Two important arbitral jurisdictions in Asia have recently amended their arbitration laws. On November 4, 2020, the President of India passed an ordinance amending the Arbitration and Conciliation Act (the Indian Act), which entered into force with immediate effect. On December 1, 2020, amendments to the International Arbitration Act (the Singapore Act) entered into force. This alert summarizes these amendments.
I. Amendments to the Indian Arbitration and Conciliation Act
As one of the largest economies in Asia, the number of international arbitrations involving Indian parties and/or contractual performance in India is, unsurprisingly, large. India-related disputes are today a common and recurring feature of the case loads of multiple leading arbitral institutions. Indian parties are, for instance, some of the most frequent users of the SIAC, ICC and LCIA rules.1 This has been driven, in part, by a concerted effort by the Government of India to promote the use of arbitration to, among other things, mitigate the tremendous load on the Indian courts.2 Given the increasing use of arbitration by Indian parties, changes to the arbitration laws in India are of particular interest to the international arbitration community and businesses with a presence in India.
The arbitration landscape in India has seen considerable change in the past five years. As set out in our previous client alerts in 2015 and 2016, the Indian Act was substantially overhauled in 2015 (2015 Amendment Act), reflecting India's desire to adopt a more robust and supportive approach to arbitration. The Indian Act was amended again in 2019 (2019 Amendment Act).
On November 4, 2020, the President of India promulgated the Arbitration and Conciliation (Amendment) Ordinance 2020 (2020 Ordinance), the third set of legislative changes to the Indian Act. The 2020 Ordinance makes two key amendments to the framework governing Indian-seated disputes. These amendments are designed to (i) clarify uncertainties on when a court can grant an unconditional stay on the enforcement of arbitral awards in light of the amendments introduced by the 2015 Amendment Act; and (ii) respond to criticisms on the introduction of limits imposed by the 2019 Amendment Act on who can sit as an arbitrator in an Indian-seated arbitration. The amendments are summarized below.
A. Stay on Enforcement of Arbitral Awards
Prior to the 2015 Amendment Act, Section 36 of the Indian Act provided that the filing of a set-aside application under Section 34 automatically stayed the enforcement of an arbitral award until the set aside application was finally decided.3 In practice, this led to dilatory tactics, encouraging parties to challenge awards in a bid to delay enforcement.
The 2015 Amendment Act sought to remedy this. Section 36 on the enforcement of arbitral awards in Indian-seated disputes was replaced in its entirety, and the new Section 36 provides that the filing of a set-aside application does not automatically stay the enforcement of an arbitral award. Instead, under Section 36(2), a party is now required to make a separate application seeking a stay of enforcement, and the court has the discretion to determine whether to grant the application. Section 36(3) further provides that the court can, in granting a stay application, impose conditions that it "may deem fit." A proviso to Section 36(3) also provides that the "Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908."4
The provisions of the Code of Civil Procedure, 1908 (CPC) that deal with the grant of stay of a money decree are Order XLI Rules 1 and 5. Under the CPC, the filing of an appeal does not automatically stay the execution of a judgment.5 A stay is only granted on the showing of "sufficient cause."6 In addition, Order XLI Rule 5(3) sets out the conditions that must be satisfied before a stay is granted, which includes a requirement that the judgment debtor provide security for the judgment amount.7 Although the amendment to Section 36 was welcomed, the reference to the CPC in the proviso to Section 36(3) led to some uncertainty on the conditions applicable to stays of enforcement.
The Indian high courts split on the question of whether the provisions of the CPC applied mandatorily to applications to stay an arbitral award. The proviso to Section 36(3) introduced by the 2015 Amendment Act—in particular, the phrase the "Court shall ... have regard to" the CPC—led to divergent interpretations on whether the granting of security was a prerequisite to staying the enforcement of arbitral awards. While some courts considered themselves bound by the provisions of the CPC,8 others did not.9 As a result, there was considerable uncertainty as to whether an award debtor had to furnish security before a court could stay the execution of an award or, conversely, if the courts had the discretion to grant an unconditional stay.
