International Arbitration (Amendment) Bill

5.43 pm

Order for Second Reading read.

The Minister for Law (Mr K Shanmugam): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The Government began developing Singapore as a hub for international arbitration in the mid-2000s. We have come a long way. The Singapore International Arbitration Centre's ("SIAC") total caseload stood at 188 last year. I have asked for a distribution of an Annex which sets out how our arbitration sector has developed and some data on the caseload [ A handout (Pg 102-106) was distributed to Members ]. It will be treated as part of my speech.

The data does not include arbitrations administered by other institutions and ad hoc arbitrations.

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I think, by most international reckonings, our position as the leading centre for arbitration in Asia is now cemented. An Asian Legal Business article in December 2011 called Singapore's rise in the world of arbitration as "meteoric". Singapore has become the leading Asian seat for international arbitrations.

Today's Bill seeks to make further refinements to laws governing arbitration. We have consulted many people, both in Singapore and overseas, with whom we work closely. I thank all who have contributed.

There are four main amendments. One, broadening the definition of what an arbitration agreement is; two, providing recourse against negative jurisdictional rulings by an arbitral tribunal; three, clarifying the tribunal's power to award interest; and, four, recognising emergency arbitrators and interim orders.

First, on the definition of what is an arbitration agreement. Clause 2(b) deletes the existing definition of an arbitration agreement in section 2. Clause 3 inserts a new section 2A, containing a broader definition of an arbitration agreement. The new section 2A incorporates Option I of Article 7 of the 2006 Amendments to the 1985 UNCITRAL Model Law on International Commercial Arbitration.

Under the new definition, an arbitration agreement which is concluded orally, or by conduct, or through any other means, if its content is recorded in any form, it will be recognised as an arbitration agreement within the context of the International Arbitration Act. In our consultation last year, a majority of arbitrators and practitioners were of the view that the broadened definition should be adopted.

Second, recourse against negative jurisdictional rulings by an arbitral tribunal. Clause 4 repeals and re-enacts section 10 to provide recourse against negative jurisdictional rulings by an arbitral tribunal. Such a ruling is one where the tribunal holds that it does not have the jurisdiction to hear a dispute. The Act currently follows the Model Law in not providing any recourse against such negative jurisdictional rulings. The absence of recourse against such rulings may defeat the parties' intention to arbitrate.

Academics and practitioners have called for reform in this area. In particular, the Singapore Academy of Law's Law Reform Committee had recommended that the review of negative jurisdictional rulings be allowed. That was in its January 2011 Report on the Right to Judicial Review of Negative Jurisdictional Rulings.

Such a ruling made at any stage of the arbitral proceedings can now be appealed to the High Court, and appealed further to the Court of Appeal, if the High Court grants leave to appeal. The Bill will also allow the tribunal and the court to award costs against any party for the arbitral and/or court proceedings, when it rules that the tribunal has no jurisdiction.

Third, clause 9 amends section 20 to clarify the power of arbitral tribunals to award interest. Subject to the arbitral agreement, the tribunal will be able to award simple or compound interest, on sums claimed or costs awarded in the arbitration, from such a date, at such rate and with such rest as it sees fit. In other words, full discretion will be given to the arbitral tribunal to award interest.

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Fourth, clause 2(a) amends the definition of an arbitral tribunal in section 2(1) to include emergency arbitrators. Emergency arbitrators provide urgent interim relief to parties before the arbitral tribunal is constituted. They are a fairly recent innovation in international arbitration. The SIAC was one of the first in the world to introduce them. Other arbitral institutions have now followed suit.

With the amendments, there will be clear legislative support for emergency arbitrators. They will be able to exercise the full range of powers available to the tribunal under the Act. Their awards will be enforceable in our courts in the same way as awards by any other tribunal.

In addition, clause 10 amends the definition of foreign arbitration awards in section 27(1). The amended definition will encompass interim measures made by an arbitral tribunal, such as orders for the preservation of property. Such interim measures will now be enforceable in our courts.

Clause 11 makes similar amendments, where relevant, to the Arbitration Act. The remaining clauses make miscellaneous, consequential and other minor amendments.

