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Singapore-Asias Leading Arbitration Hub?

Lim Shi Mei

Archishman Ramasubramanian V
Yvonne Ng Yi Wen Peng Pinhao Yashwardhan Agarwal Tutorial 3, Group 1 3/16/2011


Introduction ............................................................................ 2 SIAC and international ventures ............................................. 2 Compliance with international standards ................................ 3 Liberalizing Singapores legal environment ........................... 4 Domestic factors ..................................................................... 5 The competition ...................................................................... 5 Conclusion .............................................................................. 6 Bibliography ........................................................................... 8

Arbitration offers many benefits to parties seeking amicable resolution of commercial disputes. It is less costly than litigation and offers confidentiality and moreover, the rulings remain legally binding for all parties involved. With the growing of cross-border trade and outsourcing, arbitration offers another key benefit over litigation: International Enforceability. As such, it seems logical for the Singapore government to pursue the establishment of the Singapore International Arbitration Center (SIAC) and promote it as a leading commercial arbitration hub in Asia. For it to truly be the best arbitration hub in Asia however requires it to exploit a combination of various strengths the country enjoys as well as actions taken to make Singapore increasingly favorable as an arbitration center. This report will attempt to examine the factors likely to affect the success of Singapores aims in the matter. In particular, it will focus on efforts aimed at increasing the internationality of Singapores legal environment and therefore, the SIAC.

SIAC and international ventures

The internationality of an arbitration institution is of vital importance to its success. This is in a large part because of the affordances to international commercial dispute resolution arbitration offers. As such, the SIAC has pursued links with international organizations and has conformed to international arbitration standards meticulously since the early 2000s, when legal services were identified as potential area of growth for the country.1 One particular instance of this is the establishment of Maxwell Chambers, the worlds first integrated alternative dispute resolution complex located in Singapore which houses multiple institutions for arbitration as well as mediation. 2 By housing and allowing the SIAC to partner with institutions such as the American Arbitration Association to set up centres like the International Center for Dispute Resolution (ICDR), the Maxwell Chambers venture attracts companies from other countries which might not otherwise consider Singapore as an arbitration destination. For example, companies which normally turn to the ICDR for arbitration would now be able to seek services in Singapore. Given the significance of previous dealings in establishing the preference of an arbitration destination, having other

Jeffery Chan Wah Teck, Liberalization of the Singapore Legal Sector, Asean Law Association, 10th General Assembly 2 Maxwell Chamber, About us: Profile, http://www.maxwell-chambers.com/about-profile.html, 11 Mar 2011

international arbitration institutions in Singapore will do a great deal to attract their business to the country. By providing state of the art facilities for arbitration, Maxwell Chambers in Singapore helps to establish itself as an arbitration hub which many leading arbitration institutions in the world have not been able to due to the lack of resources to establish such facilities for regular use. As a result, Singapore leverages on its geographic position in the Asia-Pacific region between the burgeoning markets of both China and India. As illustrated in the above examples, the SIAC has addressed a key issue of how to attract clients to Singapore by a combination of joint ventures with other arbitration centers as well as international organizations. This allows the SIAC to gain a high reputation which is essential to the establishment of a venue as a key arbitration destination. Singapore is a member of the International Chamber of Commerce (ICC) - A highly respected arbitration court with members in over 90 countries and a reputation for neutrality and multi-cultural insights brought by its wide membership.3Also, the International Court for Arbitration of the ICC relocated its regional office which was located in Hong Kong to Singapore in 2003.4 This shows the growing prominence of the region in delivering legal services like commercial arbitration.

Compliance with international standards

The international arbitration landscape is highly diverse with a range of laws, common practices and rules affecting the arbitration proceedings of any case at any time. As such, international standards help simplify matters and reduce uncertainty by providing at least guidelines if not outright limitations on what can, or cannot, be achieved through arbitration. One such example of this would be the ICC. Compliance with the rules as laid out by ICC in determining the rules of arbitration in Singapore is important because arbitration rules can be complex and must take into account the norms of international practices, the laws of the country the arbitration institute is located in and the laws of the country the dispute arose in. By complying with ICC norms, the arbitration rules of Singapores arbitration institutions are more likely to conform to the international norms and standards. At
3 4