In 2019, the Indian Supreme Court clarified in Pam Developments Private Limited v. State of West Bengal that the phrase "having regard to" in the proviso to Section 36(3) meant that the provisions of the CPC were only "directory" and not "mandatory."10 However, the Supreme Court came to this conclusion while deciding an appeal from the Calcutta High Court, where the court granted the Government of West Bengal, a state government, an unconditional stay on the basis that Order XXVII Rule 8-A of the CPC specifically exempts the Government from furnishing security. Given its reliance on statutory provisions specific to governments, there remained some ambiguity on the conditions that could be imposed on other applicants seeking a stay on enforcement.
By introducing an additional proviso to Section 36(3), the 2020 Ordinance seeks to clarify the position on the grant of an unconditional stay, albeit only in relation to cases of fraud or corruption. Under the new proviso, where a court is "satisfied that a prima facie case is made out" that:
a. "the arbitration agreement or contract which is the basis of the award," or
b. "the making of the award"
is "induced or effected by fraud or corruption," then the court "shall stay the award unconditionally pending" a resolution of any set-aside application.11
The new proviso to Section 36(3) applies retrospectively from October 23, 2015, i.e., the day the 2015 Amendment Act came into force. While the 2020 Ordinance seeks to clarify the position in relation to cases of fraud or corruption, the uncertainty as to whether unconditional stays can be granted in other cases remains. The introduction of the new proviso may also confuse the situation further as Indian courts could interpret the introduction of the proviso to mean that in all other cases (i.e., other than fraud or corruption cases), the court does not have the discretion to stay an award unconditionally.
It also remains to be seen how the courts will apply the new proviso in cases of fraud and corruption. There already appear to be two sources of uncertainty.
First, it is unclear what the "prima facie" test will entail. Fraud and corruption allegations often involve complex questions of fact and are difficult to prove, usually requiring detailed arguments and evidence. If the courts apply a test that simply accepts the allegations of fraud or corruption once made, this could incentivize parties to make such assertions in a bid to derail enforcement applications, without the risk of security or other conditions acting as a check.
Second, the phrase "shall stay the award unconditionally" could raise questions over the degree of judicial discretion in cases of fraud and corruption. Some commentators have suggested that the phrase "shall stay" could be read as imposing a mandatory stay where a prima facie case of fraud or corruption is established, removing any scope for judicial discretion. However, another interpretation of the new proviso is simply that it removes the discretion of the courts in imposing any conditions (such as security) on a stay where a prima facie case of fraud or corruption is established, with the courts still retaining the general discretion to determine whether a stay should be granted in light of all the circumstances of the case.
The latter interpretation is arguably more consistent with the structure of Section 36, with the new proviso appearing under Section 36(3) that deals with the conditions applicable to stays rather than Section 36(2) that deals with the discretion of the courts in granting stay applications. The preamble to the 2020 Ordinance also highlights that the amendment was introduced "to ensure that all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards" in cases of fraud or corruption.
It remains to be seen whether the 2020 Ordinance succeeds in "address[ing] the concerns of stakeholders,"12 as intended, or creates more issues, which may once again need clarification.
B. Qualifications of Arbitrators
The 2019 Amendment Act introduced a new schedule (titled the Eight Schedule) to the Indian Act. This Schedule introduced minimum requirements for a person to be "qualified" to sit as an arbitrator in an Indian-seated arbitration. Among other things, the Eight Schedule provided that "a person shall not be qualified to be an arbitrator unless" he or she was an "advocate within the meaning of the Advocates Act, 1961[,] having ten years of practice experience as an advocate."13 The Eight Schedule also identified "general norms" applicable to arbitrators, including a requirement that "the arbitrator shall be conversant with the Constitution of India."
