Singapore

Arbitration as a dispute resolution mechanism has gained acceptance in many Asian countries. Between 2000 and 2007, Asian arbitral institutions registered a general increase in the number of arbitration cases heard while, in some instances, sharp increases were registered (see Table 1). The increase in arbitration cases is likely to continue against a backdrop of increasing cross-border disputes as the world's economies face some of their most challenging times. This article discusses the recent developments in the arbitration landscape of Singapore and the continued pro-arbitration efforts made by the Singapore government and its judiciary.

Table 1: Number of International Cases Administered by Arbitral Institutions and Number of International Cases Received by the HKIAC.

Between 2000 and 2007, the Singapore International Arbitration Centre (SIAC) has seen its arbitration caseload increase by almost 50 per cent to a total of 86 cases (see Table 2). The number of arbitrations held in Singapore is in fact higher as ad hoc arbitrations are not included in the statistics in Table 2.

Table 2: All Cases Administered by the SIAC

The increase in arbitration cases in Singapore is no accident. Through the years, the Singapore government has taken a pro-active role in building Singapore's reputation as the premier arbitration venue in the region. In 2007, Singapore was able to attract international arbitration bodies such as the Permanent Court of Arbitration and the International Centre for Dispute Resolution to set up their regional headquarters in Singapore.

Features of international arbitration in Singapore include:

- independent, neutral third-country venue;
- international commercial arbitration modelled on the UNCITRAL Model Law;
- party to the 1958 New York Convention (on enforcement of arbitration awards);
- strong tradition of the rule of law;
- maximum judicial support of arbitration, minimum intervention;
- freedom of choice of counsel in arbitration proceedings;
- strong arbitration institution (the SIAC);
- competent arbitration professionals — lawyers, arbitrators and experts; and
- lower costs than many other major centres of arbitration.

Arbitration initiatives

In 2008, Singapore's Ministry of Law introduced two new measures to help Singapore thrive as an international arbitration hub.

Tax exemption

A tax exemption scheme has been introduced for law practices in Singapore. Law practices can now take advantage of this tax exemption on a portion of their arbitration income derived from international arbitration cases with hearings held in Singapore for a period of up to five years.

Waiver of work passes for entry into Singapore

The entry requirement for non-residents entering Singapore for arbitration and mediation work has been relaxed. From 1 February 2008, non-residents are no longer required to apply for work passes to carry out arbitration and mediation services in Singapore, instead such services can now be performed while holding a social visit pass, subject to a maximum of 60 days. However, the cases heard must not be religious, racial or political in nature. Social visit passes are granted on entry at Singapore's immigration points and do not require advance application. Once in Singapore, the applicant simply makes an e-notification using the online form available at www.enotifywpe.mom.gov.sg.

The wavier is applicable to the following persons entering Singapore for arbitration and mediation-related services:

- arbitrators;
- legal counsel; and
- other professional service providers involved in the proceedings, including translators and transcribers.

Integrated Dispute Resolution Complex

Some time in mid-2009, Singapore can expect to welcome a dedicated facility for arbitration in the form of the Integrated Dispute Resolution Complex (IDRC), which will house both the SIAC and the Permanent Court of Arbitration.

Key features of the IDRC include:

- hearing rooms that are custom designed for arbitrations;
- caucus rooms for break-out sessions;
- world-class telecommunications and teleconferencing equipment;
- secure document storage facilities;
- 24-hour facility; and
- concierge services for foreign users of hearing rooms.

A pro-arbitration judiciary

One of Singapore's strengths that has helped arbitrations thrive is the Singapore courts that adopt a policy of limited and cautious curial intervention, recognising that they should only play a supportive role in arbitrations. Some of more interesting cases involving arbitrations in Singapore are discussed below.

VV and Another v VW [2008] SGHC 11

This case marks the first time in Singapore that any party to an international arbitration has tried to set aside an award on costs under the International Arbitration Act.

VV and Another (VV) and VW entered into a contract pursuant to which VV was to plan, design and provide work supervision services for an infrastructure project in VW's country. The contract provided for disputes to be referred to arbitration. Subsequently, a dispute arose and VV referred the dispute to arbitration where it claimed against VW for US$927,000. VW raised two defences and 10 counterclaims amounting to US$20 million. The arbitrator dismissed VV's claim. The arbitrator ruled that he had no jurisdiction over the counterclaims because insofar as they constituted defences of equitable set-off, it was unnecessary to consider them since VV's claim had been dismissed and, insofar as they were independent claims, no jurisdiction had been conferred on him to decide them. The arbitrator ruled that VW was entitled to costs and ordered VV to pay VW US$2.25 million (the cost award) for legal fees, disbursements and witnesses' expenditures. VV sought to set aside the cost award on the grounds that: the cost award conflicts with public policy in Singapore as it offends the principles of proportionality; the arbitrator lacked jurisdiction to award costs in respect of VW's counterclaim since the arbitrator had declined to assert jurisdiction; and the arbitrator acted in breach of natural justice in awarding costs on a scale based on alleged international arbitration practice on which no evidence was given.

The application was dismissed. The High Court found that:

- the parties to an arbitration have contracted to settle disputes in a private litigation such that an award no matter how unreasonable could not ever be considered injurious to the public good or shocking to the conscience. As such, it is not part of the public policy of Singapore to ensure that costs incurred in an arbitration are to be assessed on the principle of proportionality;
- the arbitrator's jurisdiction to determine VV's claims included a jurisdiction to hear and determine VW's defence as well as the set-off claims. The arbitrator is not deprived of jurisdiction merely because of the failure of a claim; and
- there is no breach of natural justice because the arbitrator was not bound by domestic decisions on costs. Further, the arbitrator had communicated his views to the parties. Any mistake of the arbitrator in assessing the legal costs would be a mistake of fact and the cost award could not be set aside on that ground.