ICC, Why ICC Arbitration, http://www.iccwbo.org/court/arbitration/id5256/index.html, 12 Mar 2011 International Chamber of Commerce (ICC), ICC Asia Pacific, http://www.iccwbo.org/id2618/index.html, 12 Mar 2011

the same time, one dimension of variables is accounted for, making the application of Singapore arbitration rules more predictable for foreign parties. This predictability due to well defined modes of practice will definitely attract more companies to arbitrate in Singapore. Singapore is also a member of the New York Convention, which ensures a level of certainty in enforcement of awards and penalties, even across international borders. 5 This allows an assurance of enforceability of arbitral ruling in 140 countries which is of key importance in international arbitration since the assets of parties involved may often be spread across several countries which could potentially complicate the enforcement of rulings involving compensation.

Liberalizing Singapores legal environment

In terms of managing the supply of legal counsel in the country, the Singapore government has liberalized the legal sector in Singapore to allow foreign law firms to practice in the country. In 2008, the Qualifying Foreign Law Practices (QFLP) legislation was passed, allowing foreign law practices to practice Singapore law, through Singapore lawyers who are its partners or associates.6 There are plans for the number of registered foreign law firms in Singapore to be increased.7 This key piece of legislation allows for the movement of foreign lawyers into Singapore while ensuring that they will have a check in place to adhere to Singapore law and best represent the interests of their client. Therefore, it is possible for foreign companies to be represented by their own lawyers and so, seeking legal counsel becomes economical and fast as foreign clients would not need to spend much time finding a local firm to which they would have needed to familiarize themselves with before a case. In addition, foreign law firms which are registered in Singapore are more likely to encourage their clients to specify Singapore as the destination in their arbitration clauses. Finally, the presence of foreign lawyers and law firms in Singapore are likely to offer Singaporean lawyers insight into the

UNCITRAL, 1958- Convention on the recognition and enforcement of foreign arbitral awards- the New York convention, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html, 10 Mar 2011 6 Jeffery Chan Wah Teck, Liberalization of the Singapore Legal Sector 7 Tom Chou, The Singapore Law Review, Foreign law firms in Singapore will boost arbitration, http://www.singaporelawreview.org/2009/09/foreign-law-firms-in-singapore-will-boost-arbitration/, 9 Mar 2011

nuances of the interactions of laws and contracts across international boundaries - an invaluable asset for a country aiming at being an international arbitration hub. It is also worth noting that non-residents do not require work permits in order to file for arbitration proceedings in Singapore8. This works towards making the arbitration scene in Singapore less discriminatory of foreign parties seeking redress. Thus, all these factors constructively add up in paving the way for Singapore to be a leading arbitration hub in Asia.

Domestic factors
Singapores political stability and the clarity of its laws minimize the uncertainty and hence the risk of pursuing legal services in the country. Singapores laws are well-established and clearly defined. Singapore courts are also seen as arbitration-friendly and the legal community in the country has done much to establish themselves being part of the international community through participation in various arbitration conferences and symposiums held in Singapore. 9 The political stability of the country must also be emphasized as the enforceability of arbitration decisions relies heavily on governments which are committed to agree upon laws and international conventions. When a nation is politically unstable, there continually exists the question as to whether a regime change might bring about a change in commitment to the aforementioned agreements. Singapore also boasts impressive administrative efficiency in its handling of arbitration cases. The timely handling of arbitration cases is important because the decision may affect the availability of resources parties have available for other ventures; as a result, slow resolution of cases could deny businesses access to resources or funds which are in a state of limbo prior to a ruling. Furthermore, the longer the legal proceedings extend, the higher the legal costs - something no businesses would enjoy.

The competition
For this part of the report, we would like to briefly examine the competition Singapore faces in becoming an Asian arbitration hub since it raises two important issues:

SIAC, Arbitration in Singapore-What Singapore has to offer, http://www.siac.org.sg/cms/index.php?option=com_content&view=article&id=47&Itemid=65 9 Herbert Smith, Singapore arbitration update, http://www.herbertsmith.com/NR/rdonlyres/FD2EF5CE-897A4DA1-A5DB-775E978A07BC/17138/1111Sinarbupdate.html (9 Mar 2011).