The Eight Schedule has been subject to widespread criticism. The 1961 Advocates Act (Advocates Act) imposes nationality requirements for Indian lawyers. Read together with the Advocates Act, the Eight Schedule therefore made it unlikely that foreign lawyers could acquire the qualifications to sit as arbitrators and, in effect, precluded lawyers who were not admitted to practice in India from sitting as arbitrators in Indian-seated arbitrations, regardless of whether the parties' substantive rights and obligations in dispute were governed by Indian law. The Eight Schedule similarly excluded lawyers that did not have 10 years of practice experience in India, even if they were admitted to practice under the Advocates Act.
The 2020 Ordinance deletes the Eight Schedule in its entirety. The 2020 Ordinance also amends Section 43J, which provides that "[t]he qualifications, experience and norms for accreditation of arbitrators shall be" established by new regulations. Time will tell whether these regulations will be framed keeping the principle of party autonomy and international best practices in mind or whether they will contain limitations similar to those in the Eight Schedule.
Since 2015, India has embarked on a positive and promising effort to promote arbitration, including by developing a robust legislative framework. As the 2020 Ordinance reflects, the Indian Government has paid attention to comments and criticisms and has been willing to adapt the legislative framework. Nonetheless, as set out above, there are questions regarding how the latest amendments will be applied. There are also other issues from the prior amendments that remain unresolved, such as the mechanism to "grade" arbitral institutions, which was introduced in 2019. It therefore seems likely that there will be further amendments and clarifications to the Indian Act.
II. Amendments to the Singapore International Arbitration Act
In recent years, Singapore has cemented its position as the leading arbitral jurisdiction in Asia and one of the leading jurisdictions worldwide. One of the key contributors to Singapore's success as an arbitral venue is the commitment of the Singaporean legislature to maintaining a robust and modern international arbitration framework through the Singapore Act, which has, since 2000, been amended multiple times—in 2001, 2002, 2005, 2009, 2012, 2016 and 2019. Each of these amendments has sought to respond to the needs of users by reflecting international best practices or progressively developing the law applicable to international arbitrations.14 The amendments in 2020 continue to reflect that intent.
The amendments, which followed a public consultation conducted by the Ministry of Law in 2019, provide for (i) default procedures in the appointment of arbitrators in multi-party disputes; and (ii) the power of tribunals and the Singapore courts to enforce confidentiality obligations. The Second Minister of Law observed at the reading of the amendment bill in Parliament that these changes were "moved in the spirit" of "build[ing] on our reputation for being a trusted and neutral jurisdiction, under- girded by a strong rule of law, and a legal framework that is responsive and remains relevant to the users' evolving needs."15 The two amendments are summarized below.
A. Default Procedures for Multi-Party Arbitrator Appointments
Prior to the amendments, the default mechanism under the Singapore Act for the appointment of arbitrators in three-member tribunals was that each party would appoint one arbitrator and the parties would jointly appoint the third arbitrator.16 In the event a party failed to appoint its arbitrator, or the parties jointly failed to appoint the third arbitrator, the arbitrator(s) would be chosen by the appointing authority.17 The default appointing authority under the Singapore Act is the President of the Court of the Singapore International Arbitration Centre (SIAC), and parties can agree to a different appointing authority by adopting institutional rules that specify a different appointing authority or, in the case of ad hoc arbitrations, by naming an appointing authority in their arbitration agreement.
The default procedure, contained in Section 9A, read together with Article 11 of the First Schedule of the Act, applied to all disputes, regardless of the number of parties involved. As a result, in multi-party disputes involving three or more parties, all of the claimants and all of the respondents, respectively, were required to jointly appoint their co-arbitrator, failing which, the appointing authority would appoint an arbitrator for the side that was unable or unwilling to do so. Implicit in this procedure, however, is the notion that all the claimants or respondents are able to confer and reach consensus on arbitrator appointments. But this is not always the case—parties that are ostensibly on the same side as claimants or respondents can have interests that are not aligned and, indeed, conflict. For instance, one respondent may seek to shift liability to its co-respondents. In other cases, parties may be unable to reach agreement because one or more of them may refuse to participate in the proceedings or refuse to engage in the tribunal constitution process to delay or frustrate the arbitration.
