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The Asia-Pacific Arbitration Review 2015

Introduction: SIAC

In recent years the Asia-Pacific region has witnessed a rise in inward investment and trade transactions, resulting in an increase in the number of complex cross-border disputes.

In South East Asia, the ASEAN economies in particular have demonstrated resilient growth. In 2013, the combined ASEAN economies achieved an annual growth of 5 per cent, while the global economic growth was estimated to be less than 3 per cent. In 2013, foreign direct investment into the ASEAN-51 grew by 7 per cent to US$128.4 billion. Investment in infrastructure is also expected to increase, with US$1 trillion required through 2020 for Southeast Asia alone.

ASEAN is also working towards the development of the ASEAN Economic Community, believed to further integrate and transform ASEAN into a single regional market of 620 million people and a combined GDP of more than US$2.2 trillion. The proposed Trans-Pacific Partnership (TPP) currently being negotiated by 12 countries throughout the Asia-Pacific region envisages liberalising trade movement in goods, services, investments, government procurement, IP rights, and technical barriers to trade and competition policy.2 Among the TPP countries, Singapore, Japan, US and Australia represent 40 per cent of the GDP and approximately one-third of total world trade.

Asia's escalating economic growth creates further opportunities for Singapore's continued development as Asia's international dispute resolution hub. Singapore is now the third most preferred seat of arbitration worldwide, and the Singapore International Arbitration Centre (SIAC) is the fourth most preferred arbitral institution worldwide.3

SIAC: one of the fastest growing institutions for international commercial arbitration

Since 2009, the SIAC has seen a steady increase in its workload and strengthened its position as a world-class international arbitral institution:

  • The total sum in dispute for the 259 new cases filed at the SIAC in 2013 was S$6.06 billion.
  • In 2013, the highest claim amount was S$3.5 billion.
  • The average value of a dispute was over S$24.44 million, an increase of 60 per cent on the average sum in dispute of S$15.36 million in 2012.
  • The average sum in dispute, excluding the S$3.5 billion case, was S$10.48 million, an increase from S$9.01 million in 2012.

With the introduction of the Emergency Arbitrator procedure in July 2010, the SIAC became the first Asian arbitral institution to introduce a special provision in its rules for urgent interim relief. The Expedited Procedure, also introduced in 2010, has been a huge success. As of 1 August 2014, the SIAC has received and administered 37 emergency arbitrator applications and accepted 96 of 143 applications for arbitrations using the Expedited Procedure under its rules.

India has consistently been one of the strongest jurisdictions to contribute towards the SIAC's increasing caseload. In 2013, Indian parties generated 85 of the 259 new cases received by the SIAC - approximately a third of SIAC's total caseload. That year also saw the SIAC explore new frontiers with the opening of its overseas liaison offices in Mumbai, India, and Seoul, South Korea. The new offices provide the SIAC with a unique opportunity to interact more closely and share information on a regular basis with its current and potential users in these countries.

Recognising the need for dedicated expertise in cases dealing with intellectual property rights, the SIAC set up an exclusive panel of IP arbitrators in early 2014. The SIAC IP Panel complements the SIAC's existing multi-jurisdictional panel of over 360 leading arbitrators from 39 jurisdictions.

On 6 June 2014, the SIAC held its first ever Congress titled 'Dispute Resolution Asia - Innovation and Change in an Age of Opportunity - A View from the Lion City', attracting over 350 delegates from across the world. Singapore's minister for law, K Shanmugam praised the SIAC during his Q&A session for establishing itself as a 'global contender' in the arbitration field. Given Singapore's reputation as a 'neutral and convenient seat', the minister was confident that the newly proposed Singapore International Commercial Court (SICC) and the Singapore International Mediation Centre (SIMC) will offer parties a 'complete suite of dispute resolution offerings'. Singapore's government is currently working on several fronts to ensure the enforceability of SICC judgments.

