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Issue 74 - Dec 2015
Introduction to the Singapore International Commercial Court Print E-mail

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Chief Justice Sundaresh Menon, Singapore

Queensland Law Society and Bar Association of Queensland

10 November 2015

In September 2012, I visited the London Commercial Court and observed that its caseload was growing rapidly alongside a vibrant arbitration market. This suggested to me that arbitration and commercial courts are not competing players in a zero-sum game. On the contrary, there is room for them to co-exist and even to develop and thrive together in response to business and commerce taking on an increasingly international dimension.

Following this visit, in January 2013 in my speech at the Opening of the Legal Year, I floated the idea of the Singapore International Commercial Court (“SICC”). A committee was established to study the possibility of setting up such a court and several months later, it recommended the establishment of the SICC in order to enhance Singapore’s status as a leading forum for legal services and commercial dispute resolution. By the end of 2014, the Government had passed the necessary statutory and constitutional amendments to establish the SICC and it was launched at the beginning of this year.

In my remarks on the SICC this morning I have two broad aims. The first is to explain the thinking behind the SICC, in particular, why I believe that there is a need and a niche for an international commercial court even though there already exists a well-established means of international commercial dispute resolution involving neutral adjudicators with coercive powers, namely, arbitration. The second is to explain the key features of the SICC and how these might help to make the SICC an attractive forum for resolving disputes. I situate this in the context of the SICC’s and Singapore’s aspiration to serve as a centre for the resolution of disputes beyond our shores and in the wider Asian region.

In keeping with this and in line with my earlier observation that there is room for arbitration and litigation to grow together as complementary means for the resolution of transnational commercial disputes, I will also discuss the other international commercial dispute resolution options on offer in Singapore. Disputes are not all of a kind, and which mode of dispute resolution is most suitable will depend on the nature of the individual dispute. It might therefore be helpful to have a sense of the range of the choices available. In the course of explaining the thinking behind the SICC, I will also touch on the prospect of greater harmonisation in substantive business law in the Asia-Pacific region, and in connection with this I will close my remarks this morning with some words on an upcoming initiative that will actively work towards such harmonisation.

The need for an international commercial court

There is no doubt that arbitration plays an important role in resolving transnational commercial disputes. I don’t propose this morning to touch on any of the challenges affecting arbitration. But there are several reasons why commercial parties might prefer to resolve a transnational dispute by way of litigation rather than arbitration. One is that they might wish to invoke the court’s power to join third parties to a dispute or to consolidate a number of related disputes into a single set of proceedings. Arbitrators lack such power; they may join third parties or consolidate disputes only so far as those third parties or other disputants consent to such a course. In transnational disputes, it is not uncommon to have multiple parties connected by a chain of separate contracts, for instance, where there are sub-contracting arrangements, and such disputes may be more efficiently and coherently resolved with the aid of the court’s powers of joinder and consolidation.

Another factor that might lean in favour of litigation is the possibility of an appeal. The absence of appellate review was once touted as arbitration’s major advantage but it has become something of a drawback in recent times. Because arbitration is seen as a “one-shot” affair in that there is no appeal mechanism by which errors of fact or law may be corrected, parties tend to err on the side of over-inclusiveness in bringing documents into the proceedings and in drafting written submissions. For these reasons, there tends to be expansive discovery of documents, and submissions are lengthened to formidable extents so as to ensure that nothing is left out that might conceivably persuade the arbitrators.

It is also the position that cases can and perhaps to a growing degree do get resolved more quickly in litigation than in arbitration. One important reason for this has been the emergence of specialised commercial courts, or lists staffed by judges with a wealth of commercial experience. To illustrate, in 1995 New York became the first jurisdiction in the United States to launch a commercial division within its courts, and it soon saw a significant reduction in the average time taken to dispose of contract cases: from 648 days in 1992, it became 552 days in 1998, 412 days in 2000 and, by 2002, it was just under a year. Such commercially-minded courts may further increase efficiency by applying rules and procedures specially tailored to enable speedy resolution of complex disputes. For instance, last year the New York courts implemented a new rule allowing parties to agree to an “accelerated adjudication” procedure under which there would be significant limitations on discovery as well as waiver of interlocutory appeals and objections based on lack of personal jurisdiction or forum non conveniens, and under which parties must be ready for trial within nine months of filing a request for judicial intervention.

A further reason why litigation might be preferred is that there will be cases that involve the interpretation of a commonly-used contractual term or a standard form agreement, and in such a case parties might take the view that there is benefit in obtaining an authoritative court decision that will provide guidance as to the interpretation of similar terms or agreements from that point on. An arbitral award, by contrast, would have a comparatively ad hoc character as it is ultimately concerned only with the resolution of the specific dispute that is the subject of the arbitration, and not with developing the law.