Where an appointing authority chooses an arbitrator for one side that has failed to agree on its appointee, there may therefore be an inequality in terms of the opportunity given to the parties on each side to participate in the appointment of the arbitrators. Parties that are on the side that was unable to reach agreement would be unable to appoint an arbitrator of their choice, while the other side is able to choose its arbitrator without needing to compromise with other parties on its arbitrator selection or have an arbitrator appointed for it by a third party.
This very scenario arose in the oft-cited case of BKMI & Siemens v. Dutco, where the French Court of Cassation set aside an award on the basis that the tribunal was improperly constituted. In Dutco, a dispute arose out of a tripartite consortium agreement for the construction of a factory. The two respondents objected to the proceedings on jurisdictional grounds and only jointly appointed their arbitrator under protest. The court annulled the award on the basis that the appointment procedure violated the respondents' right to equal treatment because it granted the claimant greater influence in the constitution of the tribunal than each of the respondents. In setting aside the award, the court held that the "principle of equality of the parties in the designation of arbitrators is a matter of public policy; it can be waived only after the dispute has arisen."18
To address this risk of inequality, most leading arbitral institutions, including the ICC, LCIA, HKIAC and SIAC, amended their rules to provide that if any side in a multi-party dispute is unable to reach agreement on their arbitrator, the institution has the authority to appoint the entire tribunal.19 While arbitral institutions reacted to Dutco, however, arbitral laws remained unchanged. As a result, ad hoc multi-party arbitrations continued to be subject to the default procedures in arbitral laws that pre-dated Dutco.
The 2020 amendments to the Singapore Act address this lacuna by introducing a new Section 9B that deals specifically with the default procedure to appoint arbitrators in multi-party disputes. As the Parliamentary discussions explain, the new Section 9B was introduced in light of the increase in multi-party disputes and to ensure an equality of arms between parties in such proceedings.20
Under the new Section 9B(1):
(a) All the claimants must jointly appoint their arbitrator and
inform the respondents of the appointment in the request for
(b) All the respondents must jointly appoint their arbitrator within 30 days of when the last respondent receives the request for arbitration; and
(c) The two appointed co-arbitrators must jointly appoint the third arbitrator within 60 days of when the last respondent receives the request for arbitration.
Under Section 9B(2), the appointing authority must, at the request of any party, appoint all three arbitrators and designate one as the presiding arbitrator if either side is unable to reach agreement on their arbitrator. In appointing the arbitrators, the appointing authority has a broad discretion under Section 9B(3) to consider "all relevant circumstances" and can revoke any existing appointments made by the parties or reappoint the arbitrators previously chosen by the parties. The appointing authority is thus entitled to consider the choices already made by the parties, what stage the proceedings are at and the reasons why the parties have been unable to reach agreement on a candidate.21
B. Powers to Enforce Confidentiality Obligations
Singapore common law recognizes an implied duty of confidentiality in arbitral proceedings,22 and the Singapore courts have even recognized a "public policy [in] keeping arbitrations confidential."23 The duty of confidentiality can also arise as a result of an agreement between the parties (in their arbitration agreement or elsewhere) or under the arbitral rules chosen by the parties.
The new Section 12(1)(j) of the Singapore Act expressly provides that tribunals have the power to make orders or give directions to any party to enforce any confidentiality obligation, whether it arises as a matter of law, under arbitral rules or the parties' arbitration agreement. The Act does not seek to codify the duty of confidentiality or define its scope, which is left to be developed by the common law on a case-by-case basis. As the Parliamentary discussions reflect, Section 12(1)(j) "recognises that confidentiality is an important attribute of arbitration, and that the common law is still developing as to the precise extent of the obligation – in other words, whom it should bind, and the exceptions, if any, to the rules."24
The new amendments to the Singapore Act continue to strengthen Singapore's position as a leading arbitral jurisdiction both in Asia and worldwide. This is unlikely, however, to be the last of the changes seen to the Singapore Act in the short term. In addition to the two changes in the 2020 amendments, the Ministry of Law has indicated that it is also considering other amendments based on the public consultation in 2019, including provisions that permit parties to agree (i) to appeals on points of law to the Singapore courts, (ii) to limit or waive the grounds to set aside awards under the Singapore Act, and (iii) that the tribunal render preliminary rulings on jurisdiction. It is unclear whether those changes will be implemented and, if so, when. Should they be adopted, however, they are likely to further enhance party autonomy in arbitral proceedings, and thus Singapore's appeal as an arbitral seat.
