Singapore

The annual report of the Singapore International Arbitration Centre (SIAC) 2014 described the past year as ‘a year of innovation for SIAC’. Indeed, the past 12 months bore witness to a number of exciting developments in international arbitration not just at SIAC but for Singapore as a whole. The Singapore International Mediation Centre (SIMC) was launched on 5 November 2014, followed by the Singapore International Commercial Court (SICC) on 5 January 2015. In the words of Mr K Shanmugam, Minister for Foreign Affairs and Law, at the inaugural SIAC Congress 2014 on 6 June 2014, the SIMC and the SICC, together with SIAC will provide a ‘complete suite of dispute resolution offerings to parties, especially those with cross-border disputes.’

Continued growth of international arbitration and dispute-resolution products

Singapore’s tripartite dispute-resolution mechanisms

The SIMC offers world-class international commercial mediation services targeted at the needs of parties in cross-border commercial disputes. It hosts an experienced panel of over 65 eminent mediators from 14 jurisdictions worldwide. Among other things, the SIMC will offer professional appointing authority and case management services under the SIMC Mediation Rules.

Mediation at the SIMC will have the benefit of enforceability as settlement agreements may be recorded as consent awards under the Arb-Med-Arb Protocol between SIAC and the SIMC, an innovative process where a dispute is first referred to arbitration before mediation is attempted. If parties are able to settle their dispute through mediation, their mediated settlement may be recorded as a consent award enforceable under the New York Convention. If parties are unable to settle their dispute through mediation, they may resume the arbitration proceedings.

On the other hand, the SICC offers foreign parties access to a neutral international court forum in Asia and in which 11 eminent international jurists have been appointed as ‘international judges’. The SICC will complement mediation at SIMC and arbitration at SIAC – it will involve an adjudicative court process managed by the Singapore High Court. The SICC will be able to handle non-arbitrable matters, and will also permit parties access to an appeal process. Parties before the SICC may be represented by a foreign lawyer registered under the relevant statutory provisions. The SICC is not bound to apply any rule of evidence under Singapore law, and parties may apply for other or foreign rules of evidence to govern proceedings. Additionally, the SICC may, on the application of a party, order that any question of foreign law be determined on the basis of oral or written submissions, or both, instead of formal proof.

The SICC has the jurisdiction to hear a claim if: it is of an international and commercial nature; (the parties have submitted to the SICC’s jurisdiction pursuant to a written jurisdiction agreement; and the parties do not seek any relief in the form of, or connected with, a prerogative order. The SICC may at its discretion also hear cases that are transferred from the High Court.

SICC judgments are enforced in the same manner as judgments of other superior courts, namely via registration in countries or territories scheduled under the Reciprocal Enforcement of Commonwealth Judgments Act (Cap 264) and the Reciprocal Enforcement of Foreign Judgments Act (Cap 265), or by commencing an action on the judgment against the judgment debtor in common law jurisdictions.

The SIMC and the SICC complements what SIAC offers – with international commercial arbitration, litigation and mediation services now collectively in place, Singapore seeks to offer the full suite of dispute resolution services to commercial users to address their commercial needs.

SIAC 2014 case profiles: an overview

 In 2014, for the first time in three years, SIAC saw a slight decline in the number of new cases received, from 259 received in 2013 to 222 in 2014. Nonetheless, SIAC continues to maintain its position as one of the leading and fastest-growing arbitral institutions in the world, having consistently received over 220 new cases each year since 2012.

SIAC currently handles some of the largest and most complex arbitrations in the world. The total sum in dispute for new cases filed in SIAC in 2014 amounted to S$5.04 billion. The highest claim amount for 2014 was S$2.40 billion, while the average value of a SIAC dispute in 2014 was S$23.65 million (similar to the average sum in dispute in 2013). Excluding the respective cases with the highest claim amounts for each year, the average sum in dispute for 2014 was S$12.42 million, roughly a 20 per cent increase from the average sum in dispute for 2013. A diverse range of claims was filed at SIAC in 2014, arising from key sectors such as commercial (27 per cent), trade (25 per cent), shipping and maritime (14 per cent), corporate (13 per cent), construction and engineering (12 per cent), and the rest (9 per cent) made up by insurance, mining, energy, IP and IT, financial services, and aviation. As in previous years, trade and commercial disputes were the key areas in relation to which disputes have been filed at SIAC.