That brings me to the broader point that an international commercial court might facilitate the harmonisation of substantive commercial law across jurisdictions, especially within the Asia-Pacific region. At present, there is much heterogeneity in Asia-Pacific law, and that increases the transaction costs for businesses that wish to operate within the region. Legal heterogeneity also leads to uncertainty as to the application of the laws of various national legal systems to cross-border transactions, which in turn causes uncertainty as to the enforceability of those transactions. It is therefore desirable to reduce this heterogeneity as far as possible within the framework of existing legal infrastructure.

In this regard I might refer to the experience of the Organisation for the Harmonisation of Business Law in Africa. The organisation was formed about two decades ago and it created unified business codes which were adopted by its member states, most of which were Francophone countries. These codes led to greater clarity and uniformity in domestic legal systems and regional legal infrastructure, and this in turn promoted greater cross-border trade as well as foreign investment. The African experience rests on certain premises that are somewhat unique but at a broad level it illustrates the positive effects that harmonisation of substantive law could have on regional commerce.

The need for harmonisation in the Asia-Pacific region will only become more pressing as the volume of transnational trade in this region increases. According to the Boston Consulting Group, Asia accounted for more than 30% of world trade in 2010, and is expected to account for 35% by 2020. Other studies report that, while global GDP is expected to increase by about 73% from 2010 to 2020, the Asian economy is expected in that same period to experience a more than three-fold increase.

Against this economic backdrop, an international commercial court within the Asia-Pacific region would be well-positioned to develop business law as it applies to cross-border transactions. Arbitration is simply not suited to the achievement of such an end: by its nature, it is an ad hoc and confidential method of resolving disputes, and was never designed to be a source of authoritative decisions that reached beyond the parties to settle the law. An international commercial court, on the other hand, will furnish an open body of published jurisprudence that commercial parties can take guidance from, and the availability of avenues of appeal will enable the correction of legal error and the creation of precedent.

As against this, it might be thought that arbitration has an important advantage over litigation in one material respect in particular and that is in the fact that an arbitral award is easier to enforce in other jurisdictions than a court judgment. That is certainly true at a broad level given the widespread subscription to the New York Convention but this too can be more closely analysed. First, parties may voluntarily comply with judgments of an international commercial court in order to preserve business relationships, just as they often voluntarily comply with arbitral awards for that reason. Second, it is not difficult to enforce court judgments in jurisdictions where there are reciprocal enforcement provisions, and in common law countries, it is possible to commence an action on the judgment. Third, the Hague Convention on Choice of Court Agreements came into force on 1 October this year. Under this Convention, where a choice of court agreement designates a particular court as the forum for a given dispute and that court issues a decision in the dispute, that decision will be recognised and enforced in the courts of all States that are party to the Convention. With 28 parties already and other signatories, including Singapore, this has the potential to be a game changer for the enforceability of court judgments.

It therefore seems to me that there is a need and a niche for an international commercial court such as the SICC. Against that background, I turn to discuss the key features of the SICC.

Key features of the SICC

In terms of its jurisdiction, the SICC will primarily hear three categories of case. The first category concerns cases in which parties have agreed on an ad hoc basis to have their disputes resolved in the SICC. The second category concerns cases in which there is a contractual choice of court clause providing that the SICC will resolve all disputes arising out of that transaction or contract. The third category concerns cases transferred from the Singapore High Court to the SICC by reason of their international and commercial nature.

The first key feature of the SICC which I highlight is that its judges are drawn from a pool that includes both local and international judges. The local judges consist of the Judges of the Singapore Supreme Court, as well as a retired Chief Justice who presently serving as a Senior Judge. The international judges currently comprise senior jurists from the UK, Australia, France, Japan, Austria, Hong Kong and the United States. Thus the SICC has judges who hail from civil law systems and who would better command the confidence of parties which are more familiar with that system. This feature of the SICC will be particularly useful in the Asia-Pacific region because of the diversity of legal systems within it. With jurists from both the common and civil law systems in its ranks, there is the possibility of dialogue between them such as would result in the cross-pollination of ideas, procedures and jurisprudence from both systems.