areas in which different arbitration hubs can differ as well as direct challenges Singapore faces in its aims to being an arbitration hub. In particular we will look at Hong Kong which has the twin advantages of having been longer established than Singapore as a provider of legal services and being geographically and culturally closer to a large hinterland of businesses: China. The Hong Kong International Arbitration Center (HKIAC), like Singapore, has aims at being the regions arbitration hub. Their efforts in recent years have targeted countries in the United States in particular.10 However, HKIAC has a few disadvantages. According to HKIAC, many of the counsel and business people HKIAC spoke with are reluctant to use Hong Kong as an arbitration destination, expressing doubts that they would receive a fair trial and saying that the territory is too close to China.11 On the other hand, Singapores perceived neutrality due to being geographically disconnected from the Chinese region and the fact that arbitral proceedings are cheaper and more predictable in Singapore will attract customers to Singapore rather than Hong Kong, thus eliminating the competition.

Singapores aims of being an arbitration hub of the Asian region seem very promising. It has already enjoyed meteoric growth in the number of arbitration cases handled annually since it began to focus on providing legal services to international clients (SIAC handled 37 cases in 2000 and 114 in 2009)12. Possible areas of improvement however lie in branding; an important factor for arbitration centers given how heavily reputation features in a companys decision of an arbitration center. 13 Singapore has multiple arbitration institutions, the key one being the SIAC. By having multiple faces of the Singapore arbitration scene, Singapore risks diluting


Singapore challenges Hong Kong as an international arbitration hub, Asia Law, 9 Apr 2008 Asia Law, Singapore Challenging Hong Kong as an international arbitration hub , http://www.asialaw.com/Article/1970762/Channel/16680/Singapore-challenging-Hong-Kong-as-aninternational-arbitration-hub.html 12 SIAC, Statistics 2010, http://www.siac.org.sg/cms/index.php?option=com_content&view=article&id=204&Itemid=73, 13 Mar 2011 13 White & Case 2010 International Arbitration Survey: Choices in International Arbitration, Choices in the seat of arbitration, http://choices.whitecase.com/news/newsdetail.aspx?news=3787, 15 Mar 2011

its brand name and confusing potential clients. However ventures such as Maxwell Chambers may help counter this by creating a more effective face for Singapores arbitration identity. In considering Singapores actions towards arbitration, one cannot help but notice that the countrys actions are largely aimed at decreasing the risk and uncertainty of parties engaged in arbitration. Because arbitration is so closely tied with commercial dealings, it is unsurprising that like in business, the aims in creating a legal framework are to diminish the amount of uncertainty and risk as much as possible. Hence this paper ends on a positive note by saying that Singapore has chances of being the leading Arbitration hub in Asia.

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<http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html>. Chou, Tom. "Foreign Law Firms in Singapore Will Boost Arbitration." The Singapore Law Review. 18 Sept. 2009. Web. 9 Mar. 2011.

<http://www.singaporelawreview.org/2009/09/foreign-law-firms-in-singapore-will-boostarbitration/>. Savage, John. "SIAC Arbitration: Some Strong 2010 Numbers and an App." Legal News from the Asia Pacific Region. Kluwer Law International. Web. 15 Mar. 2011. <http://kluwer.practicesource.com/blog/2011/siac-arbitration-some-strong-2010-numbersand-an-app/>. "Singapore Arbitration Update." Herbert Smith. 10 Nov. 2010. Web. 9 Mar. 2011. <http://www.herbertsmith.com/NR/rdonlyres/FD2EF5CE-897A-4DA1-A5DB775E978A07BC/17138/1111Sinarbupdate.html>.

"Singapore Challenging Hong Kong as an International Arbitration Hub." Asialaw. Web. 13 Mar. 2011. <http://www.asialaw.com/Article/1970762/Channel/16680/Singaporechallenging-Hong-Kong-as-an-international-arbitration-hub.html>. "Guide to Arbitration in Hong Kong." Hong Kong International Arbitration Centre. Web. 13 Mar. 2011. <http://www.hkiac.org/show_content.php?article_id=103>. "Statistics- 2010 : Overview of Arbitration in SIAC." Singapore International Arbitration Centre. Web. 13 Mar. 2011.

<http://www.siac.org.sg/cms/index.php?option=com_content&view=article&id=204&Itemid =73>. "Choice of the Seat of Arbitration." 2010 International Arbitration Survey: Choices in International Arbitration. White & Case. Web. 15 Mar. 2011.