With strong support from the Ministry of Law, the SIMC was established earlier this year as an independent, not-for-profit company. The SIMC, to be formally launched in November 2014, will provide world-class international commercial mediation services to complement arbitration and litigation. The non-adversarial nature of mediation means that the process can be business-oriented and parties can agree on legal and non-legal solutions suited to their interests and needs. Mediation at the SIMC will further give parties a unique benefit of enforceability. In conjunction with SIAC, the SIMC will offer parties an Arb-Med-Arb procedure, where settlement agreements may be transformed into consent awards in appropriate cases.

The highlight of SIAC's 2014 Congress Gala Dinner was the official launch of SIAC's innovative arbitration training video, conceptualised and developed by SIAC to depict the workings of a typical modern day international commercial arbitration administered under its rules. Since its launch in June 2014, training workshops in China and Korea have already adopted the video as an indispensable and well-received training tool. SIAC's arbitration video will continue to feature in workshops scheduled to take place throughout the rest of this year in Indonesia, India, the Philippines and Japan.

Legal developments in Asia

China

There are 225 arbitration commissions in China, only a few of which accept cases involving foreign-related disputes. In 2013, 1,596 cases - out of a total of 104,257 - involved Hong Kong, Macao, or Taiwanese elements or foreign-related elements.4

In 2013, the China International Economic and Trade Arbitration Commission (CIETAC) accepted 1,256 cases - 881 domestic and 375 involving a foreign element.5

In 2013, the Beijing Arbitration Commission (BAC) handled 1,627 cases, of which 44 were foreign-related. BAC has recently drafted a new set of Arbitration Rules, currently available for comments from arbitration researchers and practitioners.6

In April, after splitting from CIETAC, the CIETAC-Shanghai Commission was renamed the Shanghai International Economic and Trade Arbitration Commission (SHIAC). SHIAC established the China (Shanghai) Pilot Free Trade Zone Court of Arbitration to perform arbitration services in the China (Shanghai) Pilot Free Trade Zone.7

Over the past few years, there has been much scepticism over the capability of foreign arbitral institutions to conduct arbitrations in China. In Longlide Packaging Co Ltd v BP Agnati SRL,8 the Supreme People's Court (SPC) reaffirmed the test laid down by the Higher People's Court of Anhui Province for determining the validity of an arbitration agreement if the parties chose a foreign arbitration institution to arbitrate their dispute in China. Under article 16 of the China Arbitration Act:

an arbitration agreement shall contain three elements: 1) an expression of intention to apply for arbitration; 2) subject matters for arbitration; 3) a designated arbitration commission.

In this case, the SPC upheld the validity of the arbitration clause involving an ICC arbitration with the seat of arbitration in Shanghai but did not comment on the capacity of foreign arbitral institutions to hold arbitrations in China.

Hong Kong

In 2013, the Hong Kong International Arbitration Centre (HKIAC) handled 260 new arbitration cases, of which 81 cases were fully administered by the HKIAC. In May 2013, HKIAC opened a branch office in Seoul. In November 2013, HKIAC's new Administered Arbitration Rules (the HKIAC Rules) came into force.9 The HKIAC Rules made several key changes addressing topical issues in international arbitration including joinder of additional parties, consolidation of claims and appointment of an emergency arbitrator. Pursuant to the Arbitration (Amendment) Ordinance 2013 passed by the Legislative Council of Hong Kong in July 2013, the amendments allow Hong Kong courts to enforce emergency relief granted by an emergency arbitrator either in or outside Hong Kong.10

India

Until relatively recently, international parties to arbitration agreements with Indian counterparties were typically wary of intervention by the Indian courts in the arbitral process, and with good reason. However, recent judicial decisions evince a developing maturity of non-interference and respect for the international arbitral process. Recognising the need to align recent judicial developments with the current lacuna in India's Arbitration and Conciliation Act, 1996 (the 1996 Act), the 20th Law Commission of India is currently in the process of recommending proposals to the Law Ministry that are aimed at harmonising the relationship between courts and the arbitral system. The proposed amendments hope to bolster the credibility of arbitration and fortify the process against interference by the Indian courts.