In conclusion, Sir, may I mention that the Bill comes before this House at a significant moment. In June this year, Singapore will host the 21st Congress of the International Council for Commercial Arbitration (ICCA). That is a significant global arbitral meeting. It is the first time since 2004 that the ICCA is meeting in Asia. It emphasises Singapore's growing status as a hub for international arbitration. The passage of this Bill will signal to the international arbitration community our continued commitment to providing the fullest legislative support for international arbitration. Sir, I beg to move.

Question proposed.

5.50 pm

Mr Patrick Tay Teck Guan (Nee Soon): Mr Speaker, Sir, I declare my interest as a member of the Singapore Institute of Arbitrators. Sir, I rise in support of the Bill that will help to further enhance Singapore's status as an international arbitration hub. The Bill demonstrates our commitment to developing Singapore as an arbitration hub through constantly improving the legislative framework for the conduct of international arbitration in Singapore. It is a very competitive arena, and to secure our position as the leading hub in Asia, we have to work constantly to make improvements to the overall environment. I am confident that the amendments will encourage more international businesses to adopt arbitration as an expedient alternative dispute resolution platform with Singapore as a preferred site.

I would now like to enunciate further on the amendments and how I see them. For a start, the relaxation of the writing requirement acknowledges commercial realities and practicalities, as it may not always be feasible to make an arbitration agreement in writing. This is a step forward.

The critical importance in the enhancement of the arbitration framework to strengthen Singapore's status as a commercial hub in Southeast Asia cannot be understated. For Singapore to continue to grow and prosper as a nation and maintain our attractiveness to foreign investors, not only do we need the best infrastructure and people, our legal framework must also keep up with the times. The new provision for an appointment of an emergency arbitrator is a fine example of this strategic development.

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In a fast-moving business environment, emergency arbitration provides for the swift resolution of arbitration cases where timeliness is tied to the product nature. The amendments to the law will provide the legal recognition and alignment to what has already been practised by the international arbitral institutions, including Singapore International Arbitration Centre (SIAC). In recognition of the emergency arbitrator, I am glad that the Bill has decided to take a pioneering approach. In fact, we are doubly a pioneer in this area – the SIAC was one of the first arbitral institutions to introduce the emergency arbitrator, and we are now the first jurisdiction in the world to provide explicit legislative support for such a scheme. The legislative recognition of the emergency arbitrator is complemented by the recognition of interim conservatory orders made by foreign arbitral tribunals. These proposed legislative amendments would further widen the range of options available to parties who require interim relief in aid of arbitrations.

The last time the International Arbitration Act was amended, the court was granted the power under section 12A to make certain interim conservatory orders in support of arbitrations. With the passage of the Bill, a party involved in an arbitration conducted in Singapore who requires such relief now has the additional option of applying to an emergency arbitrator who would be able to exercise the full range of powers available to arbitral tribunals, and the proposed amendment to section 2 would ensure that such orders would be enforceable by the Singapore courts. I believe that this amendment gives greater flexibility to parties and enhances the attractiveness of Singapore as a forum for arbitration.

On allowing the review of negative jurisdictional rulings by arbitral tribunals, it is an important step in giving our Singapore courts a greater power in making judgements that are "non-interventionist" and to enable the arbitration process to achieve its intended outcomes – which is a swift and speedy resolution of disputes.

Contrary to the thinking that this may be in conflict with the United Nations Commission on International Trade Law (UNCITRAL) Model Law in relation to international arbitrations, a "non-interventionist" approach should not be equated with a totally inactive one. Taking a step back to understand the relevance of the review mechanism, we currently have a good number of fully administered arbitrations of which many are foreign entities. As the Minister has mentioned earlier, in 2010, we have a total of 265 cases; in 2011, 235 cases, all from more than 40 countries. In many of the arbitral agreements, Singapore is cited in the clauses as a venue for the enforcement of awards. If there is a lack of clarity and understanding from our judicial system on the execution of international commercial arbitration, this would not bode well for us as an arbitration hub. I am glad to note that the amendments will therefore help to close the loop on this.

