award.[7] The court further said that international arbitration tribunals are perfectly capable of addressing any procedural issues during the proceedings and it is inappropriate and counterproductive for national courts to scrutinise every procedural decision made by the tribunal during the setting-aside or enforcement proceedings.[8]

C. Summary procedure in investment arbitration

In an arbitration proceeding, a summary procedure is a special procedure that enables the tribunal to summarily deal with the claim at a preliminary stage. It allows a party to apply for an early dismissal, and the tribunal is empowered to dismiss a claim if it finds that it is ‘manifestly without legal merit’. It is not common in the past, but the Singapore International Arbitration Centre (‘SIAC’) has not so long ago included an express provision in its arbitration rules about summary procedure in the context of international commercial arbitration and investment arbitration.[9] The importance of this procedure lies in the time and cost efficiency it provides while not wrongly depriving the parties of their rights to due process.[10]

The summary procedure is an expedited one. There are three phases in addressing a party’s objection that the claim is manifestly without legal merit. Phase 1 involves filing a written submission by a party who raises an objection. Rule 26.2[11] requires the applicant to ‘state in detail the facts and legal basis supporting the application’ while simultaneously, ‘[sending] a copy of the application to the other Party’ and ‘[notifying] the Tribunal that it has done so, specifying the mode of service employed and the date of service.’ Under rule 26.3,[12] phase 2 requires parties have ‘the opportunity to be heard.’ Failure to provide such opportunity could lead to setting aside or a refusal of enforcement under arts 34(2)(a)(ii) and 36(2)(a)(ii) of the UNCITRAL Model Law. Phase 3 is where the tribunal makes a decision. This decision shall be made within 90 days from the date of application. The Registrar may extend the time, but only in ‘exceptional’ circumstances. Despite its efficiency, the threshold to establish that a claim is ‘manifestly without legal merit’ is extremely high.[13]

D. The Arb-Med-Arb Protocol

Arb-Med-Arb is a hybrid mechanism in which parties contractually agree to resolve their disputes by mediation before proceeding to arbitration. SIAC and the Singapore International Mediation Centre (‘SIMC’) introduced the Arb-Med-Arb Protocol (the ‘AMA Protocol’). When parties contractually agree to settle their dispute in a manner described by the protocol, a party may apply for a stay of the arbitration proceedings and submit the case to mediation. If the dispute is fully or partially resolved, the matter is then referred back to arbitration for recording of a consent award. Any issue that is not resolved by mediation would then be decided through arbitration. Although the new United Nations Convention on International Settlement Agreements (‘Singapore Convention’) established a framework for Mediated Settlement Agreements (‘MSA’) to be recognised and enforced internationally, it is still in its infancy and there is a lot of uncertainty as to its operation.[14] The structure of the AMA Protocol allows parties to take advantage of the benefits of mediation without its enforcement limitations. Starting with arbitral proceedings allows for the exchange of written statements, enabling parties to evaluate their legal positions. Also, the parties can take advantage of the procedural powers of the tribunal that are not available in mediation. The referral of the dispute back to arbitration after the creation of MSA by the mediator allows the arbitral tribunal to record it as an award that is recognised and enforceable in many jurisdictions under the New York Convention.[15]

The significance of the AMA protocol is it being mandatory for parties to undertake mediation until completion, and almost immediately on commencement of arbitration. This creates the possibility of a quicker and less costly resolution of a dispute than if the entire dispute is resolved through arbitration. In prescribing the step-by-step procedure on how an arbitration and mediation is to proceed there is a smooth transition from arbitration to mediation and back to arbitration that can help the parties avoid confusion. As a result, using the AMA protocol allows parties to take advantage of the combined administrative capabilities of SIAC and SIMC.

However, despite all its advantages, the AMA protocol suffers from some ambiguities. While these can be resolved by parties, it is important for the parties to be aware of them. These include ambiguities regarding the commencement date of arbitration and mediation; and the sequence of events leading up to, and the termination/lifting of, stay of arbitration. Also, the AMA protocol does not have an express provision on jurisdictional challenges and applications for interim measures.[16] This shows that practitioners may have to address these issues before they decide to adopt the AMA protocol in their commercial contracts. Despite its ambiguities, the AMA Protocol is still an innovative hybrid system of dispute resolution that takes advantage of both mediation and arbitration while avoiding the limitations of both processes.