This year, in two pro-arbitration decisions, the Bombay High Court in HSBC v Avitel,11 and the Supreme Court of India in World Sport Group v MSM Satellite,12 both held that where allegations of fraud and malpractice are raised by one party, such issues should be properly dealt with by the arbitral tribunal in accordance with the parties' arbitration agreements, and not the courts. This view bodes well for a continuing pro-arbitration trend by Indian courts in the international context. Another aspect of the HSBC case worth noting is that the Bombay High Court, in exercise of its jurisdiction to grant interim measures of protection, ordered interim relief on similar terms as granted by an SIAC emergency arbitrator in that case.

In Reliance Industries v Union of India,13 the Supreme Court rejected the Indian government's application to set aside an UNCITRAL arbitral award, ruling that it must apply instead to the English courts. The Supreme Court's reasoning for declining jurisdiction was due to the parties' conscious decision to seat the arbitration in London and choose English law as the governing law of the arbitration agreement. The express choice of English law as the law governing the arbitration agreement appeared to be a key factor in the Supreme Court's decision to preclude the applicability of part I of the 1996 Act. This decision directly affects parties that have entered into arbitration agreements with Indian counterparties before 6 September 2012 (ie, prior to the BALCO decision),14 but may not have expressly excluded part I of the 1996 Act. The Reliance Industries decision confirms the current trend in pro-arbitration jurisprudence emanating from India and clarifies the limits of Indian judicial authority over foreign-seated arbitrations.

In an altogether separate dispute between Reliance Industries and India,15 the Supreme Court delivered an important decision concerning the exercise of the court's default power of appointing arbitrators pursuant to section 9 of the 1996 Act. As the party-nominated arbitrators were unable to agree on the appointment of a presiding arbitrator, the chief justice of the Supreme Court exercised his discretion to appoint a presiding arbitrator of neutral nationality in an attempt to ensure neutrality and impartiality. This is a welcome departure from the general practice of appointing retired senior Indian judges as arbitrators.

Adding to the suite of recent pro-arbitration decisions, the Supreme Court in Enercon India Ltd v Enercon GmbH16 observed that courts must adopt a pragmatic approach while interpreting or construing arbitration clauses, and try to give effect to the intention of the parties. In this case, a poorly drafted arbitration clause that failed to specify the procedure for appointment of a third arbitrator was not held 'unworkable' or pathological, given the obvious nature of the omission and the ease with which it could be rectified. This judgment also exemplifies the importance of explicitly identifying the 'seat' as opposed to the venue of arbitration, as well as the need to specify the law governing the arbitration agreement. The Supreme Court in this case retained supervisory jurisdiction over the dispute by holding India as the seat despite London being chosen as the 'venue', as Indian law was chosen as the law applicable to all aspects of the agreement and the conduct of the arbitration. It was therefore unlikely that the parties intended to fix the seat as London. The absence of any factors connecting the dispute to London besides being designated as the 'venue' was critical to the court's determination.

Japan

On 1 February 2014, the Japan Commercial Arbitration Association (JCAA) introduced amendments to its arbitration rules. Key changes include the addition of procedures dealing with emergency arbitrators, expedited procedures, interim measures, and the consolidation of claims and joinder of third parties. Unlike the rules of other leading arbitral institutions, the new rules provide that the parties may at any time agree to refer the dispute to mediation proceedings under the institution's own mediation rules, namely the JCAA's International Commercial Mediation Rules. No member of the respective arbitral tribunal may be appointed as the mediator, except where the parties agree. The arbitrator who serves as mediator in relation to the same dispute is not allowed to consult separately with any party unless all parties agree in writing. The amendments reflect the JCAA's desire to keep pace with current issues in international arbitration and to offer modern and efficient tools for the users of the JCAA rules.

Korea

The Seoul International Dispute Resolution Centre (SIDRC) was established in May 2013 to promote Seoul as North East Asia's international arbitration hub. A number of arbitral institutions have already claimed their spot at the SIDRC, including SIAC with the launch of its second overseas liaison office. Korea is currently in the process of amending its Arbitration Act17 to incorporate the provisions of the UNCITRAL Model Law 2006. Proposed amendments mainly deal with expanding the arbitral tribunal's power to grant provisional measures, and ascertaining whether to recognise and enforce an arbitral tribunal's interim orders and awards.