The second key feature of the SICC has to do with representation by foreign counsel. Where a party wishes to be represented by foreign counsel in a case in Singapore’s domestic courts, for instance, a Queen’s Counsel from England or Australia, there are stringent criteria to be met before ad hoc admission of foreign counsel will be permitted. It must generally be shown that the foreign counsel has expertise and qualifications particularly suited to the dispute at hand, and that there is no competent local counsel available to take on the matter. In the SICC, however, the approach taken towards the registration of foreign counsel is much more liberal – an application for such registration may be made so long as that foreign counsel (i) is authorised to practise law in his home jurisdiction, (ii) has at least five years’ experience in advocacy, (iii) is sufficiently proficient in the English language, (iv) has not been disciplined in his capacity as a legal practitioner in his home jurisdiction, and (v) gives an undertaking that he will abide by any order that his representation be limited to making submissions on questions of foreign law.

Hence it will generally not be difficult for foreign parties to be represented by counsel that they are familiar with. This is a considerable benefit to business. On a related note, questions of foreign law may be determined on the basis of submissions rather than proof, and this is facilitated not only by the possible involvement of foreign counsel but also by the possible involvement of an international judge. I might add that foreign counsel will have to abide by a code of conduct, meaning that they will be subject to a greater degree of regulation as compared to in arbitration.

The third key feature of the SICC is that it has simplified court processes that are meant to allow more efficient resolution of disputes. The rules and procedures that govern proceedings in the SICC are based on best practices in other commercial courts and international commercial arbitration. An important example is discovery. Unlike in the domestic courts, there is no process of general discovery. Instead, parties are to provide the documents on which they intend to rely, and to do so within the time and in the manner ordered by the court. Parties may also serve a request to produce on any person. In this connection the SICC has drawn from the rules promulgated by the International Bar Association.

More fundamentally, parties possess a measure of autonomy to design the processes that would be most suitable for their case. In our domestic courts it is mandatory to follow the rules of evidence stipulated in the relevant legislation, but in the SICC, the court may, if all parties agree, order that one or more of these rules will not apply and that one or more other rules of evidence will apply.

The fourth and final feature of the SICC I would highlight is that the SICC is a division of the Singapore High Court such that judgments of the SICC will enjoy the benefit of reciprocal enforcement agreements which Singapore has with other States, including Australia. In addition, should parties be dissatisfied with a decision of the SICC, they may appeal to the Court of Appeal on the substantive merits of the matter. Thus it is not a “one-shot” affair. On the other hand, if parties do not desire this possibility, they can opt out of appeals.

Finally, submitting disputes to the SICC will mean that cases are resolved by adjudicators appointed by the Chief Justice and not by the parties, and none of the adjudicators practise as counsel. Together, these features of the SICC aim to bring together some of the best parts of arbitration and litigation.

Arbitration

Notwithstanding the optimism with which we view the SICC, there can be no doubt that arbitration remains a vital mode of dispute resolution, not least because of its confidentiality and flexibility and the relative ease of enforcing an arbitral award around the world.

Arbitration is by no means a perfect system of dispute resolution, but as I said earlier I don’t propose to touch on the challenges affecting it. It suffices to say that some of the shortcomings of arbitration may be overcome with the refinement and improvement of the rules and procedures in accordance with which arbitration is conducted. We are well aware of this in Singapore, and I might mention that the Singapore International Arbitration Centre (“SIAC”) is presently reviewing its Arbitration Rules with a view to releasing the updated Rules sometime in mid-2016. To facilitate this review, two months ago the SIAC established what it calls the “Users Council”, which comprises international arbitration users drawn from over jurisdictions from Asia, the Americas, Europe, Africa and elsewhere. The function of this Council is to provide feedback on the SIAC’s Rules on the basis of its members’ considerable collective experience in arbitrating international commercial and investment disputes. The members of the Users Council serve two-year terms and they are kept apprised of developments of interest in the SIAC. It is envisaged that the diversity and quality of the members of the Users Council will better enable the SIAC to adopt and develop best practices in arbitration.

It is evident that the SIAC is acutely conscious of the challenges that parties face in submitting their disputes to arbitration, and it will constantly examine how it might address those challenges in order that Singapore might continue to be an arbitral seat of choice in the region and the world. The SIAC has already ensured that cost-competitive administrative and technological support, translation services, and state-of-the-art conference facilities are readily and easily available. The statistics suggest that these measures have met with some success: in the space of 10 years, the number of arbitrations administered by the SIAC increased from 64 in 2003 to 259 in 2013.