1 LCIA, Case Work Report (2019), at p. 11; SIAC, Annual Report (2019), at p. 15; ICC, Dispute Resolution Statistics (2019), at p. 10.
2 See generally Law Commission of India, Report No. 246 – Amendments to the Arbitration and Conciliation Act 1996, August 2014.
3 Section 36 of the Indian Act, prior to the 2015 Amendment Act ("36. Enforcement. - Where the time for making an application to set aside the arbitration award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court.")
4 Section 36(3) of the Indian Act, as amended by the 2015 Amendment Act.
5 CPC, Order XLI Rule 5(1).
6 CPC, Order XLI Rule 5(1).
7 7 CPC, Order XLI Rule 5(3) ("No order for stay of execution shall be made under sub-rule (1) or sub-rule (2) unless the Court making it is satisfied: (a) that substantial loss may result to the party applying for stay of execution unless the order is made; (b) that the application has been made without unreasonable delay; and (c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.")
8 West Bengal Power Development Corporation Ltd. v. Dongfang Electric Corporation, AIR 2017 Cal 297.
9 Ecopack India Paper Cup Pvt. Ltd. v. Sphere International, 2018 (4) ABR 552.
10 Pam Developments Private Limited. v. State of West Bengal, (2019) 8 SCC 112.
11 Section 36 of the Indian Act, as amended by the 2020 Ordinance.
12 2020 Ordinance, Preamble.
13 The Advocates Act regulates, among other things, the admission of lawyers to practice in India.
14 For instance, a series of amendments to the Singapore Act ensured that the Singapore courts have the power to grant interim relief in aid of foreign arbitrations, review negative rulings on jurisdiction by arbitral tribunals and enforce awards by emergency arbitrators. More recently, amendments to the Legal Profession Act and the Civil Law Act abolished the common law prohibition on third-party funding in international arbitration and provided a framework to regulate the quality of third-party funding services provided in Singapore-seated disputes.
15 Second Reading Speech by Second Minister for Law, Mr. Edwin Tong, on the International Arbitration (Amendment) Bill, dated October 5, 2020.
16 Singapore Act, Section 9A (read with First Schedule, Section 11).
17 See Singapore Act, Section 8(2).
18 BKMI & Siemens v. Dutco, Cour de Cassation (1er Chambre Civile), January 7, 1992, Revue de l'Arbitrage, Volume 1992 Issue 3, pp. 470 – 472.
19 2016 SIAC Rules, Rule 12; 2017 ICC Rules, Art. 12; 2018 HKIAC Rules, Art. 8.2; 2020 LCIA Rules, Art. 8.1.
20 Second Reading Speech by Second Minister for Law, Mr. Edwin Tong, on the International Arbitration (Amendment) Bill, dated October 5, 2020.
21 Second Reading Speech by Second Minister for Law, Mr. Edwin Tong, on the International Arbitration (Amendment) Bill, dated October 5, 2020.
22 See generally AAY v. AAZ  SGHC 142. See also Second Reading Speech by Second Minister for Law, Mr. Edwin Tong, on the International Arbitration (Amendment) Bill, dated October 5, 2020.
23 BBW v. BBX and others  SGHC 190, at para. 33.
24 Second Reading Speech by Second Minister for Law, Mr. Edwin Tong, on the International Arbitration (Amendment) Bill, dated October 5, 2020.
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