United States: Singapore Considers Amendments To Its International Arbitration Act

On June 26, 2019, Singapore’s Ministry of Law (the “Ministry”) published a consultation paper seeking comments from the public on six proposals for amendments to Singapore’s International Arbitration Act (“IAA”), which governs the conduct of international arbitrations seated in Singapore. We explain below the six amendments put forward by the Ministry on June 26 for public comment.   

(1)  PROPOSED AMENDMENT 1: Introduction of Default Nomination Procedure for Arbitrators in Multi-Party Arbitrations

At present, section 9A of the IAA sets out a default procedure for the appointment of three arbitrators: each party appoints one co-arbitrator, and the parties appoint the third arbitrator by agreement or, if no agreement is reached in 30 days, the appointing authority appoints the third arbitrator. However, this default procedure applies only to situations involving a single claimant and a single respondent: no provision is made for the possibility of multiple claimants and/or multiple respondents who might not be able to agree among themselves on a single co-arbitrator.  

This lacuna in the IAA contrasts with leading institutional rules, which have long stipulated default multi-party nomination procedures. In order to protect the equality of the parties, the current versions of leading institutional rules typically provide that the relevant appointing authority shall select all three arbitrators where one side is unable to agree upon a co-arbitrator between themselves. See, e.g., SIAC Rules (2016), Rule 12.2; HKIAC Rules (2018), Art. 8.2(c); ICC Rules (2017), Art. 12(8); LCIA Rules (2014), Art. 8.1 (except where separate “sides” have been agreed in writing).

The Ministry proposes a new default multi-party nomination procedure in a proposed new section 9B, which prioritizes party autonomy over equality of the parties. If adopted, proposed new section 9B would permit claimants to jointly nominate a co-arbitrator and respondents to jointly nominate another. Where one side cannot agree upon a joint nomination of a co-arbitrator, proposed section 9B would allow the other side to keep its choice of co-arbitrator. 

This proposed amendment is to be welcomed as it closes a lacuna in the IAA and should incentivize each side to agree upon a joint nomination and remove the potential for strategic disagreement with the objective of denying the opposing side its choice of a co-arbitrator. The impact of the amendment is, however, likely to be limited: it will only apply if the parties have not agreed (as is common) to apply institutional rules containing their own default multi-party nomination procedure. We expect debate on this proposed amendment to focus on the advantages and disadvantages of prioritizing party autonomy over equality.

(2)  PROPOSED AMENDMENT 2: Requirement That Arbitrator(s) Decide on Jurisdiction at the Preliminary Stage if Requested by All Parties

Currently, section 10(2) of the IAA permits Singapore-seated tribunals to rule on jurisdictional challenges “at any stage of the proceedings,” i.e., either as a preliminary question or in an award on the merits. Thus, the present approach leaves the decision in the hands of the tribunal and does not require the tribunal to respect the will of the parties in the event they wish to have a jurisdictional challenge ruled on at a preliminary stage. 

In proposed amended section 10(2), the Ministry proposes to amend the law to empower the parties, in the event of mutual agreement, to require the tribunal to determine a jurisdictional challenge at the preliminary stage rather delaying the ruling to the final award. 

This amendment demonstrates the importance that the Ministry has accorded to the promotion of party autonomy in its proposed amendments. If adopted, the amendment should enable some disputes to be resolved more expeditiously by requiring (should the parties agree) the tribunal to resolve jurisdictional challenges at an early stage in the proceedings. It might, however, be argued that the tribunal is in some circumstances better placed to assess the appropriate timing for such a ruling than the parties. We expect debate on this proposed amendment to focus on the advantages and disadvantages of prioritizing party autonomy over the tribunal’s discretion over case management.

(3)  PROPOSED AMENDMENT 3: Recognizing Tribunal’s and High Court’s Power to Enforce Confidentiality Obligations

Under Singapore law, there is an implied common law duty on the parties to keep the arbitration and information surrounding the arbitration confidential, which operates as a default duty absent party agreement to the contrary in all Singapore-seated arbitrations. See, e.g., Myanma Yaung Chi Oo Co Ltd v Win Win Nu [2003] 2 SLR(R) 547; International Coal Pte Ltd v Kristle Trading Ltd [2009] 1 SLR(R) 945; AAY v AAZ [2011] 2 SLR 528. Meanwhile, many institutional rules impose express confidentiality obligations on parties in relation to the arbitral proceedings and/or the award. See, e.g., SIAC Rules (2016), Rule 39; HKIAC Rules (2018), Art. 45; LCIA Rules (2014), Art. 30; but cf. ICC Rules (2017), Art. 22(3).