On the last point in expanding the powers of the tribunal to provide post-award interest, this is an indication of the further empowerment that our local laws are allowing tribunals like SIAC to expand its rights to exercise the judgement. Therefore, not only have we achieved economy and efficiency in the arbitration process, we are also now able to tag a time value to its effectiveness as a compensation mechanism.

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On the whole, I would like to welcome the Bill which will make Singapore an even more competitive and efficient focal point for arbitration. I am also glad to hear that today's amendments are made as a result of close consultations with industry experts, academics and other stakeholders. I opine that the Government must be seen as willing and able to work closely with stakeholders to rapidly put in place policies to meet the changing needs of the commercial world, whether in arbitration or in any other area. This is imperative to Singapore's strive for competitive advantage and success. With that, Sir, I support the Bill.

5.56 pm

Mr Pritam Singh (Aljunied): Mr Speaker, before I begin, I wish to declare that I am a practice trainee in an International Arbitration department of a local firm. Sir, the changes proposed to the International Arbitration Act by this Bill are likely to buttress Singapore's position as an international arbitration hub. Specifically, the amendment of the International Arbitration Act to accommodate aspects of the 2006 amendments to the Model Law, which has moved away from the requirement that an arbitration agreement must be in writing – as proposed in the First Schedule of the Bill – is one helpful indicator to the market that Singapore intends to keep its arbitration regime in line with the arbitral norms around the world. The careful and calibrated inclusion of certain aspects of the 2006 Model Law amendments to our international arbitration regime bodes well in Singapore's drive to maintain its premier Asian arbitration hub status.

A second amendment, the judicial review of negative jurisdictional rulings, has provoked a little more uncertainty among some segments of the arbitration community, especially since it opens the curial prospect of reversing an arbitral tribunal's ruling that it has no jurisdiction to hear a dispute. In this regard, Singapore is moving ahead even though there is no international consensus with regard to erroneous negative jurisdictional rulings by an arbitral tribunal. However, allowing the judicial review of negative jurisdictional rulings is persuasive for a variety of reasons, many of which were laid out in paragraph 12 of the Report of the "Law Reform Committee on the Right to Judicial Review of Negative Jurisdictional Rulings" published, as the Minister stated, in January 2011.

In this regard, the Law Ministry's willingness to move ahead of the Model Law when the situation deems it appropriate also speaks well for the continued and organic development of the international arbitration space in Singapore, and it should also continue to attract the confidence of the international legal community. I also note the Ministry's willingness to adopt provisions from other jurisdictions, specifically the tribunal's powers to award interest, with section 20 of the Bill based on section 79 of the Hong Kong Arbitration Ordinance 2010 which came into force last year.

To conclude, Mr Speaker, I note in the public consultation brief for this Bill that the Ministry is assessing and requesting for additional inputs on the waiver of a right to set aside an award and even third-party funding. This commitment to constant review and revision of our arbitral laws is likely to have a positive effect on the development of international arbitration in Singapore in the years to come. And these amendments are timely as we are already seeing other seats of arbitration in the region slowly but surely stepping up their efforts to attract international parties and clients to their shores. Mr Speaker, with that, I support the amendments proposed.

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Mrs Lina Chiam: Sir, can I read the two Bills together as the second Bill is rather short?

Mr Speaker: No. Mrs Chiam, you have to deal with one Bill at a time.

5.59 pm

Mrs Lina Chiam: Okay. Mr Speaker, Sir, this Bill has the support of the majority of arbitration practitioners and stakeholders in the industry, as the public consultation on this Bill has shown. These amendments are seen by them as important steps in Singapore's development as a cosmopolitan arbitration jurisdiction.

I wish to raise the issue of the Emergency Arbitrator Procedure for our discussion here. The provision in this Amendment Bill for legal recognition and support to the status and orders of emergency arbitrators is not addressed in the UNCITRAL Model Law. Neither has such legislation been made in many notable jurisdictions.

I understand the "pro-arbitration" thrust of this Bill, and I support what the majority of its practitioners in Singapore are in favour of. However, there is not yet international consensus on the concept and status of an emergency arbitrator in the arbitration firmament.

