InDepth Feature 2023 Commercial Arbitration Singapore chapter

Q. Reflecting on the past 12-18 months, what key trends and developments do you believe have dominated the commercial arbitration space in your country of focus?

A. The last 12 to 18 months have seen a continuation of Singapore’s ongoing efforts to update its legislative framework to accommodate innovations in international commercial arbitration. Amendments to Singapore’s key piece of legislation governing international arbitration, the International Arbitration Act 1994 (IAA), came into effect in December 2021. The revised IAA sets out a default process for the appointment of arbitrators in multiparty arbitrations with a three-member panel, whereby the claimants jointly appoint an arbitrator, the respondents jointly appoint an arbitrator and the two jointly appoint the third arbitrator. Where there is any failure to appoint within the given timeframe, the appointing authority – the president of the Court of Arbitration of the Singapore International Arbitration Centre (SIAC) – will appoint the relevant arbitrators. This amendment addresses a major gap seen in multiparty scenarios, and will reduce delays and inefficiencies in the conduct of multiparty arbitration proceedings in Singapore. The revised IAA also gives Singapore seated arbitral tribunals the power to enforce confidentiality obligations as if they were a court order.

Q. Have any recent commercial arbitration cases gained your attention? What can they tell us about arbitration in your country of focus?

A. One such case is CKH v CKG (2022). Here, the Court of Appeal upheld the first instance decision that the award issued by the tribunal had not taken into consideration the existence and quantum of a debt owed by CKH to CKG. This issue had not been expressly pleaded in the arbitration as a counterclaim, but was the subject of submission and evidence. The Court of Appeal held that failure to consider the issue amounted to a breach of natural justice. The Court of Appeal also upheld the lower court’s order to suspend proceedings and remit the award to the tribunal so that the tribunal could consider the principal debt issue, and thereby eliminate the grounds for the setting-aside proceedings. The case is a useful reminder that matters which were not expressly pleaded in an arbitration may in some instances still fall within the scope of issues submitted for decision. Not only does this case clarify the grounds for setting aside an arbitral award in Singapore, but it also demonstrates the Singapore courts’ reluctance to adopt a formalistic approach when determining the parties’ agreed scope of submission to arbitration.

Q. What challenges and issues exist for parties undertaking commercial arbitration in your country of focus?

A. In many jurisdictions, including Singapore, users of arbitration have continued to express concerns over the time and cost associated with arbitral proceedings. The return of in-person hearings following relaxation of coronavirus (COVID-19) restrictions has perhaps contributed to these concerns, which we see driving interest from end users of arbitration in litigation funding and conditional fee arrangements.

Q. In your opinion, how might the processes and protocols for conducting commercial arbitration be improved to enhance aspects such as speed, cost and efficiency for the benefit of the parties involved?

A. Recent years have seen increased dispute funding options in Singapore, but there is perhaps more that can be done. Following the earlier relaxation of rules restricting the use of third-party funding, the Legal Profession (Amendment) Act 2022 came into force on 4 May 2022, permitting lawyers and their clients to enter into conditional fee arrangements (CFAs) in relation to arbitrations and certain court proceedings. CFAs are agreements in which lawyers receive full or partial payment of their legal fees only in specified circumstances, such as where the client’s claim succeeds. CFAs provide parties with the opportunity and incentive to pursue meritorious claims and, as fees under a CFA are dependent on the outcome, may discourage weak or frivolous ones. While these changes are welcome, Singapore could further liberalise its dispute funding regime, as Hong Kong has done, and consider the adoption of other outcome-related fee structures such as damages-based contingency fee agreements.

Q. How robust, would you say, is arbitral enforcement in your country of focus? What can parties expect when trying to compel an award through local courts?

A. Arbitral enforcement in Singapore is very robust, with Singapore courts adopting a restrictive interpretation of the grounds for resisting enforcement. With the increasing use and popularity of emergency arbitration around the world, the Singapore High Court’s recent decision in CVG v CVH confirming that foreign emergency arbitral awards are enforceable in Singapore under the IAA is a welcome one.

Q. Would you advise companies to include arbitration provisions in their commercial agreements? What factors should they address when doing so?

A. Arbitration will not be the most appropriate dispute resolution mechanism in every commercial agreement, and the inclusion of arbitration provisions should be considered on a case by case basis. However, arbitration is the preferred dispute resolution mechanism for many businesses because of its privacy, consensual nature and the ability to select the decision makers, and also for the relative ease of cross-border enforcement. When including arbitration provisions in commercial agreements, the key is to ensure those provisions are fit for purpose and serve the needs of the contracting parties. Factors to consider include the seat and language of the arbitration, the applicable institutional rules, the number of arbitrators and the procedure for their appointment. Specifying the law governing the arbitration clause will also help avoid costly and time-consuming disputes on the matter. Adopting the model clauses recommended by the relevant arbitral institution will generally ensure that the arbitration clause is clear, valid and enforceable. In this regard, in January 2023, the Singapore International Commercial Court (SICC) has launched a model clause for arbitration-related matters under the IAA whereby the parties select the SICC as their choice of court for proceedings in relation to the arbitration.

Q. How do you expect commercial arbitration to develop in your country of focus over the coming months and years?

A. Singapore is expected to maintain its status as one of the leading centres for international arbitration over the coming months and years through its relentless efforts to develop and improve the experience of its arbitration users. It will also no doubt continue to refine its arbitration offering in response to the evolving needs of its users. Singapore is alive to the need to ensure arbitration law and procedure is in step with new and emerging areas of commerce such as blockchain and machine learning technologies, and will continue to improve the skill and expertise of its arbitrators in such areas. Continuing development of its legislative framework may also see Singapore introducing measures such as allowing parties to appeal to the High Court in relation to errors of law arising out of international arbitral awards, with such appeals currently only permitted in domestic arbitrations.

Authors: Rob Palmer, Partner; Megumi Yamamoto, Associate

The article was first published in the InDepth Feature: Commercial Arbitration 2023 magazine.