INTERNATIONAL ARBITRATION (AMENDMENT) BILL

Order for Second Reading read.

The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

This Bill amends the International Arbitration Act to make it clear that parties to an arbitration in Singapore are free to adopt the arbitration rules of their choice to govern their arbitration, and that their choice of arbitration rules will be respected by Singapore law and be given the fullest effect possible. Examples of arbitration rules are the UNCITRAL Rules, SIAC Rules, ICC Rules and LCIA Rules.

This Bill's clarification will reaffirm Singapore's position as an attractive venue for arbitration in the region. It also reaffirms Government's intention to do whatever is necessary to create conducive conditions for the conduct of international arbitrations in Singapore.

The International Arbitration Act was passed in 1995 to adopt the UNCITRAL Model Law on International Commercial Arbitration as part of Singapore's domestic law. The UNCITRAL Model Law is not a set of arbitration rules. It is intended to be the applicable arbitration law or, in lawyers' parlance - the curial law or lex arbitri. Like all arbitration laws, the UNCITRAL Model Law does not contain a comprehensive set of procedural rules, but merely sets out a basic procedural framework. The expectation is that parties will supplement this basic procedural framework with arbitration rules of their choice. Parties are also free to choose their own alternative arrangements in most procedural matters. Indeed, one of the key pillars of the UNCITRAL Model Law is the protection of party autonomy.

In other words, parties to a Singapore arbitration are free to adopt whatever set of arbitration rules they wish. The Model Law is specifically drafted to ensure that parties' wishes are given the fullest effect possible. Sir, this has been the legal position since this House adopted the Model Law as part of Singapore law in 1995, and has always remained so. And this is how both the international and local arbitration communities have always understood the legal position to be.

However, some uncertainty has arisen as a result of a Singapore High Court case, Dermajaya Properties v Premium Properties, which was decided earlier this year. The correctness of the actual decision in this case is not in dispute. What has caused concern in some quarters was a comment made by the judge in the course of delivering his judgment. He commented that, if parties adopt a set of arbitration rules which contains procedures which are different from those contemplated by the Model Law, then those arbitration rules would be regarded as incompatible with the Model Law and would therefore be entirely excluded. This comment was strictly not necessary in arriving at the actual decision in the case, and therefore did not have the effect of changing the law on the applicability of arbitration rules.

Nevertheless, my Ministry has received feedback that lawyers in some international law firms had advised their clients that, as a result of the Dermajaya case, the legal position in Singapore is now uncertain. I understand that some of these lawyers have also advised their clients to avoid Singapore as a venue for arbitration.

The Government has therefore decided to set out the legal position in no uncertain terms. The Bill does this by adding a new section 15A to the International Arbitration Act. The first subsection of the new section 15A declares, for the avoidance of doubt, that arbitration rules adopted by parties shall apply and must be given effect to the extent that they are not inconsistent with a mandatory provision of the Act or the Model Law. A mandatory provision is one whereby the Act or Model Law does not permit the parties to derogate from or vary. This therefore reinforces the principle of party autonomy, and makes it clear beyond doubt that no set of arbitration rules ought ever to be regarded as incompatible with the Act or the Model Law.

The remaining subsections seek to flesh out the concept of inconsistency, by referring to a number of scenarios where there could be doubts as to whether any inconsistency exists. For example, it is clarified in the Bill that there is no inconsistency if the rules provide for something on which the Act or the Model Law is silent or if the Act or the Model Law provides for something on which the rules are silent. There is also no inconsistency if the rules provide for something which is already covered by a non-mandatory provision of the Act or the Model Law.

To summarise, the general approach is that arbitration rules adopted by the parties will be given full effect. Where there is a conflict between the arbitration rules and the Act or the Model Law, the rules will prevail unless the conflict is with a mandatory provision of the Act or the Model Law. Hence, in effect, with this narrow exception, parties to a Singapore arbitration will have the full freedom to adopt arbitration rules of their choice. This is another move which will further establish Singapore's position as one of the most conducive places for international arbitration in the region. Other measures we have already introduced include allowing foreign counsel to participate in arbitrations conducted in Singapore, streamlining immigration procedures for foreign arbitrators and abolishing withholding tax for foreign arbitrators. Recently, the SIAC announced that it would lower the fees charged for its services, expand its panel of arbitrators and extend the scope of SIAC arbitrations. In short, Sir, we will do more to promote Singapore as a preferred venue for international arbitrations.

Sir, I beg to move.

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. - [Assoc. Prof. Ho Peng Kee].

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