SINGAPORE

Nandakumar Ponniya, Daniel Ho and Daryl Yang

A. LEGISLATION AND RULES

A.1       Legislation

International arbitration continues to be governed by the International Arbitration Act (IAA), the Arbitration Act (AA) and the Arbitration (International Investment Disputes) Act.

On 5 October 2020, the International Arbitration (Amendment) Act (“Amendment Act“) was passed by the Singapore Parliament and introduced two key amendments to the IAA, including a default procedure to appoint arbitrators in multiparty  disputes and statutory recognition of court and tribunal powers to enforce confidentiality-related obligations in arbitration.

A.1.1    Appointment of arbitrators in multiparty arbitrations

First, a new Section 9B to the IAA sets out a default mechanism for the appointment of arbitrators in arbitrations involving more than one claimant and/or more than one respondent (i.e., multiparty arbitrations).

The default mechanism for arbitrator appointments in multiparty arbitrations set out in section 9B largely reflects equivalent provisions introduced in the latest versions of the SIAC, ICC and HKIAC Rules. This latest amendment to the IAA will be particularly helpful for parties who do not have any agreement on the arbitration procedure (and institutional rules) to govern and/or administer their arbitrations (such as ad hoc arbitrations or disputes where an arbitral institution that does not provide such a mechanism is chosen to administer the arbitration). This amendment will also ensure that no party can abuse the lack of procedure to delay or stall the arbitration.

In practice, one difficulty that may arise is in situations where there is no clear-cut distinction between the claimants and the respondents. Multi-party disputes frequently involve multiple cross-claims and counterclaims, which can blur the distinction between different “groups” of disputing parties. In such circumstances, the fallback position is likely to be that the arbitral institution appoints all three arbitrators. It therefore remains prudent and sensible to negotiate a bespoke mechanism for multiparty disputes in the relevant contract(s), rather than relying upon the default procedures under institutional rules or the IAA.

A.1.2    Statutory recognition of court and tribunal powers

Second, section 12 of the IAA now expressly recognizes the powers of the Singapore High Court as well as Singapore‑seated arbitral tribunals to enforce obligations of confidentiality by making orders or giving directions as may be appropriate.

This amendment is timely, as concerns over confidentiality have proliferated with the recent shift to virtual hearings in the post-Covid era. It is imperative to note that the IAA does not seek to codify or state what such confidentiality-related obligations are in Singapore-seated arbitrations. The content of such obligations is still determined by common law, institutional rules and/or parties’ agreement. All the IAA seeks to do is to make it easier to enforce such obligations through orders and directions by the court and/or the tribunal.

A.2       Institutions, Rules and Infrastructure

The main arbitral institution in Singapore is the SIAC, which is recognized as one of the top three most-preferred arbitral institutions in the world and the most preferred institution based in Asia.[1] ICC statistics for 2019 showed that Singapore continued to be the most preferred seat for arbitrations in Asia.[2] The SIAC continued to extend its global reach, most recently with the opening of a representative office in New York, USA in December 2020.[3] It has also signed memorandums of understanding with the Hainan International Arbitration Court,[4] the Thailand Arbitration Center,[5] and law schools around Asia.[6]

The SIAC witnessed an increase in new caseloads in 2019. It saw 479 new case filings, with the total sum of dispute being USD 8.09 million (a 14.6% increase from 2018). India was the top foreign user of the SIAC, with China and the US being in the top-5 foreign users of the SIAC. the SIAC also recently confirmed that, as of 30 October 2020, it set a new record and received more than 1000 new cases, marking a significant increase from its caseload in 2019.[7] Despite the pandemic, travel restrictions and virtual hearings, the SIAC, with its world-class facilities, and Singapore continue to be the preferred choice for parties to settle their disputes.