The effort to promote Singapore as an arbitration centre does not begin and end with the SIAC. The courts have an important role to pay as well, as I highly doubt we could be an attractive arbitral seat if the substantive arbitration law promulgated by our courts were not sound. In this regard, the Singapore High Court has a specialist arbitration list staffed by judges with ample experience in the field. I would also point out that our apex court has, in recent jurisprudence, reiterated its commitment to the promotion of arbitration by emphasising the policy of minimal curial intervention in arbitration proceedings. In its latest decision in the field, AKN and another v ALC and others and other appeals [2015] 3 SLR 488, the Court of Appeal addressed itself to the trend of an increasing number of challenges to arbitral awards on the ground of breaches of natural justice. The Court noted that, through the ingenuity of counsel, what were essentially appeals on the legal merits of an arbitral award could readily be disguised and presented as challenges based on procedural failures. In that vein, the Court distinguished an arbitrator’s absolute failure even to consider an argument, which could amount to a breach of natural justice, from a decision to reject the argument, which would not give rise to issues of natural justice however erroneous might have been the decision to reject that argument.

To round off this brief discussion on the efforts Singapore is taking to maintain and improve its standing as an arbitral seat, I would add that our judges are mindful of arbitration jurisprudence in other jurisdictions and do what they can to strive for convergence. In that connection, we have sought to participate in collaboration across judiciaries. There are periodic dialogues that take place among the commercial judges of Hong Kong, New South Wales and Singapore, and it is hoped that commercial judges from Shanghai and Mumbai will also attend the next edition of this event due to be held next year. The ASEAN judiciaries have also set up a joint platform for training and development, and it is anticipated that arbitration training will be conducted in Singapore sometime next year. I believe that the outward-looking attitude of our courts, and our readiness to work with other judiciaries to promote legal convergence in the area of arbitration, will enable our substantive law to develop in a way that makes Singapore an even more conducive place for international arbitration.

Mediation

Meanwhile, mediation is fast shedding its tag as the ineffectual cousin of litigation and arbitration, and is gaining recognition as a valuable and cost-effective method of commercial dispute resolution in its own right. It is especially appropriate where parties to a dispute have a wish to maintain a long-term business relationship for their mutual benefit. The statistics reflect a commendable success rate: the UK Centre for Effective Dispute Resolution reported last year that, of the £9 billion worth of commercial claims mediated from May 2013 to May 2014, just over 75% of cases reached settlement on the day of mediation and another 11% saw settlement shortly after. It was further estimated that, in 2014 alone, mediation would save a whopping £2.4 billion in management time, relationships, productivity and legal fees.

I mentioned earlier that trade and commerce in Asia is expected to grow significantly in the second half of our current decade. This may mean potential for mediation to assume a yet more prominent role in this region, because the cultures and mindsets of the Asian market are arguably such as would embrace a less adversarial mode of resolving disputes than litigation and arbitration. Against this backdrop, the Singapore International Mediation Centre (“SIMC”) was set up in November last year.

The SIMC is the first organisation in Asia focused on offering international commercial mediation services. It aims to deliver quality international mediation services in cross-border commercial disputes under the auspices of its own mediation rules. Its panel of mediators comprises more than 65 experienced mediators from Asia, the Americas, Europe and Australasia, and it also has an international panel of more than 65 technical experts from various industry sectors. These experts will be able to assist the mediator in complex commercial disputes involving technical questions. The SIMC also offers logistical and administrative support throughout the mediation process.

Under the SIMC’s rules, there is substantial scope for case management so that a given mediation may proceed in the most efficient way possible. For instance, the SIMC may arrange pre-mediation conferences to discuss the manner in which the mediation will be conducted, including setting relevant timelines. Such pre-mediation conferences may take place by electronic means in order to save time.

A unique feature of the SIMC is the “Arb-Med-Arb” protocol that it offers in conjunction with the SIAC. While most multi-tiered dispute resolution clauses provide for “Med-Arb” procedures under which parties proceed to arbitration if and when mediation fails, under “Arb-Med-Arb” parties commence arbitration before mediation is attempted. This protocol was specifically designed for international businesses that would value finality and enforceability: because arbitration is commenced first, in the event that the mediation is successful, the settlement may be recorded as a consent award which then becomes enforceable under the New York Convention. In the event that mediation fails, the parties simply continue with the arbitration. In short, “Arb-Med-Arb” allows a seamless transition between arbitration services offered by the SIAC and mediation services offered by the SIMC.

With the SICC, the SIAC and the SIMC in place, I believe that Singapore offers a full suite of dispute resolution options to fit any given transnational commercial dispute. Harmonisation of substantive business law

Finally, I return to the point I made earlier that it is desirable to harmonise as far as possible substantive commercial law across disparate legal systems. To address the issues arising out of such an endeavour of harmonisation, Singapore will be hosting in January next year an international conference titled “Doing Business Across Asia: Legal Convergence in an Asian Century”. One highlight of this conference will be the launch of the Asian Business Law Institute (“ABLI”), which is an institution dedicated to moving substantive business law, legal policy and practice in Asia towards convergence. Allow me to elaborate on this.

