Establishing international dispute resolution laws and institutions

THE Singapore International Arbitration Centre began operations in July 1991. It was set up as an arbitral institution with the primary purposes of:

(a) providing facilities for international and domestic commercial arbitration and conciliation;
(b) promoting arbitration and conciliation as alternative to litigation for the settlement of commercial disputes; and
(c) developing a pool of arbitrators and experts in the law and practice of international arbitration and conciliation.

Singapore is still a newcomer in the arbitration arena. However, during the few years of its operation, it has learnt some useful lessons. Initiatives already taken will only bear fruit in the long term, but there have been some modest interim results.

Quantum of Claims in Arbitration Cases

Before the establishment of the SIAC, almost all arbitrations in Singapore were ad hoc arbitrations with no institutional support. Lawyers involved in those arbitrations would conduct them as they would proceedings in the courts for which they were primarily trained. With the setting up of the SIAC, we realised that this pattern of ad hoc arbitration had to be changed, as had the mindset of lawyers with regard to how arbitrations should be conducted.

One of the first tasks of the SIAC was thus to produce institutional rules for arbitration. We had the advantage of the excellent work done by UNCITRAL, the LCIA and the AAA in the form of their various rules of arbitration. We studied them and came up with the SIAC Rules 1991. In drawing up these rules, we tried to be consistent with acceptable international arbitration practice as well as to keep in view existing arbitration law in Singapore.

The initial reaction of many professionals (particularly lawyers) to the setting up of the SIAC was one of scepticism. Many articles and speeches derided the decision of the High Court in Turner (East Asia) Pte Ltd v Builders Federal (Hong Kong) Ltd & Anor in which the court disallowed a firm of US attorneys from representing a party to a pending arbitration in Singapore. I was then Attorney-General for Singapore, and realised that the position taken by the court in Turner had to be clarified.

In 1992, the Legal Profession Amendment Act was passed by parliament and the amendment came into force on March 27, 1992. This effectively allows foreign lawyers to appear in all arbitrations in Singapore, with the provision that in cases where Singapore law is involved, the foreign lawyer must appear with a practising Singapore lawyer. In moving the amendment, the minister for law summed up the effects thus:

"The Turner case .... has given rise to speculation and uncertainty as to the participation of foreign lawyers in international arbitrations held in Singapore. Whether it was rightly decided or not, it has unintentionally brought about adverse effects on the commercial reputation of Singapore as a centre of international arbitrations. The new law would clarify the position of foreign lawyers appearing in arbitration proceedings here.

"The Bill would amend the Legal Profession Act so that the exclusive right of local lawyers to practise law and act as an agent in legal proceedings will not apply to arbitration when the law applicable to the dispute is foreign law. There is, however, some flexibility. If the applicable law is Singapore law, foreign lawyers could still appear in arbitration proceedings if they do so jointly with a local practising advocate or solicitor. This requirement would also act as a safeguard as the local lawyer can advise the foreign lawyer on aspects of the local law in which the foreign lawyer may not have sufficient expertise"

The amendment took much of the wind out of the sails of Singapore’s critics. Nevertheless, there were still those who felt we had not gone far enough, and that the requirement of having to appear with local council was restrictive. With respect, I cannot see any form of restriction being imposed by this amendment. No prudent foreign lawyer would take on the responsibility of advising on law and practice in Singapore, law which would to start with be unfamiliar to that lawyer. What we have legislated on therefore is a measure of prudence, not restriction.

Category of Arbitration Cases

Another aspect that had come to my attention shortly after the setting up of the SIAC was my concern that the Singapore Arbitration Act (which was first enacted in 1953 following the English 1950 Act) may no longer be suitable for the conduct of the international arbitrations which the SIAC and Singapore hope to attract. In November 1991, I appointed a working committee to examine existing Singapore laws relating to commercial arbitration in the light of developments in international and commercial arbitration and to make recommendations for the reform of the law and related rules of court.

The committee carried on its work under my successor and became a subcommittee of the Law Reform Committee of the Singapore Academy of Law.

The task of the subcommittee was made easier because several countries had by then also undertaken similar exercises, namely, England, Scotland, Australia, Hong Kong, and New Zealand. On August 31, 1993, the subcommittee submitted the report to the Attorney-General, making the following recommendations.