In August 2020, the SIAC released the SIAC Guides, a series of user-friendly tools created by the SIAC Secretariat to assist the SIAC’s users, arbitrators, colleagues and stakeholders to conduct their arbitration cases.[8] The first of the series is Taking Your Arbitration Remote, which is designed to help parties identify the main considerations that could impact the adoption of remote hearing technologies, and encourage discussions between parties and tribunals on the most suitable procedure for their specific case.

In July 2020, the SIAC announced the formal commencement of the process of reviewing the SIAC Arbitration Rules (“Rules“) and plans to release the seventh edition of the Rules in the third quarter of 2021.[9] The Rules were last revised in 2016, which included the introduction of additional time and cost-saving mechanisms such as consolidation, multiple contracts, and joinder of additional parties, as well as an innovative procedure for the early dismissal of claims and defenses.

B. CASES

B.1       Conflict between arbitration clause and exclusive jurisdiction clause

If an agreement has both an exclusive jurisdiction clause (in favor of the courts) and an arbitration clause, the court will consider whether parties have evinced a real intention to arbitrate. If so, the court will interpret such agreements such that arbitration, not litigation, would be considered to be the parties’ intended choice of dispute resolution, with any disputes about the arbitration being subject to the courts. This was the holding of the Singapore Court of Appeal in BXH v BXI [2020] 1 SLR 1043, where the agreement included an arbitration clause as well as a clause that states that the agreement shall be governed by Singapore law.

In reaching this decision, the court reiterated Singapore’s pro-arbitration approach and held that “minor inconsistencies between clauses cannot be allowed to detract from the parties’ agreement to arbitrate”.[10] Instead, the court will adopt a “generous and harmonious interpretation”. In particular, the court observed that the arbitration clause in this case was very detailed and “painstakingly provides” for various aspects of the arbitration, such as the number of arbitrators and the manner of appointment.

In light of the litigation risk that arises when an agreement may feature conflicting dispute resolution clauses, parties must ensure that their agreements adequately and consistently reflect their mutual intentions in relation to the resolution of disputes.

B.2       Setting aside an arbitral award for breach of international comity

An arbitral award may be set aside if it is contrary to public policy. In Gokul Patnaik v Nine Rivers Capital Ltd [2020] SGHC(I) 23, the Singapore International Commercial Court (SICC) was invited to set aside an arbitral award on the basis that the award is in conflict with the public policy of India because the awarded relief is in contravention with Indian Law and it would be a breach of international comity and thus against Singapore public policy to allow the award to stand. The SICC declined to do so.

First, the SICC held that the tribunal had already decided as a matter of Indian law that the contract in question was not an illegal contract. The court held that if an arbitral tribunal decides that a contract is not illegal under foreign law, then there is no issue of Singapore law which is engaged and therefore no finding of law which a Singapore court could set aside under article 34(2)(b)(ii) of the Model Law for being contrary to Singapore public policy. In particular, it clarified that findings of Indian law are findings of fact as to a foreign law that the court cannot disturb.

In contrast, if an arbitral tribunal decides that a contract is illegal but also decides that it was not against Singapore public policy to enforce that contract in Singapore, that finding would be a finding of law which, if erroneous, could be set aside under article 34(2)(b)(ii) of the Model Law by a court in Singapore if the contract is governed by Singapore law.

Second, the court held that even if an arbitral award amounts to illegality in a foreign state, the illegality must demonstrate sufficiently egregious circumstances that would “shock the conscience” or violate the most basic notions of morality and justice so as to amount to a breach of Singapore public policy. Otherwise, taken to its logical conclusion, any minor illegality or regulatory infringement by a contract in its place of performance would “ipso facto lead to the conclusion that international comity, and thus Singapore public policy, would be breached so that the arbitral award would have to be set aside”.[11] The court also observed that there were no authorities to support the proposition that a contract which is illegal in another foreign state necessarily leads to a breach of international comity, and thus Singapore public policy under article34(2)(b)(ii) of the Model Law, if the arbitral award contemplating the enforcement of that contract is not set aside.