In NDS v KT Skylife,18 the Seoul High Court recognised the validity of an arbitral award despite the lack of specificity required for its execution under Korean law. Under article 36(4) of the Korean Arbitration Act, an enforcement judgment limits applications to set aside the award and precludes any challenges against it. Therefore even for an award that cannot be practically executed, an enforcement judgment signifies the Court's recognition of the validity of the award.

In the Lone Star case,19 the High Court refused to enforce an award on the basis of a lack of validity of the arbitration agreement between the parties, applying the law of the seat of arbitration to the arbitration agreement and not the governing law.

Malaysia

The Kuala Lumpur Regional Centre for Arbitration (KLRCA), established in 1978, has recently upgraded and improved its procedures, and as a result its number of arbitration cases has risen in recent years. In 2012, the KLRCA registered 85 new cases. It brought into force new arbitral rules in October 2013 which introduced an emergency arbitrator procedure. The KLRCA will move into new, modern facilities in the second half of 2014; the Sulaiman building will house state-of-the-art facilities with 19 hearing rooms and will open its doors to other institutions that wish to set up an office in Kuala Lumpur, in the same way as Maxwell Chambers has done in Singapore.

The Malaysian government is supportive of the developing arbitral institution. For example, the most recent amendments to the Legal Profession Act 1976 have followed the Singapore approach by relaxing the immigration rules to allow both foreign arbitrators and foreign lawyers to enter into Malaysia to participate in arbitral proceedings and to allow foreign law firms to open local bases in Malaysia (either as qualified foreign law firms or through joint ventures with local firms).

Mongolia

In March 2014, Mongolia's Ministry of Justice - together with the USAID, the Mongolian International and National Arbitration Center at the Mongolian National Chamber of Commerce and Industry (MNCCI/MINAC), and AmCham - co-organised the 'International Conference on Commercial Arbitration in Mongolia' in Ulan Bator, Mongolia. The conference provided a forum for stakeholders to learn, share and discuss best regional arbitration practices, and to forge a private-public sector consensus on the framework that should govern new arbitration reforms in Mongolia. In a pre-conference meeting, with representatives from the banking, construction and mining associations, as well as the MNCCI/MINAC arbitration centre, the SIAC's registrar, Tan Ai Leen, discussed regional and international arbitration best practices and encouraged the private sector to settle disputes through arbitration proceedings.

The Mongolian government has engaged an international law firm to redraft the country's arbitration laws, along with one of its local firms. The law firms are working closely with the Mongolian Ministry of Justice to rework the existing regime, in a bid to drive foreign investment. Mongolia, better known for its rich mining resources, is said to be in dire need of a stable regulatory footing if it is to compete with other resource-rich nations.

Myanmar

The legal framework for arbitration in Myanmar is currently governed by legislation predating Myanmar's independence, namely the Arbitration Act 1944. In May 2014, the Myanmar parliament released a draft of its new Arbitration Bill (the Bill) almost a year after the country's accession to the New York Convention on 15 July 2013. The Bill represents an overhaul of Myanmar's present arbitration regime and demonstrates the government's commitment to conform to international arbitration regimes. No official English translation of the Bill is currently available. However, it is our understanding that the proposed legislation is closely based on the provisions of the UNCITRAL Model Law 1985.

The Bill will apply to domestic and international arbitrations, whether ad hoc or administered. While parties to an 'international commercial arbitration' are free to select the substantive law of the arbitration, arbitrations seated in Myanmar do not fall within this definition and must adopt Myanmar law as the substantive law of the arbitration. The Bill also grants Myanmar courts the power to extend a contractual time bar to commence arbitration for arbitrations seated in Myanmar. There is no similar provision in the Model Law or Singapore's International Arbitration Act. The Bill further provides that awards made in Myanmar will be enforced where the court has refused to set aside the award or where the application to set aside the award has expired. Parties objecting to an award must therefore seek to set aside the award, rather than challenging the award's subsequent enforcement. The Bill remains subject to amendment before being passed into law. Nevertheless, it represents a positive step by Myanmar to develop a system for dispute resolution that will encourage inward foreign investment.