The ABLI will commission research on specific areas of legal convergence identified through consultations with a wide range of stakeholders: businesses, legal practitioners and in-house counsel, academia, the judiciary, governments, and local, regional and international institutions. This will be research with tangible output, as the research projects should be designed to culminate in concrete policy recommendations and legal tools that would be practically applicable, suited and usable for the Asian context. In doing so, the ABLI will draw on techniques used by other international, regional and national organisations involved in promoting the harmonisation of laws such as the American Law Institute, the European Law Institute and UNCITRAL.

A unique feature of the ABLI will be its role in providing a forum for businesses in the region to, interact with and articulate their commercial perspectives and needs to the legal community. It is hoped that this interaction between businessmen and lawyers will allow for greater practical application and adoption of ABLI’s work, and thus set it apart from the conventional approach of other organisations and university-led initiatives. Indeed, we intend to establish an advisory council that includes business representatives who can provide guidance for the work of the Institute.

Ultimately, the ABLI will undertake sustained outreach efforts among its diverse stakeholders to promote legal convergence in Asia. Its outreach strategy includes a number of components including the establishment of partnerships with other international institutions such as the American and European Law Institutes, the International Bar Association, and the International Institute for the Unification of Private Law, also known as UNIDROIT. It will also explore government-to-government platforms to promote its work to regional policy-makers.

The ABLI will also host a major international conference on the convergence of Asian business laws once every two years, and the event in January next year is the inaugural edition. The conference has already attracted notable speakers and panellists, including the Honourable Chief Justice Robert French, the Honourable Chief Justice Geoffrey Ma of Hong Kong, Mr Michael Traynor, President Emeritus of the American Law Institute, and Mr Henri de Castries, Chairman and CEO of the AXA Group.

The work of the ABLI will be steered by a governing council which will include a number of senior judges, jurists and lawyers from several jurisdictions including Australia, China, Hong Kong, India and Singapore. I believe that the work the ABLI will do will prove highly valuable in the conduct of transnational business in Asia. It is especially important, in my view, that all stakeholders should be engaged and brought into the discussion, because they are all instrumental in their own way in the push towards legal convergence in the region. The ABLI recognises this, and I am confident that it will result in proposals and recommendations that are not only legally sound but are also commercially sensible and practically applicable by governments, courts, commercial lawyers and most importantly by parties.

Conclusion

In a speech I recently delivered in Mumbai, I highlighted two challenges facing the transnational trading community, which will have profound significance for our legal system. The first is the exponential growth of international trade that has given rise to a corresponding increase in the volume of disputes. The second is the fact that these disputes have also grown in complexity, requiring a greater degree of technical sophistication; and with the great surge in transnational dealing, also an appreciation of cross border legal issues. These challenges in some respects pull against the widespread desire for the dispensation of justice that is swift, practical, and cost-effective. This makes it essential for us to innovate and evolve our legal frameworks for dispute resolution so as to enable us to better meet these needs.

I hope I have given you a good understanding of what the SICC is, what it does, and what it hopes to achieve. It is early days yet for the institution, and so it is too soon to assess its contributions to the resolution of transnational commercial disputes. But thus far in its debut year, the SICC has had transferred to it two cases which were started in the High Court, and these cases are moving along through the various pre-trial stages. It is not at all a bad start.

In addition, I hope I have also given you a broader understanding of the full range of international commercial dispute resolution options in Singapore, which includes arbitration and mediation.

There was a time when ADR was an acronym that stood only for Alternative Dispute Resolution. This seems to confine the understanding of dispute resolution methods such as arbitration and mediation within the perspective of a negative definition: they are alternatives in the sense that they are not the usual or preferred methods. In the context of a legal framework that seeks to serve the transnational trading environment of this century, it is obvious that this is a woefully inadequate and misplaced perspective.

We in Singapore seek to meet the need for a vibrant and robust centre that can serve the wider region in which we are situated by providing a rich tool kit of different dispute resolution methods. In this environment, ADR could be modernised and brought up to date to stand for Appropriate Dispute Resolution. Under this conceptualisation, arbitration, litigation and mediation are not competing in a flat and mono-dimensional zero-sum game. Rather they each seek to enhance their strengths and attractions so that the users they seek to serve have the advantage of finding the appropriate tool that best serves their needs.


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