In 90 per cent of new cases filed at SIAC in 2014, the parties had included a choice of law clause in the contract that gave rise to the dispute and the laws of 19 different jurisdictions were the express governing laws of the underlying contract. Top choices of governing law in these contracts include Singapore law (49 per cent), English law (25 per cent) and Indian law (4 per cent).

Of the new cases filed with SIAC in 2014, 81 per cent were international. The highest number of filings in 2014 was generated by parties from China, closely followed by parties from the United States and India. 2014 saw a significant increase in the number of cases involving parties from the United States, which rose in the rankings to become the second largest foreign user of SIAC arbitration.

Cases involving parties from Australia, Malaysia and the UK also increased in 2014, with Malaysia and the UK sharing a joint fifth ranking. The other parties in the top 10 list of foreign users were Hong Kong, South Korea, Indonesia and Thailand. SIAC received cases from parties from 58 jurisdictions in 2014. SIAC users came from a wider range of jurisdictions in 2014 than in 2013, and included parties from Mongolia and Papua New Guinea.

Use of expedited procedure and emergency arbitrators

In 2014, SIAC received and accepted 12 applications to appoint an emergency arbitrator. SIAC also received 44 requests for the expedited procedure, of which SIAC accepted 23 requests. As at 31 December 2014, SIAC had received a total of 159 applications for the expedited procedure (and accepted 107 requests) since the introduction of these provisions in the SIAC Rules in July 2010.

SIAC developments and initiatives in the last 12 months

SIAC has undergone a change in leadership in recent months with the appointment of a new president and several new members of the SIAC Court of Arbitration. With effect from 1 April 2015, Mr Gary Born was appointed the new president of the SIAC Court of Arbitration, taking over from Dr Michael Pryles, the founding president.

Among the initiatives undertaken by SIAC in 2014 was the filming and production of an innovative SIAC Arbitration Training Video, a teaching and business development tool that demonstrates an international commercial arbitration and depicts SIAC’s workings. SIAC has also rejuvenated its Young SIAC membership (for younger lawyers aged below 40) by rebranding the group as YSIAC and forming a new committee to implement initiatives.

The year 2014 also saw the emergence of a new trend, with four investor-state disputes being referred to SIAC. The SIAC Rules 2013 specifically provide that a party may commence an arbitration in relation to disputes arising out of a legal instrument such as an investment treaty. SIAC was also requested to act as the appointing authority in an investment dispute conducted under the UNCITRAL Arbitration Rules 2010.

In a letter dated 1 April 2015, Mr Gary Born, on the commencement of his term as the new president of the Court of Arbitration of SIAC, noted that one of the key objectives going forward is to enhance SIAC’s position as one of the world’s truly global international arbitration institutions. While SIAC has a dominant regional position in Asian international arbitration, it would seek to enhance its position as a global institution by ensuring users from all parts of the world regard it as the preferred choice for international dispute resolution.

Case law developments

There have been several significant developments in this area since our last report as well as a large number of international arbitration matters before the Singapore Court of Appeal and High Court in the period from July 2014 to March 2015. We report on a selection of the cases in further detail below:

• In R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521 the Court of Appeal granted a permanent anti-suit injunction in aid of international arbitration proceedings seated in Singapore.
• In BLC & Ors v BLB & Anor [2014] 4 SLR 79, the Court of Appeal reiterated that courts may only interfere if there was a denial of natural justice (as opposed to a mere error of law or fact); and a party’s failure to resort to any available remedy under article 33(3) of the UNCITRAL Model Law (the Model Law) might have an impact on whether the courts will exercise its discretion to set aside an award under article 34 of the Model Law.
• In AKN v ALC [2015] SGCA 18, the Court of Appeal took the opportunity to reiterate the policy of minimal curial intervention and cautioned that the court must not engage with an appeal on the legal merits of an arbitral award.
• In PT Central Investindo v Franciscus Wongso & Ors & Anor Matter [2014] 4 SLR 978, the High Court noted that the arbitrator’s removal for impartiality would not automatically render any award made prior to such removal a nullity.
• In Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] SGHC 15, the High Court interpreted the scope of a bilateral investment treaty in an appeal against an investment tribunal’s jurisdiction ruling and considered the applicable standard of review to a tribunal’s ruling on jurisdiction in the context of an investment arbitration.
• In AQZ v ARA [2015] SGHC 49, the High Court considered a challenge to a SIAC award rendered issued by a sole arbitrator pursuant to SIAC’s expedited procedure, despite parties’ express agreement for a three-member tribunal.

Court of Appeal grants permanent anti-suit injunction in aid of international arbitration proceedings seated in Singapore

We reported in last year’s chapter the High Court’s decision in R1 International Pte Ltd v Lonstroff AG [2014] 3 SLR 166, where the High Court opined (obiter) that the Singapore courts had the power to grant a permanent anti-suit injunction in aid of international arbitration proceedings seated in Singapore. However, on the facts of the case, the High Court held that there was in fact no arbitration agreement between the parties and the defendant (Lonstroff) was therefore entitled to commence proceedings in the Swiss court.

The plaintiff/appellant (R1) and Lonstroff dealt with each other on a number of transactions under which R1 sold, and Lonstroff bought, consignments of rubber. A dispute arose from one of the orders and Lonstroff commenced proceedings in the courts of Switzerland. R1 then commenced proceedings in Singapore to obtain an anti-suit injunction preventing Lonstroff from continuing the Swiss proceedings in breach of the Singapore Commodity Exchange (SICOM) arbitration clause. Lonstroff resisted R1’s application on the basis that the terms of each transaction were exhaustively captured in e-mail confirmations sent by Lonstroff, which did not contain any arbitration agreement. The High Court dismissed R1’s application.

The Court of Appeal reversed the decision below in R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521, having found that R1’s terms had in fact been incorporated such that there was a submission to arbitration. In so doing, the Court of Appeal had regard to inter alia the standard industry practice for parties to contract on the basis of standardised terms and the parties’ conduct throughout the course of the transactions. Even though silence by one party would not by itself constitute acceptance of the terms sent by the other, the failure to object might, in some circumstances, constitute assent to the incorporation of the other party’s terms, including a term to submit to arbitration. The Court of Appeal also granted R1’s application for the anti-suit injunction on the basis that there was a valid and binding arbitration agreement between the parties.

Court interference only if there was a denial of natural justice and the potential impact of a failure to seek remedy from a tribunal under article 33(3) of the Model Law

In BLC & Ors v BLB & Anor [2014] 4 SLR 79, the Court of Appeal reversed the decision of the High Court to set aside part of an arbitration award on the ground of a breach of natural justice.

Following an unsuccessful joint venture between two groups of companies, the appellants commenced arbitration proceedings against the respondents. In response, the respondents launched their counterclaims. The arbitrator proceeded to issue an award in favour of the appellants in respect of some of their claims, but completely dismissed the respondent’s counterclaims.

The respondents applied to set aside the entire award on the basis that (inter alia) the arbitrator had not addressed his mind to one of their counterclaims. This failure to deal with an essential issue in dispute gave rise to an alleged breach of natural justice.

The High Court agreed that the arbitrator had failed to deal with the counterclaim. Such failure could have made a material difference in the award and therefore a denial of natural justice had occurred. The High Court remitted the issue of the counterclaim to a new tribunal to be constituted. The High Court also noted this would have been the type of case that article 33(3) of the Model Law (which permits parties to request within a specified time period the arbitrator to make an additional award as to claims presented in the proceedings but omitted from the award) would have been intended to provide redress for.

