“In the international arbitration space, Singapore is not just a regional leader but also a global leader,” shares Managing Partner and Head of Dispute Resolution in a Asia Business Law Journal feature on international arbitration
Oon & Bazul’s Managing Partner and Head of Dispute Resolution Bazul Ashhab commented in an Asia Business Law Journal article titled “All about action”. The original article was first published online in Asia Business Law Journal on 11 September 2018.
Source: 2018 © Asia Business Law Journal
Author: Joanna Law
Singapore has been shaping itself as a first-class hub for international arbitration, among other things. And as its neighbours know, what Singapore wants, Singapore usually gets, writes Joanna Law
Singapore was in the international spotlight recently as the country selected for the headline-grabbing and controversial meeting of US President Donald Trump and North Korean leader Kim Jong-un.
The two met on 12 June, kicking off an unprecedented summit between the two leaders. Regardless of the political polarization of the meeting, the fact that Singapore was chosen as the location is evidence of the popular perception of the city-state as a neutral space.
This rings particularly true for arbitrations, and many legal firms and practitioners believe Singapore is unrivalled in Asia. It’s seen as a place that gets things done, where transparency is high and where legislative change within its dominant-party structure is unshackled by the roadblocks inherent with multi-party democracies and their close relatives.
According to the 2018 International Arbitration Survey conducted by the School of International Arbitration, Queen Mary University of London, Singapore was once again ranked in the top five most preferred seats of arbitration globally as it was in the previous survey conducted in 2010. One significant difference compared with the previous International Arbitration Survey is that Singapore has overtaken Hong Kong and has surged ahead to 3rd place, behind only London and Paris. Respondents to the same 2018 International Arbitration Survey also placed the Singapore International Arbitration Centre (SIAC) as the third-most-preferred arbitration institution globally, ahead of the Hong Kong International Arbitration Centre.
“Just looking at these statistics, it is difficult to dispute that Singapore is the international arbitration hub in Asia,” says Bazul Ashhab, partner and head of dispute resolution at Oon & Bazul in Singapore.
Michelle Chiam, deputy centre director of SIAC, says Singapore is home to all the key players that are critical to the successful resolution of a dispute: institutions, arbitrators, law firms, barristers’ chambers, and professional service and ancillary service providers. “By convening the relevant parties and offering a comprehensive range of options, Singapore serves as a gateway for the dispute resolution needs of parties from around the world,” Chiam says.
On 2 July 2018, the SIAC announced the launch of an inaugural module titled “SIAC and Institutional Arbitration” in collaboration with the National University of Singapore’s (NUS) Faculty of Law. The module introduces the role and function of arbitral institutions in the practice of international arbitration, as well as the complex issues that arbitral institutions face in the administration of arbitrations, such as appointment of arbitrators, issuance of arbitral rules and practice notes.
“By putting in place policies to bring in more arbitration work, Singapore continues to develop itself as a dispute resolution hub,” says Mohammed Reza, a partner at Simmons & Simmons JWS in Singapore. “The SIAC is seeing faster growth than other institutions. As such, Singapore is very well positioned to be the regional leader for legal services.”
Vivek Kathpalia, a partner at Nishith Desai Associates, says the fact that Singapore has also liberalized its legal services regime effectively has helped it become the easiest place in the world to do business. In late April 2018, the International Chamber of Commerce (ICC) announced that its secretariat had opened its new case management office in Singapore to facilitate the chamber’s desire to better manage ICC arbitrations in Singapore and the region.
“Being a hub for arbitration at the SIAC, and the setting up of the Singapore International Commercial Court (SICC) and the Singapore International Mediation Court (SIMC) clearly show that Singapore is leaving no stone unturned to establish supremacy in legal services in the region,” says Kathpalia. “This attracts a lot of diverse legal talent and creates a thriving legal eco-system.”
Based on ICC data, Singapore last year retained its place for the eighth year running as the top-ranking destination for ICC arbitrations in Asia. The data show that parties from more than 140 countries were involved in over 800 cases in 2017.