 B.3      Timeline for correction of arbitral award

Article34(3) of the UNCITRAL Model Law provides that “[a]n application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal.” In BRS v BRQ and another and another appeal [2020] SGCA 108, the Singapore Court of Appeal considered the types of request that fall within the scope of article 33.

After the arbitral tribunal issued a final award, the respondent BRQ had made a request for correction under article 33, which was dismissed by the tribunal. The court held that though the request was made under article 33, the corrections sought were in fact reviews of the tribunal’s decision on substantive matters. The request therefore did not fall within the scope of article 33 to correct an error in computation, a clerical or typographical error or any error of similar nature. The timeline for the respondent to file its setting aside application therefore would start from the date it received the award, rather than the date that the tribunal dismissed its request for correction.

B.4       A tribunal’s mandate to ascertain, develop and apply Singapore’s law of arbitration

Under Singapore arbitration law, parties to an arbitration are obliged to keep the documents and proceedings confidential. In Republic of India v Vedanta Resources plc [2020] SGHC 208, the plaintiff had sought two declarations that documents disclosed or generated in the arbitration were not “confidential or private” and that the plaintiff will not breach any obligation of confidentiality or privacy if it disclosed for the purpose of another arbitration the documents which were disclosed or generated in the arbitration in question.

The tribunal had earlier held that the general obligation of confidentiality did extend to investment-treaty arbitrations. In response, the plaintiff argued before the court that the tribunal had gone beyond its mandate to develop Singapore’s law of arbitration when the Singapore courts have not yet pronounced on this issue.

The court disagreed with the plaintiff and held that a tribunal in a Singapore-seated arbitration is entitled and empowered to “ascertain, develop and apply the principles of common law where that is necessary for [the tribunal] to resolve the dispute at hand“.[12] Accordingly, the court declined to grant the declarations and reiterated the principle of minimal curial intervention as a compelling factor militating against exercising the discretion to grant the plaintiff the declaratory relief which it sought.

B.5       The right to be heard by the tribunal does not give a party an unlimited opportunity to present its case

Article 18 of the Model Law provides that “each party shall be given a full opportunity of presenting his case.” Where a party was “unable to present his case”, it may apply to set aside an award under article34(2)(a)(ii) of the Model Law and section 24(b) of the International Arbitration Act. In China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another [2020] 1 SLR 695, the appellant sought to set aside the arbitral award on the basis that it was deprived of a full opportunity to respond to the other party’s claim by the arbitral tribunal’s procedural mismanagement of the proceeding in relation to the document production process and the submission of expert evidence.

The Singapore Court of Appeal dismissed the appeal and clarified that while the right to be heard is a fundamental rule of natural justice, what constituted a “full opportunity” is a contextual inquiry to be undertaken within the specific context of the particular facts and circumstances of each case. The proper approach is for the court to ask itself if what the tribunal did (or decided not to do) fell within the range of what a reasonable and fair-minded tribunal in those circumstances might have done.

This case reiterates the very high threshold for a party to succeed in setting aside an arbitral award on the basis of a breach of natural justice. In undertaking this exercise, the court had to put itself in the shoes of the tribunal. This means that the tribunal’s decisions could only be assessed by reference to what was known to or had been brought to the tribunal’s attention at the material time. Further, the court would accord a margin of deference to the tribunal in matters of procedure and would not intervene simply because it might have done things differently.

B.6       An arbitral award will not be set aside for being contrary to public policy where the tribunal had wrongly declined to exercise its mandate

As a matter of law, can a party challenge an award on the ground that the award is contrary to public policy because the award rests on an error of law by reason of which error the tribunal considered that it was not able to exercise its mandate and determine the merits of either party’s position? Alternatively, is it contrary to public policy to uphold an arbitral award that allows a party to take advantage of its breach of contract? These were the questions that the Singapore Court of Appeal considered in BTN and another v BTP and another [2020] SGCA 105.