1. Generally, UNCITRAL Model Law should be adopted in Singapore in relation to international arbitrations.
2. The distinction between ‘international’ and ‘domestic’ arbitration regimes should be maintained , and the distinction defined in terms of the Model Law, with certain modifications.
3. No definition of ‘public policy’ should be included in the Model Law, as adopted in Singapore.
4. The powers of arbitrators conferred under the Model Law should be expanded.
5. The assistance of the courts should be available to enforce interim orders and/or directions made by arbitrators under the Model Law.
6. Article 16 of the Model Law should be adopted, but with a right of appeal to the High Court (and, ultimately, with leave, to the Court of Appeal).
7. The principle of reciprocity of enforcement of arbitral awards embodied in the New York Convention should be adhered to. Articles 35 and 36 of the Model Law should not be adopted.
8. Arbitrators should be authorised to determine the rates of interest applicable tp both pre- and post-award sums.
9. The Registrar of the SIAC should undertake the task of taxing costs in relation to international arbitrations.
10. Arbitrators in international arbitrations should have the power to order security for costs.
11. Such procedures as the law allows to provide security for claims to parties engaged in litigation should be made available to parties who choose to arbitrate under the international arbitration regime.
12. No provision should be made, in the case of international arbitration, for the consolidation of arbitral proceedings.
13. Specific legislation should be enacted providing for immunity from liability for arbitrators.
14. Provision should be made to the effect that the parties to an international arbitration shall be taken, unless otherwise agreed, to have conferred on the arbitral tribunal the power to adopt inquisitorial processes.
15. Legislation should be adopted to ensure the confidentiality of court proceedings arising out of international arbitrations.
16. The settlement of disputes by conciliators should be allowed provided that the parties desire it and provided that the narrower, rather than wider, view of amiable conciliation is adopted.
17. Awards ex aequo et bono should be permitted in international arbitrations, provided the parties agree.
18. Conciliation rules should be adopted by the SIAC, and the Conciliation Section of the Hong Kong Ordinance should be adopted to allow an arbitrator, with the consent of all parties to the arbitration, to act as a conciliator.

These recommendations were accepted by the government, and the International Arbitration Act 1994 (IAA) was enacted in October 1994. The IAA came into force on January 27, 1995, adopting all of these recommendations with minor changes.

With the enactment of the IAA, there are now in Singapore two regimes of law that govern arbitration - the Arbitration Act, which applies to domestic arbitrations, and the IAA, which applies to all international arbitrations.

The IAA adopts the UNCITRAL Model Law on International Commercial Arbitration as ‘having the force of the law’ in Singapore. Parties in domestic arbitrations may opt in to the IAA regime. Similarly, parties to an international arbitration who wish to retain the higher degree of judicial control may opt out of the IAA.

Appeals against awards

One of the most significant changes brought about by the adoption of the Model Law is the abolition of appeals to the courts against arbitral awards on the basis that the arbitral tribunal made a mistake in law or had misconducted itself or the proceedings.

The jurisdiction of the court under the Model Law to set aside an award is limited to those circumstances in which an award ought not be made in the first instance, e.g., the arbitration agreement was entered into by a party without capacity; a party was not given proper notice of the proceedings or was not given an opportunity to present its case; the award deals with matters outside the scope of the agreement; the arbitral tribunal was improperly constituted; the subject matter is not arbitral under the laws of Singapore or the award is in conflict with the public policy of Singapore (in essence Article 34 of Model Law).

I should perhaps highlight some of the other main changes brought about by the IAA which were not originally in the Model Law.

Authorities under the IAA

The IAA separates the various functions required to be performed and has conferred them on several authorities:

1. With regard to an application for a stay of proceedings which is commenced in contravention of an arbitration agreement, the court in which those proceedings are pending.
2. The chairman of the SIAC for the purpose of appointing the arbitral tribunal or the conciliators.
3. The registrar of the SIAC for taxation costs; and
4. The High Court generally, including applications relating to the challenge of arbitrators, appeals, setting aside awards, enforcement of interlocutory arbitral directions/orders and arbitral awards, and interlocutory orders.

In designating the SIAC as the appointing authority for arbitrators and for taxation of costs, parties to an international arbitration in Singapore have yet another assurance that they would not be unnecessarily forced into the courts. Certain procedural difficulties such as service of judicial process overseas, relating to applications made to the courts for appointing arbitrators, would also be overcome with applications now being made to the SIAC.