“As Singapore continues its push to be the preferred centre for alternative dispute resolution on the global stage, the opening of this [ICC] office helps underline how Singapore law and arbitrators are options for parties embroiled in commercial disputes,” says Audrey Yap, managing partner of Yusarn.
“In the international arbitration space, Singapore is not just a regional leader but also a global leader,” adds Ashhab, from Oon & Bazul.
On 1 November 2017, to strengthen the framework for enforcement of mediated settlements conducted wholly or in part in Singapore, the Mediation Act and the Mediation Rules came into force. The act also applies to mediations conducted elsewhere, provided that the mediation agreement states that the Mediation Act or Singapore law applies to the mediation.
Pursuant to the act, foreign counsel and mediators are also allowed to participate in mediations administered by mediation service providers, or if they are a certified mediator. “The removal of the restriction on the practice of Singapore law for foreign mediation counsel and mediators will further afford parties greater flexibility in appointing their counsel and mediators, and further develop the international commercial mediation space in Singapore,” says Chiam.
Another more recent and significant development is the approval of a draft convention and model law on enforceability of settlement agreements, on 25 June 2018 at the United Nations’ general assembly. The agreements arose from international mediation proceedings. An offer by Singapore to host the signing of the convention in August next year was also formally endorsed and it was agreed that the convention would be known as the “Singapore Convention on Mediation”. The convention will be submitted to the UN general assembly for approval later this year.
“The drafts were the fruit of nearly three years’ labour by the Working Group II (Dispute Settlement),” says Chiam. “The convention and draft model law put in place an international framework for the enforcement of mediated settlements similar to the 1958 New York Convention for the enforcement of arbitral awards.”
It is expected that the Singapore Convention will make mediation more attractive for international parties as it will expedite the enforcement of mediated settlements arising from foreign mediations (as opposed to the court-enforcement route of initiating legal proceedings for breaches of mediated settlement agreements).
Meanwhile, on 3 April 2018, just over a year after Singapore legislation of third party funding for international arbitration came into effect, the Ministry of Law has sought public feedback on the operation of the funding framework, including whether there is a need to expand the safe harbour for funding of international arbitration cases into new areas.
This legislation is also a finance and risk management tool, allowing companies to devote their limited funds to their core business and outsourcing the financial burdens of a dispute to third-party funders.
“The legalisation substantially reduces the cost barrier for claimants to pursue their legitimate claims,” says Ashhab. “This development also allows corporations to leverage such funding to shift the cost and inherent risk of pursuing a claim in arbitration from their balance sheet to a third-party funder.”
Ashhab expects that third-party funding will be a huge growth area in the coming months and years. “The giant step taken to amend our laws, to abolish the tort of champerty and maintenance, paved the way to bring Singapore in line with other leading centres of dispute resolution in Australia, the UK and the US, where third-party funding of disputes is commonplace.”
It is still too early to determine if third-party funding for international arbitration will ultimately be successful in Singapore. Chiam says industry stakeholders expect that Singapore will in time further permit third-party funding in international commercial litigation to strengthen Singapore’s position as an international dispute resolution hub by attracting complex and high-value disputes in the region.
Ashhab says Singapore is the undisputed regional leader for legal services. For example, recent Companies Act amendments in 2017 introduced reforms that strengthen Singapore’s corporate rehabilitation processes and its capability to deal with cross-border restructuring and insolvency cases, engrafting the best features from the US Chapter 11 into the present system based on the English law model.
“It is widely accepted that with the recent Companies Act amendments in 2017, Singapore has one of the most forward looking and flexible corporate debt restructuring regimes in Asia,” says Ashhab.
