SINGAPORE: An Introduction to Dispute Resolution: Arbitration: The Elite
INTERNATIONAL ARBITRATION IN SINGAPORE
This article summarises a number of key developments in 2022 in international arbitration in Singapore.
Case law
In 2022 the Singapore Courts handed down a number of significant decisions in relation to international arbitration. A few of these decisions and their impact on users of international arbitration are summarised below.
In CVG v CVH [2022] SGHC 249, Chua Lee Ming J held that emergency interim awards made by emergency arbitrators in arbitrations seated outside Singapore may be enforced in Singapore under the International Arbitration Act. This judgment settles an issue under Singapore law that has been the subject of debate in numerous jurisdictions. It brings Singapore in line with the position in several major jurisdictions, including India where the Indian Supreme Court recently enforced a Singapore emergency arbitrator’s award in the well-reported dispute between Future and Amazon.
In a decision that will be of interest to investor-state arbitration users, S Mohan J held in CNX v CNY [2022] SGHC 53 that under section 14(2) of Singapore’s State Immunity Act, where a state has been served by a claimant with an order of the Singapore Court granting it leave to enforce an arbitral award, the state has two months in addition to any time period that may be stipulated in the order of court to apply to set that order aside. Claimants seeking to enforce arbitral awards obtained against states in Singapore should bear the extended time limit in mind when considering their enforcement strategy.
In Shanghai Xinan Screenwall Building & Decoration Co Ltd [2022] SGHC 58, Philip Jeyaretnam J dealt with the enforceability of an arbitration clause that provided that disputes under the relevant contract shall be submitted to the “China International Arbitration Center” for arbitration. No such entity exists. The plaintiff commenced arbitration before the CIETAC and obtained an award. In resisting enforcement, the defendant argued among other things that the arbitration agreement was invalid. Jeyaretnam J disagreed. Having examined the facts and the background and context to the arbitration clause, Jeyaretnam J held that the parties’ objective intention was not to choose an arbitral institution that did not exist but to submit their disputes to arbitration administered by an existing arbitral institution. Jeyaretnam J held that the parties had in fact intended to choose CIETAC but that had not been accurately reflected in the arbitration clause. This case affirms that the court will strive to give effect to the parties’ intentions to arbitrate where those intentions are clear even in the face of drafting errors in the arbitration clause.
The Singapore Court of Appeal has also re-emphasised the critical role that pleadings play in international arbitration. In Phoenixfin Pte Ltd and others v Convexity Ltd [2022] SGCA 17, the appellants applied to the tribunal during the arbitration to amend their pleadings to add a new issue (whether certain clauses were penalty clauses). That application was dismissed. After the hearing, the tribunal took the view that the penalty issue was in play and directed over the respondent’s objections that the parties file further written submissions and permitted further cross-examination on that issue. The tribunal subsequently found in the respondent’s favour on the penalty issue and the respondent applied to set the award aside.
The Court of Appeal set aside the findings on the penalty issue for excess of jurisdiction and breach of natural justice. The Court of Appeal noted that where a new issue sought to be raised is factual or a mixed issue of fact and law, pleadings must be amended to introduce it to enable parties not only to submit on the law but also to question the evidence produced in support of the issue as well as have the chance to themselves introduce relevant rebuttal evidence.
This decision reinforces the important role pleadings play in international arbitration. Care should be taken to ensure they are clear and comprehensive. Where a party wishes to introduce an issue, it should also carefully consider whether it has been pleaded. If it has not, it may wish to err on the side of caution and put in an amendment application.
Legislative and institutional developments
On 1 January 2022 the 4th Edition of the SCMA’s Arbitration Rules (“SCMA Rules 2022”) came into operation. The SCMA Rules 2022 restructure and significantly overhaul the previous edition of the SCMA Rules (ie, the SCMA Rules 2015). Key changes include:
(a) Changes aimed at addressing the abuse by parties of changes to their representatives as a delay tactic. Rule 4.4 of the SCMA Rules 2022 provides that any change by a party to its authorised representatives after the tribunal has been constituted shall be subject to the tribunal’s approval, and that approval may only be withheld if the tribunal is satisfied that there is a substantial risk that such change might prejudice the conduct of the proceedings or the enforceability of any Award. The SCMA Rules 2015 contained no such equivalent;
(b) The introduction of Rule 8.4(c) of the SCMA Rules 2022, which had no equivalent under the SCMA Rules 2015. Under Rule 8.4(c), upon their appointment, the two party-nominated arbitrators shall constitute the tribunal for the time being and may at any time thereafter appoint a third arbitrator so long as that is done before any substantive hearing or without delay if they cannot agree on any matter relating to the arbitration. These amendments codify existing practice in the maritime industry; and
(c) Changes to the expedited procedure. Under Rule 44 of the SCMA Rules 2022 the expedited procedure now applies to any dispute where the aggregate amount of all claims and counterclaims is no more than USD300,000. This is an increase from the limit of USD150,000 for the small claims procedure under the SCMA Rules 2015, and it broadens the scope of disputes that can be resolved under more quickly and expeditiously under the compressed timelines provided by the expedited procedure.
On 4 May 2022 the Legal Profession (Conditional Fee Agreement) Regulations 2022 (“CFA Regulations”) came into operation. The CFA Regulations provide that Singapore lawyers may enter into conditional fee agreements (“CFA”) in relation to arbitration proceedings whether in Singapore or abroad, and to certain arbitration-related proceedings before the Singapore Courts.
CFAs provide clients and lawyers with an alternative to the more traditional arrangements of billing on time costs or fixed or capped fees. Under a CFA, clients may agree with their lawyers that part or all of the lawyers’ fees, including uplift fees, may be conditioned on the outcome of the arbitration. CFAs may in the appropriate case be used to help clients manage the strain on their cash flow that the arbitration process may cause or to help clients who may otherwise have difficulty pursuing legitimate claims in arbitration to do so.
CFAs are to be distinguished from contingency fees, ie, where lawyers’ fees are calculated based on a percentage or proportion of the damages award obtained. Contingency fees remain prohibited in Singapore.
The introduction of CFAs in Singapore is a recent development. It remains to be seen how the Singapore legal market will react to these new options and how frequently they will be taken up.