The High Court’s decision was overturned by the Court of Appeal, which found that the arbitrator did in fact address his mind to the counterclaim and did in fact render a decision in respect thereof. As such, it found that there had been no breach of natural justice.

The Court of Appeal took the opportunity to stress that there will be minimal curial intervention in arbitral proceedings. In considering whether an arbitrator has addressed his or her mind to an issue, the court should be wary of its natural inclination to be drawn to the various arguments in relation to the substantive merits of the underlying dispute between the parties which are beyond its remit. There is no right of recourse to the courts where an arbitrator has simply made an error of law or fact.

The Court of Appeal also made several noteworthy observations on articles 33(3) and 34(4) of the Model Law. It held that it would be consistent with the principle of minimal curial intervention to require that parties first seek relief from the tribunal before resorting to court proceedings. While a party was not obliged to invoke article 33(3) before applying to court under article 34, such party took the risk that the court would not exercise its discretion to set aside any part of the award or invoke the powers of remission under article 34(4). It was also cautioned that the applicant’s reasons for failing to resort to article 33(3) (where applicable) might impact upon whether the court would exercise its discretion to set aside an award under article 34.

As regards article 34(4), which essentially allows the court to remit the matter instead of setting aside an arbitral award, the Court of Appeal noted that the clear language of the provision required that the remission be to the original tribunal that had heard the matter.

Court of Appeal reiterates the law on setting aside arbitral awards for breaches of natural justice

In AKN v ALC [2015] SGCA 18, the plaintiffs (the liquidator and secured creditors of a corporation undergoing liquidation) had entered into an agreement with the defendant purchasers in relation to the corporation’s production plant and related assets. A dispute subsequently arose when the assets became encumbered with a statutory lien for tax liabilities. The defendant purchasers commenced arbitration proceedings and obtained an award in their favour. The plaintiffs then applied to set aside the award.

High Court

The High Court decision is reported at AKM v AKN [2014] 4 SLR 245. The High Court set aside the award having found that there were one or more breaches of natural justice and that the tribunal had exceeded its jurisdiction.

The High Court was of the view that the tribunal had misunderstood the plaintiffs’ case and inexplicably failed to engage with a number of the plaintiffs’ submissions and evidence. The High Court also opined that the tribunal had exceeded its jurisdiction by departing significantly from the parties’ submissions in deciding on issues that fell beyond the scope of reference to the arbitration. In particular, the tribunal had erroneously recharacterised the defendant’s claim as a loss of opportunity despite not having heard, or invited, submissions on such claim.

Court of Appeal

The Court of Appeal reviewed this decision in AKN v ALC [2015] SGCA 18 and allowed the appeals in part, having found that the High Court had erred in various aspects by engaging with the merits of the underlying dispute.

The Court of Appeal took the opportunity to restate the ‘proper relationship between arbitral tribunals and the courts’. In the light of the court’s limited role in arbitral proceedings, it must not engage with an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration.

When examining a challenge for breach of natural justice, the court must assess the real nature of the complaint and only an arbitral tribunal’s failure to even consider an argument amounts to a breach of natural justice. A decision to reject an argument (whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits) is but an error of law.

The Court of Appeal emphasised that if the first hurdle of establishing a breach of natural justice is crossed, then the remaining issues arise, namely, whether there was a causal nexus between the breach and the arbitral award, and whether the breach prejudiced the aggrieved party’s rights.

The Court of Appeal also observed that, generally the courts should not engage with the merits of the dispute when dealing with an application to set aside arbitral awards. However, an exception arises when the courts are confronted with arguments relating to the jurisdiction of the tribunal in which it undertakes a de novo hearing.

High Court dismisses application to remove arbitrator for alleged apparent bias

PT Central Investindo v Franciscus Wongso & Ors [2014] 4 SLR 978 involved an application to remove an arbitrator for apparent bias and also addressed the unusual circumstances where a sole arbitrator renders a final award before the determination of an application to remove him.