Statistics provided by the Singapore Law Society show that legal services are projected to grow at 3.3% a year globally between 2014 and 2019, and 5.5% a year in the Asia-Pacific region. “Singapore is well placed to be an international hub for legal services,” says Debby Lim, a partner at Shook Lin & Bok. “Many multinational corporations have a presence in Singapore and engage Singapore lawyers for their regional transactions.” Legal work in Asia is also expected to grow in areas such as infrastructure, especially, because of China’s Belt and Road initiative. ASEAN is also projected to become the fourth-largest economy in the world by 2050.
Lim says a recent government-led initiative that aims to help Singapore lawyers to venture overseas, called Lawyers Go Global, will connect Singapore legal expertise with opportunities in the region and beyond, through overseas networking trips, training, and branding and marketing.
Singapore’s legal sector also responds quickly to international legal trends. The Monetary Authority of Singapore (MAS) recently proposed guidelines to strengthen individual accountability of senior managers, strengthen oversight of employees in material risk functions, and raise standards of conduct in financial institutions, in line with developments in London and Hong Kong.
“These guidelines present five specific outcomes, with the central goal to ensure risk ownership is embedded at all levels of the organization,” says Mohammed Reza, a partner at Simmons & Simmons JWS. “Assessment of compliance by the MAS will take the form of a consultative approach in the initial implementation phase and become part of the ongoing supervisory process.”
Another international trend is deferred prosecution agreements, and Singapore has introduced legislation allowing for prosecutorial discretion as a means of dealing with corporate crimes. “Deferred prosecution agreements [DPAs] will allow for a proportionate response, taking into account the particular nature and extent of the corporate crime,” says Reza. “The agreements should increase corporate accountability as they provide an incentive for corporate entities to confront criminal conduct within their ranks and encourage whistle-blowing, which is often necessary to uncover criminal conduct in the first place.”
In addition to developing individual and corporate accountability regimes, Singapore aims to improve its competitiveness as a domicile for global investment funds through the introduction of a new Singapore Variable Capital Company (S-VACC) structure for all types of investment funds and schemes in Singapore. “This proposed framework offers increased opportunities for cross-border collaboration, growth for stakeholders in the fund industry, a wider investor base for fund managers to tap into, and would be a game changer for asset management in Asia-Pacific,” says Reza.
Singapore is developing many legaltech initiatives at the moment, including the recent TechLaw, implementation of AI software in law firms, and introduction of a legal technology manual by the Singapore Academy of Law (SAL). The Intellectual Property Office of Singapore (IPOS) has established a fintech Fast Track (FTFT) initiative to advance the file-to-grant process for fintech patents. Under this initiative, an applicant can expect to get a patent granted in six months, compared to at least two years for normal applications. The FTFT was launched on 26 April 2018, fittingly on World Intellectual Property Day.
“We understand that such efforts are seen to be complementary/in conjunction with the MAS Financial Sector Technology and Innovation (FSTI) funding scheme, which is designed to support a thriving fintech ecosystem in Singapore,” says Ashley Chew, an associate at Ella Cheong in Singapore. “In particular, MAS intends to make Singapore the destination of choice for innovative fintech companies by easing the process of starting an innovative financial business.”
Such developments are significant as Singapore moulds itself as a “smart nation” and a leading regional financial hub. “As innovation of Fintech and the protection, commercialization and enforcement of the same is closely tied to the national agenda, we expect to see more companies in the fintech space filing for patent protection and overseas-based companies will be encouraged to set up shop in Singapore,” says Chew.
She expects to see regulatory developments continue in the next 12 months as MAS proactively works with stakeholders to develop guidelines such as the E-payments User Protection Guidelines, and statutes such as the new Payment Services Act.
As the legal industry continues to be both disrupted and enabled by technology, the momentum will definitely pick up in the next 12 months.
“Singapore is the regional leader for legal services, because it has built up a vibrant dispute resolution ecosystem with the right elements to cater to the growing demand from international parties for such services,” says Chiam. “There is a full suite of dispute resolution options for users to select from, including arbitration, mediation, international litigation, depending on the users’ needs and preferences.”