NCC International AB v Alliance Concrete Singapore Pte Ltd [2008] SGCA 5

NCC International AB (NCC) and Alliance Concrete Singapore Pte Ltd (Alliance) entered into a contract pursuant to which Alliance supplies ready-mixed concrete to NCC. A subsequent ban on the export of sand — one of the essential ingredients of ready-mixed concrete — imposed by the Indonesian government caused Alliance's supply of concrete to cease save for small quantities required to maintain structural integrity of the construction works. The Singapore government then intervened through the Building and Construction Authority (BCA) and the Singapore Contractors Association Ltd, by establishing a procedure for the distribution of sand from the Singapore government's stockpile. However, NCC and Alliance failed to agree on how to collect and pay for the sand distributed by the BCA. NCC took the position that Alliance should collect the sand and supply ready-mixed concrete to it at the fixed price stipulated in the contract. In contrast, Alliance took the position that NCC should arrange for delivery of the allocated sand to Alliance's batching site according to the BCA's procedure. NCC then applied to the High Court for an injunction compelling Alliance to deliver ready-mixed concrete under the terms of the contracts.

The High Court dismissed NCC's application on the basis that NCC had failed to show that it deserved the court's assistance in the issuance of the injunction. The judge took into account, inter alia, NCC's failure to follow the process of dispute resolution set out in the contract.

On appeal, the Court of Appeal affirmed the High Court's decision to refuse NCC's application for the injunction and dismissed the appeal. The Court of Appeal stated, inter alia, that:

- where the court had concurrent jurisdiction with the arbitral tribunal, it would only intervene to support arbitration, for instance, where third parties over whom the arbitral tribunal had jurisdiction were involved, where matters were very urgent, or where the court's coercive powers of enforcement were required; and
- NCC's conduct amounted to an abuse of process because it sought an injunction from the court despite having no genuine intention to commence arbitration.
- Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] SGHC 67
- Dongwoo Mann+Hummel Co Ltd (Dongwoo) and Mann+Hummel GmbH (M+H) were parties to various agreements, including a Technical Assistance and Trade Mark Licensing Agreement (TATLA). Pursuant to the TATLA, M+H was obliged to supply Dongwoo with certain technical information. Dongwoo experienced difficulties with M+H and eventually terminated the TATLA. M+H challenged the termination and referred the question of its validity to arbitration. The arbitral tribunal decided that Dongwoo had failed to establish that M+H had breached its obligations under the TATLA and found in favour of M+H.
- Dongwoo then commenced an action in the High Court to set aside the final arbitration award on, inter alia, the following grounds:
- that the principles of natural justice had been breached because the tribunal had failed to direct M+H to extend copies of certain confidential documents to Dongwoo; and
- that the tribunal had made an award contrary to public policy by:
- allowing M+H to flout the tribunal's directions in relation to discovery; and
- not drawing an adverse inference from M+H's refusal to disclose documents as directed.

The action was dismissed. The High Court found, inter alia, that there was no breach of the principles of natural justice because there was no connection between the alleged breach and the award made. The tribunal had properly concluded that there was no material breach of the TATLA because M+H had fulfilled its obligations based on all credible evidence disclosed to the tribunal. The court then held that a deliberate refusal to comply with a discovery order is not per se a contravention of public policy because the adversarial procedure in an arbitration allows the tribunal to impose the possible sanction of an adverse inference being drawn. Dongwoo had not demonstrated that upholding the award would be 'wholly offensive to the ordinary and reasonable fully informed member of the public'. As such, the court was not satisfied that upholding the award would be contrary to public policy.

Insigma Technology Co Ltd v Alstom Technology Ltd [2008] SGHC 134

Insigma Technology Co Ltd (Insigma) and Alstom Technology Ltd (Alstom) entered into a license agreement which provided, inter alia, at article 18© that disputes are first to be settled through friendly consultations, and:

In case no agreement can be reached through consultation: Any and all such disputes shall be finally resolved by arbitration before the Singapore International Arbitration Centre in accordance with the Rules of Arbitration of the International Chamber of Commerce then in effect.

Subsequently, a dispute arose between the parties regarding the calculation of annual royalties. Discussions were held to resolve the dispute but failed. Alstom then requested that the matter be resolved through arbitration before the International Chamber of Commerce (ICC). Insigma disputed the jurisdiction of any arbitral tribunal constituted by the ICC, arguing that the parties had intended for the SIAC to administer the arbitration under ICC Rules.

At the arbitration, the tribunal heard preliminary issues pertaining to its jurisdiction and decided that it had jurisdiction to hear the dispute. Insigma commenced an action before the High Court to set aside the tribunal's decision. Insigma argued, inter alia, that article 18© was not a valid arbitration agreement.

The action was dismissed. The High Court decided that the parties had bargained for an SIAC-administered arbitration on an ad-hoc basis which applies ICC Rules rather than an ICC institutional arbitration. The High Court states that there is 'in principle, no problem with one institution administering arbitration proceedings in accordance with another set of rules chosen by the parties'. The High Court went on to state that the administering or supervising authority and the procedural rules adopted for the arbitration do not have to be of the same institution so long as the choices made do not result in significant inconsistency.

***

As the economic crisis of 2008 unfolds, there will no doubt be immense economic uncertainties across Asia, many of which will result in disputes resolved by arbitration in Singapore as a key arbitration centre in the Asian region.