On the first question, the appellants had sought to argue that an error of law as to the res judicata effect of a prior decision went towards the jurisdiction of the tribunal, which is subject to de novo independent review. The appellants further argued that refusing to recognize such an award would be consistent with the pro-arbitration public policy of Singapore, by ensuring that tribunals honor their mandate to arbitrate on the whole dispute submitted to them.

However, the court disagreed and held that the issue on res judicata is an issue of admissibility, which the courts cannot review on its merits. This is because where a party alleges that a dispute has already been resolved and should not be reheard, the party is not attempting to get the dispute resolved in a different forum; rather the party does not want the claim (or part thereof) to be resolved in any forum.

On the second question as to whether it is contrary to public policy to uphold an award that allows a party to take advantage of its breach of contract, the court dismissed the argument on its facts and held that the appellants had failed to demonstrate that the respondents were in breach of the arbitration agreements by referring the dispute to the Malaysian Industrial Court (MIC). Instead, by failing to invoke the arbitration agreements at the relevant time, the appellants could not now seek to impugn the respondents’ actions in commencing proceedings at the MIC.

 

[1] SIAC, SIAC is Most Preferred Arbitral Institution in Asia and 3rd in the World, 10 May 2018, https://www.siac.org.sg/69-siac-news/568-siac-is-most-preferred-arbitral-institution-in-asia-and-3rd-in-the-world.

[2] International Chamber of Commerce, ICC Dispute Resolution 2019 statistics, https://iccwbo.org/publication/icc-dispute-resolution-statistics.

[3] SIAC, SIAC Opens Office in New York and Announces New Record Caseload, 3 December 2020, https://www.siac.org.sg/business/69-siac-news/684-siac-opens-office-in-new-york-and-announces-new-record-caseload.

[4] SIAC, SIAC Signs Memorandum of Understanding with the Hainan International Arbitration Court, 30 November 2020, https://www.siac.org.sg/69-siac-news/681-siac-signs-memorandum-of-understanding-with-the-hainan-international-arbitration-court.

[5] SIAC, SIAC Signs Memorandum of Understanding with the Thailand Arbitration Center, 9 September 2020, https://www.siac.org.sg/our-rules/69-siac-news/673-siac-signs-memorandum-of-understanding-with-the-thailand-arbitration-center.

[6] SIAC, SIAC Signs Memorandum of Understanding with the Thammasat University Faculty of Law, 8 July 2020, https://www.siac.org.sg/69-siac-news/668-siac-signs-memorandum-of-understanding-with-the-thammasat-university-faculty-of-law; SIAC, SIAC Signs Memorandum of Understanding with Fudan University Law School, 1 July 2020, https://siac.org.sg/ysiac/about-us/69-siac-news/667-siac-signs-memorandum-of-understanding-with-fudan-university-law-school; SIAC, SIAC Signs Memorandum of Understanding with the Chulalongkorn University Faculty of Law, 17 January 2020, https://www.siac.org.sg/69-siac-news/641-siac-signs-memorandum-of-understanding-with-the-chulalongkorn-university-faculty-of-law

[7] SIAC, SIAC Opens Office in New York and Announces New Record Caseload, 3 December 2020, https://www.siac.org.sg/business/69-siac-news/684-siac-opens-office-in-new-york-and-announces-new-record-caseload.

[8] SIAC, Release of the SIAC Guides – Taking Your Arbitration Remote, 31 August 2020, https://www.siac.org.sg/69-siac-news/672-release-of-the-siac-guides-taking-your-arbitration-remote.

[9] SIAC, SIAC Announces Commencement of Revisions for SIAC Arbitration Rules, 7 July 2020, https://siac.org.sg/ysiac/about-us/69-siac-news/669-siac-announces-commencement-of-revisions-for-siac-arbitration-rules.

[10] BXH v BXI [2020] 1 SLR 1043 at [60].

[11] Gokul Patnaik v Nine Rivers Capital Ltd [2020] SGHC(I) 23 at [206].

[12] Republic of India v Vedanta Resources plc [2020] SGHC 208 at [144].