The plaintiff’s complaints that the arbitrator was affected by apparent bias arose from certain directions given by the arbitrator. After the plaintiff’s notice of challenge against the arbitrator was dismissed by the SIAC chairman, the plaintiff applied to the High Court to remove the arbitrator pursuant to article 12(2) of the Model Law. The arbitrator rendered his award in favour of the defendants pending the determination of the removal proceedings. The plaintiff sought a consequential order to set aside the award as of right in the event that it succeeded in its application to remove the arbitrator, and also took out a separate application to set aside the award on the basis that the arbitrator was affected by apparent basis.

The High Court dismissed the plaintiff’s applications. With regards to apparent bias, the test was whether a reasonable and fair-minded person with knowledge of all the relevant facts would entertain a reasonable suspicion that the circumstances surrounding the proceedings could result in the arbitration being affected by apparent bias. The Court found that plaintiff’s complaints could not support a finding that the arbitrator was affected by apparent bias, and that the directions complained of fell within the case management powers of the tribunal and accordingly were within the discretion of the arbitrator.

The High Court also rejected the plaintiff’s contention that the award should be set aside. Under article 13(3) of the Model Law, the arbitrator could render an award pending determination of an application for his removal, and had done so by setting out extensive reasons for making a finding contrary to the plaintiff’s evidence. An error of law or finding in fact in an arbitral award (if any) did not constitute a ground for setting aside the award under the International Arbitration Act (Cap 143A) (IAA).

In this regard, the High Court observed, obiter, that articles 12 and 13 of the Model Law were silent as to the effect of an order to remove an arbitrator made after an award was rendered. Article 34(2) of the Model Law did not list a successful challenge against an arbitrator under article 13 as a ground for setting aside an award. Nonetheless, even though a successful applicant might not obtain a consequential order upon a court order to remove an arbitrator, it could nevertheless set aside the award by relying on the court order as proof of either ground of setting aside under article 34(2)(iv) (namely procedural irregularity) or 34(2)(b)(ii) (namely conflict of public policy) of the Model Law.

High Court adopts de novo approach in reviewing jurisdictional ruling by arbitral tribunal and overturns decision that a bilateral investment treaty between PRC and Laos applied to Macao

In Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] SGHC 15, the High Court was tasked with reviewing an arbitral tribunal’s ruling on jurisdiction. In so doing, the Court had first to consider whether the PRC-Laos BIT applied to Macao.

By way of background, the PRC resumed sovereignty over Macao in 1999. The relevant PRC-Laos BIT had been signed earlier in 1993, but was silent on its application to Macao. The defendant (Sanum) was incorporated under the laws of Macao and, in 2007, Sanum began investing in the gaming and hospitality industry of Laos. Disputes subsequently arose and Sanum commenced arbitral proceedings in 2012 against the government of Laos, in accordance with the dispute resolution article (article 8(3)) of the PRC-Laos BIT. The government of Laos challenged the arbitral tribunal’s jurisdiction on the basis that the PRC-Laos BIT did not apply to Macao, but the tribunal held that it had jurisdiction to arbitrate the dispute.

The government of Laos appealed to the High Court pursuant to section 10 of the IAA for a review of the tribunal’s ruling over jurisdiction. It also sought to admit fresh evidence in the form of two letters that were only obtained after the arbitral tribunal had issued its positive jurisdictional ruling. The first letter was from the Laotian Ministry of Foreign Affairs declaring Laos’s position that the PRC-Laos BIT did not apply to Macao and seeking the views of the PRC government. The second letter was the reply from the PRC Embassy in Laos, affirming Laos’s view that the PRC-Laos BIT did not extend to Macao ‘unless both China and Laos make separate arrangements in the future’.

There were two issues before the High Court, namely whether the PRC-Laos BIT applied to Macao; and, if it did apply, whether Sanum’s expropriation claims fell outside the scope of article 8(3) of the PRC-Laos BIT which provides that disputes ‘involving the amount of compensation for expropriation’ could be submitted to arbitration.

The High Court dealt first with the preliminary issue of whether the two letters should be admitted. The court decided to admit them, having exercised its discretion with reference to the conditions of the Ladd v Marshall test. The court held that the two letters were crucial in determining whether the PRC-Laos BIT applied to Macao.

