Singapore: A World-Class Forum For International Arbitration

Singapore’s strong economy, infrastructure, and cutting-edge communication facilities, coupled with its political and social stability, are some key reasons why many of the world’s leading multinational corporations have established their Asian operations there. In a 2002 survey of 60 world economies conducted by the Economist Intelligence Unit, Singapore was voted the best business environment in Asia.

Parallel to this recognition has been Singapore’s growing reputation as a worldclass forum for international arbitration. According to figures released by Singapore’s Economic Development Board, there were more than 60 registered international arbitrations conducted in Singapore in 2002. Of these, 14 arbitrations were administered by the International Chamber of Commerce ("ICC"). This comprises almost 50 percent of the ICC arbitrations conducted in the Asian region in 2002, making Singapore the leading venue in Asia for ICC arbitrations.

The Singapore International Arbitration Centre ("SIAC"), which was established in 1991, spearheads Singapore’s drive to be Asia’s leading international arbitration center. In just over a decade, SIAC has managed more than 700 arbitration cases, of which approximately two-thirds involved non-Singaporean parties. In addition, there have also been a large number of noninstitutional or ad hoc arbitrations and mediations held in Singapore in recent years that have been facilitated by the Singapore Institute of Arbitrators, the ICC Asia regional office, the Singapore Mediation Centre, and other bodies representing a host of industries from IT, banking, insurance, construction, and commerce.

This article briefly outlines what constitutes an international arbitration in Singapore and reviews recent developments in the law and practice governing international arbitrations in Singapore that have contributed to enhancing the attractiveness of Singapore as a venue for international arbitration in Asia.

In Singapore, the IAA governs international arbitration. The IAA makes provision for the conduct of international commercial arbitrations based on the familiar Model Law on International Commercial Arbitration ("the Model Law") adopted by the United Nations Commission on International Trade Law ("UNCITRAL") and conciliation proceedings. It also gives effect to the New York Convention on the recognition and enforcement of foreign arbitral awards.

Under Part II of the IAA, an arbitration is treated as an international arbitration, and thereby governed by the IAA, if:

• the parties expressly agree in writing that Part II of the IAA or the Model Law shall apply to their arbitration (see section 5(1) of the IAA); or

• the arbitration is deemed to be international under section 5(2) of the IAA.

Under section 5(2), an arbitration is deemed to be "international" if it involves international parties of whom at least one has its place of business in a state other than Singapore; or the place of arbitration is outside of Singapore; or a substantial part of the obligations to be performed by one or both parties is outside of Singapore; or the parties have agreed that the subject matter of the arbitration agreement relates to more than one country.

Thus, international parties who choose to arbitrate in Singapore can feel assured by the fact that by default, their arbitrations will be governed by the IAA, which applies the internationally recognized and accepted Model Law adopted by UNCITRAL.

However, international parties who carry on business in Singapore through a locally incorporated subsidiary should be aware that by default, any arbitration involving the locally incorporated subsidiary and other Singapore domestic parties will be governed by the new Arbitration Act (Cap. 10) if the arbitration is not deemed to be "international" under the criteria set out in section 5(2) of the IAA and the parties have not expressly agreed that the IAA will apply.

One way in which a locally incorporated subsidiary can ensure that its disputes are resolved by international arbitration even if section 5(2) of the IAA does not apply is to agree to arbitrate under the SIAC Rules (2nd Edition) October 1997. These rules are based on the UNCITRAL Arbitration Rules and the Rules of the London Court of International Arbitration. Rule 32 also provides that the parties are deemed to have agreed that the IAA shall apply to their arbitration.

Another way is for the parties to specifically agree (in writing) that Part II of the IAA or the Model Law applies to their arbitration (as provided per section 5(1) of the IAA).

There are a number of reasons why Singapore is increasing in popularity as a forum for international arbitration by disputing parties. We list some of the main factors below.

• Singapore is seen as a neutral venue in Asia.

• Singapore is politically and socially stable.

• Singapore is an established hub for international travel and has the convenience of efficient and comfortable transportation and leading-edge communications facilities.

• The English language is widely used in Singapore and is the language of government and business.