The IAA does not contain any express provisions setting out the parties’ duty of confidentiality in relation to the arbitration or empowering the tribunal or the courts to enforce such obligations. Proposed section 12(1)(j) proposes to explicitly recognize the tribunal’s power to enforce confidentiality obligations, but does not provide further elaboration. This clarification is a welcome amendment and should give tribunals confidence to respond to breaches of confidentiality appropriately. We expect that consultation around this proposal will focus on whether the proposed amendment provides sufficient guidance on the tribunal’s powers.

(4)  PROPOSED AMENDMENT 4: Provision for Parties to Opt In to an Appellate Procedure on Questions of Law

It is a key tenet of international arbitration that arbitral awards are final and binding. “Appeals” against awards are generally not permitted, and challenges to awards are limited to narrow, procedural grounds, typically reflective of those under Article V of the New York Convention. The IAA currently adopts this approach, limiting the grounds on which parties may challenge awards to those set out in section 24 of the IAA and Article 34(2) of the Model Law (reproduced in the First Schedule of the IAA).

The Ministry proposes new sections 24A, 24B, 24C, and 24D, which would allow parties to opt in to an appellate mechanism allowing appeals to the Singapore High Court to determine narrow questions of law arising out of an award. Leave of court would be required to appeal. Proposed section 24A(4) provides that leave of court will only be granted where the appeal raises a question of “general public importance and the decision of the arbitral tribunal is at least open to serious doubt,” or where the tribunal’s decision was “obviously wrong.” 

The Ministry’s proposed appellate mechanism largely adopts the approach found in section 69 of the English Arbitration Act 1996 (which requires parties to opt out), section 49 of Singapore’s (domestic) Arbitration Act (which requires parties to opt out), and section 5 of Schedule 2 of the Hong Kong Arbitration Ordinance (which generally requires parties to opt in except for certain domestic arbitrations). 

This proposal allows parties—should they wish—to tailor their arbitration agreement to minimize the risk of mistakes of law, albeit at the expense of finality and cost efficiency. Though it might be argued that this proposal threatens to undermine the achievement of final decisions in a quick and efficient manner, its impact is likely to be limited because the mechanism requires parties to opt in. We expect that discussions in the course of the consultation will draw from experience in England and Hong Kong. 

(5)  PROPOSED AMENDMENT 5: Exclusion/Limitation of Set Aside Grounds Under the Model Law and IAA

In response to a proposal received from an unidentified third party, the Ministry seeks views on a proposal to allow parties to agree to limit the grounds on which awards may be set aside, in particular the grounds set out in section 24(b) of the IAA, i.e., breach of the rules of natural justice in connection with the making of the award, and Article 34(2)(a) of the Model Law, i.e., incapacity, invalidity of the arbitration agreement, improper notice, inability of a party to present its case, lack or excess of jurisdiction, and failure to adhere to the parties arbitration agreement. The proposal envisages that any such agreement could only be reached after the award has been rendered.

We expect the discussion around this proposal will focus on whether the amendment is likely to be useful and necessary in practice. Because the proposal envisages that the parties could only agree to limit set aside grounds after the award has been rendered, it seems unlikely that the losing party would ever reach such an agreement with the prevailing party. We note that the proposal does not propose to permit agreement on the limitation or exclusion of similar grounds in enforcement proceedings in both Singapore and elsewhere.

(6)  PROPOSED AMENDMENT 6: Empowerment of the Court to Order Costs Following Set Aside

In February 2019, the Singapore Academy of Law’s Law Reform Committee published a report that found that Singapore courts do not currently have the power to order costs of the arbitration where an arbitral award has been successfully set aside. This is a lacuna in the law because a tribunal would generally be functus officio following the setting aside of an award and thus be unable to render a new award of costs. Reacting to the Academy of Law’s report, the Ministry seeks views on a proposal to grant the Singapore courts the power to order costs of the arbitration in such situations.

Conclusion

The Ministry’s proposed amendments to the IAA place a strong emphasis on party autonomy and are the latest initiative by Singapore to ensure that its arbitration legislation remains cutting edge and responsive to the needs of users. The proposals further the ability of contracting parties to craft sophisticated and tailored procedures to meet their needs. The proposed changes demonstrate that Singapore remains intent on cementing its status as one of the premier seats of international arbitration. The proposed amendments underline that the pace of innovation in arbitration legislation and institutional rules in Asia remains fast. It is important for arbitration users to regularly update their arbitration clauses with the help of experienced counsel to ensure consistency with current procedures and to take advantage of recent innovations.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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