E. Third Party Funding

The Singapore government, on 1 March 2017, approved a law that legalises third party funding of dispute resolution proceedings.[17] Singapore has long been hesitant to allow third party financiers, due to the doctrines of maintenance and champerty which arose to combat abuses in medieval England. In law, maintenance is defined as the ‘[a]ssistance or encouragement to a party to litigation by a person who has no interest in the litigation and no motive recognised as justifying interference’[18] whereas champerty is defined as ‘[a]n aggravated form of maintenance, in which the consideration given for the maintenance of court proceedings is a share of anything gained as the result of the proceedings, or some other profit’.[19]  As the cost of dispute resolution proceedings increases over the years, the courts recognise that it has become harder for some businesses to access civil justice. This could challenge Singapore’s status as one of the leading seats for international arbitration. The prohibition on third party arbitration funding could discourage parties away from Singapore and towards other jurisdictions such as Australia[20] and England & Wales[21] which have long abolished the common law crimes of maintenance and champerty.

Legalisation of third-party funding of arbitration proceedings are achieved by statutory abolition of the torts of maintenance and champerty. Inspired by what has been done in Australia and England & Wales, Singapore has adopted a ‘light touch’ approach to regulation of third-party funding of civil litigation.[22] As such, funding arrangements between parties and their fund providers can still be held unenforceable if they are found to be contrary to public policy.[23] Thus, third party funders as well as the parties to the dispute have to be careful in choosing their respective partners and make sure that they all do their due diligence before entering into any funding agreement.

The degree of control to be permitted to third-party funders as well as whether adverse cost should be granted against them are areas are also still not clarified by the legislation.[24] Some parties to disputes are unfamiliar with arbitration proceedings, making the process particularly stressful. While the principles of contract provide parties with freedom on how to resolve their disputes, it is unclear whether the legislation allows the same freedom for parties choosing how their disputes are to be managed. Despite some unresolved matters, the new rules being developed in Singapore are helping to promote the use of arbitration in dispute resolution in Asia.

In addition to the disclosure requirements, lawyer’s fiduciary duties are still owed to their client (who must be the funded party) and not to the funder. This means that lawyers must act in the best interest of the funded party even if it would result to the detriment of the funder.

III. The Practice of Arbitration in Singapore from a Practitioner’s Perspective

A. Introduction

Please State your name, occupation, area of expertise and a brief description of your experience: Anil Changaroth, Mediator, Arbitrator, Adjudicator, Advocate & Solicitor of Singapore, Solicitor of England and Wales – focuses on Appropriate Dispute Resolution involving infrastructure, building, and construction projects and most aspects of Commercial, Civil, Criminal and Corporate Front End Advisory.

B. Singapore arbitration practice

What do you think is the reason Singapore is considered one of the most preferred seats of International Commercial Arbitration? Good Judiciary, professional and great infrastructure for ADR.

The Singapore courts have been adopting a policy of minimum judicial interference when it comes to Arbitration proceedings. Given that Model Law provides powers of the Tribunal that is on par with that of the courts, based on your experience, do you think that there should be more (or less) ‘hands on’ approach in the court’s exercise of supervisory jurisdiction over Arbitration proceedings? Less, if not maintained at the current level of involvement.

C. Independence and Impartiality of Arbitral Tribunals

Impartiality has always been the main duty of party-appointed arbitrators. In practice, how do parties select their arbitrators? Reference of other Arbitration practitioners.

In practice, do lawyers involve in parties’ decision in the selection of arbitrators? If they do, to what extent parties normally rely on their lawyers in the selection of suitable arbitrators? Yes, very much. Parties (maybe 70%) do reply on their lawyers.

D. The Efficiency of Arbitral Proceedings

The issue of costs involved in Arbitration has also come under sharp criticism, with parties often complaining that the costs involved in arbitration are extravagant. Do you agree and to what extent? What possible legal and practical innovations, in your opinion, counter the issue of rising costs?

Yes, I agree. Arbitrators being far my efficient in the process and timelines.

How effective are Alternate Dispute Resolution (ADR) processes in Singapore context? With reference to time and cost, is arbitration still an effective means of resolution of dispute or should parties add mediation as part of their dispute resolution clauses? It is really no longer ‘Alternate’ but really ‘Appropriate’ – as many of the ADR mechanism are far more appropriate than Litigation or Arbitration. Dispute Boards, Expert Determination, Mediation, Neutral Evaluation have all come to the forefront and far more time and cost effective.

What are the things parties need to consider in deciding whether to go with institutional or ad-hoc arbitration? Institutional has a clear framework/procedure/process in place.

E. Impact of Covid-19

Since the arbitrations are being held via virtual hearings since the outbreak of the COVID-19 pandemic, how do you see the arbitration practice changing? Do you think we will ever come back to the traditional way? Many are converts leaving a small percentage that are still traditionalist. We are likely not to return completing to in person hearings.