Singapore

The Singapore courts have shown their continued support for arbitration. The decisions in TMM Division Maritima SA v Pacific Richfield Marine Pte Ltd [2013] SCHC 186 and BLB and another v BLC and others [2013] SCHC 196 confirmed the courts' principle of minimal curial intervention when faced with applications to set aside arbitral awards. In considering the applications, the courts recognised their supervisory function in providing relief in cases of genuine challenges but stated that the principle of finality in arbitral proceedings meant that their power should only be exercised in meritorious cases where the statutory grounds for setting aside had been established.

In another recent decision, the Singapore courts demonstrated support for one of the fundamental principles of arbitration: the principle of party autonomy. The 'choice of remedies' was one of the more interesting legal issues arising out of the well-known case of PT First Media TBK v Astro Nusantara International BV and others [2013] SGCA 57. The result of the decision is that a party to an arbitration in Singapore who wishes to bring a jurisdictional challenge is free to choose between the 'active' remedy of immediately setting aside or challenging a preliminary ruling or the 'passive' remedy of waiting until the award is enforced. The court was aware of the 'potential ramifications' of restraining party autonomy and said: 'This can have potentially far-reaching implications on the practice and flourishing of arbitration in Singapore.'

Vietnam

In June 2010, the Vietnam National Assembly passed the Law on Commercial Arbitration,20 which took effect on 1 January 2011 (the New Law) and replaced the 2003 Ordinance on Commercial Arbitration. In July 2011, the government passed further implementing regulations to the New Law by virtue of Decree 63/2011/ND-CP. The New Law was passed to address the shortcomings of its predecessor. However, conflicting interpretations of the law and a sense of judicial interference rendered the intention of its drafters nugatory.

In January 2013, the Vietnamese Supreme Court published the draft Resolution 01 to provide additional guidance on the New Law, which was passed earlier this year by the Committee of Justice of the Supreme High Court of Vietnam.21 Resolution 01 is considered to be an important resource to provide consistency in interpretations, and predictability in the application of the New Law.

Notes

  1. Indonesia, Malaysia, the Philippines, Singapore and Thailand.
  2. www.ustr.gov/tpp.
  3. Ministry of Law, Singapore.
  4. Song Lianbin, Shen Hongyu, Xiao Fang, 'Annual Review on Commercial Arbitration', Commercial Dispute Resolution in China: An Annual Review and Preview 2014, p1.
  5. http://cn.cietac.org/AboutUs/About US4Read.asp.
  6. www.bjac.org.cn.
  7. www.shiac.org/English/NewsDetails.aspx?tid=7&nid=501.
  8. SPC Docket Number: 2013-MinTa Zi No.13.
  9. www.hkiac.org.
  10. www.legco.gov.hk/yr12-13/english/ord/ord007-13-e.pdf.
  11. HSBC PI Holdings (Mauritius) Ltd v Avitel Post Studioz Ltd and others, (Arbitration Petition No. 1062/2012, Judgment of 22 January 2014).
  12. World Sport Group (Mauritius) Ltd v MSM Satellite (Singapore), (Civil Appeal No. 895 OF 2014 arising out of SLP (C) No. 34978 of 2010).
  13. Reliance Industries v Union of India, (Civil Appeal No. 5765 OF 2014 arising out of SLP (C) No. 20041 of 2013).
  14. (2012) 9 SCC 552.
  15. Arbitration Petition No. 27 of 2013 dated 31 March 2014.
  16. Civil Appeal No. 2086 of 2014 dated 14 February 2014.
  17. Act No. 6626, 26 January 2002.
  18. Case No. 2013Na13506 (Seoul High Court), 17 January 2014.
  19. Lone Star Fin-Korea Deposit Ins Co v Korea Resolution & Collection Co, Case No. 20 2012Na88930 (Seoul High Court), 16 August 2013.
  20. No. 54/2010/QH12.
  21. Resolution No. 01/2014/NQ-HDTP.

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