Also, emergency arbitrator proceedings may be unnecessarily protracted if parties are allowed to appeal to the High Court against the ruling of an emergency arbitrator. Thorny questions may potentially arise from these situations. Would the Minister explain how these questions and issues can be resolved?

6.01 pm

Mr Hri Kumar Nair (Bishan-Toa Payoh): Mr Speaker, Sir, I support the Bill and let me declare my interest as a lawyer and an arbitration practitioner. We have succeeded beyond most expectations to become a global arbitration player, the paper just distributed by the Minister makes this clear. For a small and young country like ours, this is a remarkable achievement.

Arbitration has firmly established itself as the method of choice of most large and multinational companies to resolve disputes. And they will naturally choose to arbitrate in a jurisdiction which has the political and legal infrastructure to facilitate a fair, timely and cost effective resolution of proceedings. This is where Singapore has succeeded in providing a real value proposition to the world. Prof Michael Pryles, Chairman of the Singapore International Arbitration Centre (SIAC), noted that Singapore is seen as a neutral venue for the holding of international commercial arbitration which is in a geographically convenient location and is supported by a physical, legal and political infrastructure that is sophisticated, skilled and of high integrity.

But competition is increasing, and other countries are eager to establish themselves as centres for arbitration themselves. In order to stay ahead, we need to provide a proper legislative framework to support and facilitate arbitration and our laws must reflect the best practices in the industry. The proposed amendments align Singapore law with the needs of the industry and are therefore a welcome improvement.

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I just have one issue which I hope the Minister could clarify. The amendments propose that an arbitration agreement will be considered to be in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means. This is line with the UNCITRAL Model Law on International Commercial Arbitration.

However, what exactly are the requirements for the agreement to be "recorded in any form"? Would it suffice for one party to the oral agreement to record the arbitration agreement without confirmation from the other party? What happens if the parties both record terms which are inconsistent?

Should there be a disagreement as to the existence or content of the arbitration agreement, parties could be forced to resolve this preliminary issue before they can even engage on the substance of the claim? This would result in uncertainty and higher costs. Further, some parties may try to delay court proceedings by contriving allegations that the parties had agreed to arbitrate. If the party appeals an unfavourable decision, the delay could take months. How does the Ministry propose to ensure that these disputes are resolved quickly?

Another problem, as noted by the editors of Redfern and Hunter on International Arbitration, is that an arbitration agreement that is regarded as valid by an arbitral tribunal or court in one country may not be so regarded by the courts of the country where the award falls to be enforced. By way of example, the Norwegian Court of Appeal refused recognition of an award rendered in London because an exchange of emails did not, in its view, satisfy the writing requirement under Article II(2) of the New York Convention. Although such an electronic exchange was sufficient to establish the existence of an arbitration agreement as a matter of the law of the place of arbitration, the court held that the validity of the arbitration agreement was to be separately assessed by the law of the enforcement court.

In the circumstances, it would be helpful if some clarity can be given on the phrase "recorded in any form", as any uncertainty may diminish our attractiveness as an arbitration centre. With that, I support the Bill.

6.05 pm

Mr K Shanmugam: Sir, before I start my substantive response, I could not quite follow Mrs Chiam's point. I thought she said that she supported and welcomed the amendments, including the emergency arbitrator procedures, but was not quite sure how thorny questions may be addressed. Could I get some clarity on what sort of thorny questions Mrs Chiam is thinking of and whether she is in principle supportive of the amendments given that she also recognises that the vast majority of local arbitration practitioners as well as international people whom we have consulted, support it? I would like some clarity on what sort of thorny questions she is thinking of.

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Mrs Lina Chiam: I am not very sure of these thorny questions. So, that is why I wanted to ask the Minister about it.

Mr K Shanmugam: It is a little bit difficult to answer when I am asked about thorny questions when the Member is not able to explain. Perhaps, she might want to do it by way of a written question.

Mrs Lina Chiam: I would write a written question on that.