The High Court rejected Sanum’s contention that the standard of review under section 10 IAA is a limited one of deference and respect for the tribunal in investor-state arbitrations which may concern issues of public international law, and which decision involved the interpretation of an investment treaty by arbitrators who were experts in international law. The court found that there was no basis to distinguish between investor–state and commercial arbitration, and adopted the de novo approach laid down in its earlier decision in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal [2014] 1 SLR 372.

Taking into account the two letters, the High Court’s view of the Hong Kong experience, the WTO Trade Report as well as the PRC-Portugal Joint Declaration, the court decided that the exception to the moving treaty frontier rule was established, and that the PRC-Laos BIT did not apply to Macao. The court went on to opine that, contrary to the decision of the international tribunal in Tza Yap Shum v Peru, Case No. ARB/07/06 (ICSID 19 June 2009), under article 8(3) of the PRC-Laos BIT, the tribunal did not possess subject-matter jurisdiction over Sanum’s expropriation claims.

This decision is presently the subject of an application for leave to appeal to the Court of Appeal.

High Court upholds award made under SIAC expedited procedure despite parties’ express agreement for a three-panel tribunal

In AQZ v ARA [2015] SGHC 49, the High Court was faced, for the first time, with a challenge to an award made under the expedited procedure of the 2010 SIAC Rules, and upheld the award rendered by the sole arbitrator even though the parties had expressly provided that all disputes were to be resolved by a panel of three arbitrators.

A dispute had arisen between parties over the sale and purchase of Indonesian non-coking coal and the defendant buyer commenced SIAC proceedings for the plaintiff seller’s failure to deliver. Clause 16 of the relevant arbitration agreement provided for arbitration ‘in accordance with the rules of conciliation and arbitration of the Singapore International Arbitration Centre (SIAC) by three arbitrators’.

The defendant applied for the arbitration to be conducted under the Expedited Procedure pursuant to rule 5 of the SIAC Rules 2010. The plaintiff resisted and challenged the existence of an arbitration agreement and the suitability of the expedited procedure.

The application for expedited procedure was allowed and the arbitration proceeded with the appointment of a sole arbitrator on 8 July 2013, with the plaintiff reserving all its rights accordingly.

After the award was issued in favour of the defendant, the plaintiff applied to set it aside under article 34(2)(a)(iv) of the Model Law on the basis that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, and that the arbitrator lacked requisite jurisdiction. The plaintiff argued that the rules in force at the time of the parties’ contract were the SIAC Rules 2007 (which had no expedited procedure), and therefore the conduct of the arbitration under the expedited procedure under the SIAC Rules 2010 was not in accordance with the parties’ agreement.

The High Court rejected the plaintiff’s application and applied the well-established presumption that references to rules in an arbitration clause are to be construed as references to such rules as may be applicable at the date of the commencement of arbitration, and not at the date of the contract, so long as those rules contain mainly procedural provisions. Furthermore, in contrast to the ICC Rules, the SIAC Rules 2010 did not expressly provide that the expedited procedure was not applicable to arbitration agreements which had been entered into prior to the SIAC Rules 2010 coming into force. As there was nothing on the facts to displace this presumption, the SIAC Rules 2010 were incorporated by reference.

Adopting ‘a commercially sensible approach’, the High Court held that the SIAC Rules 2010 provide the president with the discretion to appoint a sole arbitrator. The court found that this discretion had been exercised properly and accordingly the incorporated reference to an expedited procedure could and did override the parties’ agreement to have three arbitrators.

The High Court also observed that, even if plaintiff were successful in its claim that the arbitration should have been conducted before three arbitrators, the plaintiff did not discharge its burden of explaining the materiality or the seriousness of the breach. While prejudice is not a legal requirement for an award to be set aside pursuant to article 34(2)(a)(iv), it is a relevant factor that the supervisory court considers in deciding whether to exercise its discretion to set aside the award for the breach in question.