Powers of the arbitral tribunal

An arbitral tribunal derives its powers from the arbitration agreement or the institutional rules agreed upon by the parties as well as the powers granted by the law of the forum. In Singapore, the statutory powers under the Arbitration Act are very limited. For the purposes of facilitating the conduct of international arbitrations in Singapore, the IAA provides extensive powers to arbitral tribunals to make orders for:

1. security of costs;
2. discovery (of documents and interrogatories);
3. giving of evidence by affidavit;
4. the preservation, interim custody or sale of any property which is the subject-matter of the dispute;
5. securing the amount in a dispute;
6. ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and
7. an interim injunction or any other measure.

These supportive powers are concurrently exercisable by the High Court. Implicit in the supportive role of the court in arbitrations is the assumption that the court will exercise them in support of the arbitration and will refrain, except in exceptional circumstances, from making any order which is within the powers of the arbitrator.

Interim orders or directions of an arbitral tribunal made under the provisions of the IAA can with leave be enforceable as orders or judgements of the court. Hitherto interim orders or directions made by arbitrators will not be enforceable. This greatly undermined the authority and effectiveness of the arbitral tribunal. Providing for the enforcement of interim orders and directions of the IAA enables the tribunal to be in effective control of the proceedings and of the parties.

Inquisitorial philosophy

The traditional common law system of adjudication and arbitration is essentially adversarial in its approach. The civil law inquisitorial processes may not be adopted in such proceedings unless parties expressly agree. International arbitrations may involve lawyers or arbitrators from different jurisdictions outside the common law system. Arbitral awards made in common law jurisdictions such as Singapore could be exposed to the danger of being set aside by the courts should the arbitral tribunal adopt inquisitorial processes in the arbitral proceedings without the agreement of the parties. While courts may be more sympathetic to arbitrators from civil law countries conducting arbitrations in Singapore and permit some arbitral intervention or initiative, the extent to which such practice would be tolerated is uncertain.

The Model Law, being a product of compromise among countries with different legal systems, is silent in the approach to be adopted by arbitrators.

In Singapore, this lacuna is filled by Section 12(3) of the IAA which permits inquisitorial processes to be used in arbitration if the arbitral tribunal thinks fit, unless the parties in writing agree otherwise. This is a recognition by the legislature that parties choosing Singapore as a forum for their arbitration are not obliged to accept a strictly common law adversarial approach.

Arbitral immunity

The issue of the immunity of arbitrators is not addressed in the Model Law. While common law recognises a certain degree of immunity for arbitrators on the basis that they act in a quasi-judicial capacity, legislation on this aspect is necessary to assure arbitrators that they would not be exposed to liability should they make any mistake in the course of arbitration. Section 25 of the IAA is a clear policy statement in this regard. The immunity extends to negligence and mistakes of fact, law, or procedure made in the course of arbitral proceedings. The immunity also appears wide enough to protect arbitrators against claims for defamation.

Conciliation proceedings

The IAA is as an Act to "make provision for the conduct of international commercial arbitrations ... and conciliation proceedings...".

Section 16 of the IAA provides for the appointment of a conciliator by the chairman of the SIAC where parties to a conciliation have not been able to secure such an appointment. The term ‘conciliation’ is not defined in the IAA. As used in the IAA, the term should be taken to include the form of dispute resolution commonly understood as mediation.

Lawyers trained in the common law tradition may find it uncomfortable that conciliators who have confidential information disclosed to them in the course of conciliation could subsequently act as the arbitrators or that arbitrators could act as conciliators and resume their role as arbitrators should the conciliation fail. The difficulties with the notion concern the possibility that a conciliator who is privy to such information would not be able to adjudicate the matter with a fair and unbiased mind.

The IAA permits a conciliator to also act as an arbitrator in the event of the conciliation failing to achieve any settlement only if the agreement specifically provides so. Similarly, arbitrators could act as conciliators in the dispute in which they are the arbitrator only if all the parties consent and "for so long as no party has withdrawn its consent in writing". The approach taken in the IAA gives full liberty to the parties to a dispute to decide whether an arbitrator could act as a conciliator or vice-versa.

I believe the enactment of the IAA is the right step taken by the Singapore legislature for the development of international arbitration in Singapore. Initial difficulties encountered by lawyers not familiar with the new law may tempt some to opt out of the new regime into the more familiar regime of the Arbitration Act. The legislative history of the Model Law is well documented and, with the introduction by UNCITRAL of CLOUT (Case Law on UNCITRAL Texts) lawyers will have access to sufficient materials to assist them in their understanding of the new law.