Mr K Shanmugam: Because you are assuming there are thorny questions. In law, there could be a range of circumstances taking place over many years and we cannot be dealing with those sorts of hypotheses. We may have been the first, in terms of the SIAC, setting up this process, but we are not the only ones. I am not sure if the Member is aware that the International Centre for Dispute Resolution, the Stockholm Chamber of Commerce as well as the Dutch Arbitration Institute have similar procedures for the appointment of emergency arbitrators. We have had emergency arbitrators appointed since we started the process. We have not come across any particular difficulties. So, I take it that the Member does not have any specific points in mind and would clarify at some point in time in future.

Mrs Lina Chiam: I will do that, Minister.

Mr K Shanmugam: I thank all the Members who spoke for supporting the Bill and for the recognition of the Government's efforts to develop the arbitration sector.

Mr Kumar has asked for some clarifications on the new section 2A which relaxes the requirement for an arbitration agreement to be in writing.

First, what does section 2A(4) mean when it provides that an arbitration agreement is in writing, if its content is recorded in any form? The general intention is that an arbitration agreement can be entered into in any form, including orally, if there is some record of the content of the agreement which can subsequently be referred to. Section 2A(5) goes on to provide that electronic communications satisfy that requirement of record if they can be accessed for subsequent reference. The definition of "electronic communication" in section 2A(10) encompasses emails.

So, does the record made by one party suffice? The answer is "yes". This is the answer we give. At the end of the day, the courts have to decide. Our legislative intention is that, yes, a record by one party would suffice. Section 2A does not require that the record of the arbitration agreement to be confirmed by all parties. Of course, there could be disputes as to the authenticity of the record if the record is made only by one party or if inconsistent records by different parties are produced. Those disputes would have to be resolved by the courts or by the tribunal in the same manner that disputes on authenticity of written arbitration agreements are resolved, or, for that matter, any other dispute, on facts, are resolved.

Legislatively, the question is whether the possibility of such disputes arising should preclude us from recognising unilateral records. The answer must balance the competing needs of certainty as opposed to flexibility, and that is, of course, a challenge that both legislation and the courts deal with in commercial law. In this case, the loosening of the writing requirement has been recommended by UNCITRAL. When we held consultations on the Bill, the feedback was also in support of relaxing the writing requirement.

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Mr Kumar has also raised the issue of enforceability. This issue arises whenever awards are made in one country and enforced in another country. In international arbitration, enforceability is governed by the New York Convention. Under that Convention, each country has some, albeit limited, discretion in deciding whether or not to recognise and enforce an award. Some countries take a stricter approach than others; Mr Kumar gave an example. Two points are, however, of note. UNCITRAL's commentary to Article 7 emphasises that its approach is intended to preserve the enforceability of awards under the New York Convention. A second important point is that many mainstream countries have adopted similarly pragmatic approaches to the writing requirement. Jurisdictions such as Hong Kong, Australia have like us, adopted Option I of Article 7 in the 2006 Amendments to the Model Law. UK similarly recognises arbitration agreements which are evidenced in writing. France does not even require arbitration agreements to be in writing. Thus, while it is not feasible to renegotiate the New York Convention to make this enforcement issue absolutely clear, we are moving in a direction that is recognised in other jurisdictions.

Mr Patrick Tay mentioned the recognition of foreign interim arbitral awards. I would take the opportunity to expand a little more fully on this amendment. Members who follow developments in the arbitration world will know we consulted on the 2006 Model Law's interim measures − Articles 17A to 17J. Industry opinion was on balance against the adoption of those Articles. At the same time, it was also recognised that some interim measures ordered by foreign arbitral tribunals ought to be enforceable. This Bill reflects an approach that takes these two considerations into account. Tweaking the definition of award in Part III of the Act achieves three things. It allows the same range of measures that the court may order under section 12A in aid of foreign arbitration. Two, it is enforced with the leave of court as with other local interim arbitral orders, but with the added protection of the grounds for refusing enforcement set out by the New York Convention.

Sir, as regards to Mr Pritam Singh's points, I think he is generally in support of the Bill. One small qualification. I think he said that he welcomes the fact that we have moved away from the requirement that arbitration agreement should be in writing. We are not moving away completely. We are loosening it. There is still a requirement that it be in writing, but any written record, as defined in the Act, would be accepted.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [ Mr K Shanmugam ].

Bill considered in Committee; reported without amendment; read a Third time and passed.