F. About the person who shared his feedback

Mr. Changaroth is the Managing Director of Changaroth Chambers LLC. He is an experienced mediator, arbitrator, and adjudicator.[25] His full profile can be found from the Changaroth Chambers LLC website.[26]

IV. Conclusion

Singapore continues to evolve and adopt to the challenges. Its government and courts are dedicated to maintaining its status as the primary choice for parties and leading practitioners to have their disputes resolved, and because of this it is likely that Singapore will remain one the most popular location when it comes to international arbitration.

V. Bibliography

A. Articles/Books/Reports

Boo, Lawrence, and Marcus Liew, ‘Arbitration’ (2020) 21 Singapore Academy of Law Annual Review 101

Duong, Donny Trinh Ba, ‘The evolution of summary procedure in investment arbitration: past, present and future’ [2021] (37) Arbitration International 35

Gayner, Oliver and Susanna Khouri, ‘Singapore and Hong Kong: International Arbitration Meets Third Party Funding’ (2017) 40(3) Fordham International Law Journal 1033

Krishna, Elan, and Yi-Jun Kang, ‘Damages for breach of an Arbitration Agreement: An Available Remedy under Singapore Law?’ [2021] (33) Singapore Academy of Law Journal 786

Ng, Cheryl, ‘The Arb-Med-Arb Protocol’ [2020] (32) Singapore Academy of Law Journal 124

Teo Jim Yang, ‘The Singaporean Response to Abuse of Due Process in International Arbitration’ [2021] Singapore Journal of Legal Studies 244

Encyclopaedic Australian Legal Dictionary

B. Legislation

International Arbitration Act (Singapore, cap 143A, 2002 rev ed)

C. Other

SIAC rules

* 2^nd year Juris Doctor student at the University of New South Wales, Sydney.

[1] Lawrence Boo and Marcus Liew, ‘Arbitration’ (2020) 21 Singapore Academy of Law Annual Review 101, 101.

[2] Elan Krishna and Yi-Jun Kang, ‘Damages for breach of an Arbitration Agreement: An Available Remedy under Singapore Law?’ [2021] (33) Singapore Academy of Law Journal 786, 786.

[3] International Arbitration Act (Singapore, cap 143A, 2002 rev ed) s 6(2).

[4] Elan Krishna and Yi-Jun Kang, ‘Damages for breach of an Arbitration Agreement: An Available Remedy under Singapore Law?’ [2021] (33) Singapore Academy of Law Journal 786, 788.

[5] Ibid 809.

[6] Teo Jim Yang, ‘The Singaporean Response to Abuse of Due Process in International Arbitration’ [2021] Singapore Journal of Legal Studies 244, 245.

[7] Ibid 246.

[8] Ibid 248.

[9] Donny Trinh Ba Duong, ‘The evolution of summary procedure in investment arbitration: past, present and future’ [2021] (37) Arbitration International 35, 36.

[10] Ibid 37.

[11] SIAC rules.

[12] SIAC rules.

[13] Donny Trinh Ba Duong, ‘The evolution of summary procedure in investment arbitration: past, present and future’ [2021] (37) Arbitration International 35, 44.

[14] Cheryl Ng, ‘The Arb-Med-Arb Protocol’ [2020] (32) Singapore Academy of Law Journal 124, 135.

[15] Ibid 136.

[16] Ibid 164.

[17] Oliver Gayner and Susanna Khouri, ‘Singapore and Hong Kong: International Arbitration Meets Third Party Funding’ (2017) 40(3) Fordham International Law Journal 1033, 1034.

[18] Encyclopaedic Australian Legal Dictionary (online on 29 July 2022) ‘maintenance’ (def 3) citing Re Trepca Mines Ltd [No 2] [1962] Ch 511; [1962] 1 All ER 755.

[19] Encyclopaedic Australian Legal Dictionary (online on 29 July 2022) ‘champerty’ (def 1) citing Trendtex Trading Corp v Credit Suisse [1982] AC 679; [1981] 3 All ER 520.

[20] Oliver Gayner and Susanna Khouri, ‘Singapore and Hong Kong: International Arbitration Meets Third Party Funding’ (2017) 40(3) Fordham International Law Journal 1033, 1035.

[21] Ibid 1038.

[22] Ibid 1041.

[23] Ibid 1042.

[24] Ibid 1044-1046.

[25] Changaroth Chambers LLC (Web Page, 29 July 2022) <https://www.changarothchambers.com/our-lawyers>

[26] Ibid.