• Singapore has arbitration-friendly laws and an efficient judiciary where the courts protect and support the international arbitration process. When requested by a party, the courts have the power to: stay proceedings in court that are being carried out in breach of an arbitration agreement; enforce foreign arbitral awards made in New York Convention countries; enforce awards made in international arbitrations taking place in Singapore as if they were ordered by the courts themselves; make orders to preserve the subject matter of the dispute or evidence needed for an arbitration, grant interim injunctions to preserve the status quo, secure the amount in dispute, and/or secure costs of the arbitration; and issue processes to compel witnesses to attend arbitral proceedings.

• Singapore courts do not review the merits of an award in an international arbitration. An award from a New York Convention country can only be reviewed at the request of a party against narrowly defined procedural irregularities as set out in the treaty. International arbitration awards made in Singapore can only be reviewed based on a similar set of criteria.

• Confidentiality of arbitration proceedings is fully protected by the law and the SIAC.

• When necessary, the Singapore legislature is and has been quick to amend the arbitration laws to bring them in line with accepted international norms.

• Singapore is a party to the New York Convention, meaning arbitral awards made in Singapore can be enforced in 134 countries.

• Singapore has a well-established legal service industry that offers parties a good choice of local counsel and a strong pool of arbitrators with international experience. These arbitrators are drawn from the ranks of senior members of the legal and other professions, and many of them are fellows of the Singapore Institute of Arbitrators and the Chartered Institute of Arbitrators.

• International arbitrators are actively encouraged to arbitrate in Singapore and enjoy a tax exemption from income tax on fees earned in Singapore where services are rendered in Singapore for less than 183 days per calendar year.

• Singapore also allows foreign lawyers to appear and argue cases on behalf of their clients in Singapore. On this point, it is pertinent to note that there are already 62 foreign law firms registered with the Attorney General’s chambers in Singapore, including Jones Day.

• Finally, the cost of running arbitrations in Singapore is generally lower when compared to arbitrations held elsewhere. This situation is all the more so following the recent announcement by the SIAC that it was substantially reducing its charges for case management and appointment fees. For an international arbitration, SIAC’s management fee is now capped at just SG$25,000 (approximately US$14,600).

In addition to the factors above, the Singapore courts have also taken other measures aimed at making Singapore a preferred forum for international arbitration. Two such measures that were implemented earlier this year should be noted.

The first such measure was the appointment of a specialist judge to hear all arbitration-related matters brought before the High Court. This appointment follows the practice of other jurisdictions such as Hong Kong. As a result, parties conducting international arbitrations in Singapore can be more confident that if one party seeks recourse through the Singapore courts in the limited circumstances permitted by the Model Law, the matter will be determined in accordance with the letter and spirit of the Model Law and in a consistent manner.

The second measure is the adoption of anonymous reporting of arbitration cases in Singapore. ABC Co v XYZ Ltd (2003) SHGC 107 is the first reported decision in Singapore that adopts this approach. This move brings Singapore’s reporting practice in line with other major arbitration centers and will appeal to foreign companies wishing to remain anonymous in arbitration and arbitration-related court proceedings.

Reflecting the commitment of the Singapore legislature to keep the IAA in line with international norms, two amendments to the IAA were passed in 2001 and 2002 in response to three separate judicial decisions where the courts, in interpreting certain provisions of the IAA, had some doubts on the extent to which the parties enjoyed autonomy in their ability to choose the governing rules. These amendments effectively overruled these decisions and now make it clear that parties arbitrating in Singapore are free to apply the rules of any arbitration institution they choose, while also simultaneously applying the Model Law. (The amendments also make it clear that where there is an inconsistency between the specific rules chosen by the parties and the Model Law, then the Model Law shall apply.)

The speed and willingness of the Singapore Legislature to implement these amendments shows that it recognizes the importance of preserving party autonomy in arbitrations held in Singapore.

Singapore is now well regarded as a forum for fair and expeditious arbitrations. The recent steps taken by the Singapore courts, the Singapore legislature, and the SIAC further enhance this reputation and make Singapore even more attractive for international parties wishing to settle their commercial disputes in a forum where, among other factors, confidentiality and party autonomy are highly valued. Foreign commercial parties should also be reassured by the fact that local enforcement of arbitration awards will be conducted by the Singapore courts, which are rated by a number of agencies as being among the most efficient in the world.

Given these and other advantages, international parties doing business in Asia can confidently choose Singapore as a world-class forum for international arbitration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.