Second Reading Speech by Second Minister for Law, Mr Edwin Tong, on the International Arbitration (Amendment) Bill

05 Oct 2020 Posted in Parliamentary speeches and responses

Mr Speaker, I beg to move, ‘That the Bill be now read a second time’.

Introduction

2. Over the years, the Government has made significant efforts to strengthen Singapore’s position as a premier international legal services and dispute resolution hub. We have capitalised on our geographical position and our strong adherence to the rule of law to grow these services.

3. In international arbitration:

a. We have a comprehensive legal infrastructure that supports, and at the same time, intensively promotes arbitration alongside a robust and effective legal system.
b. We have enhanced our laws, to constantly improve our system, and to best meet the needs of the end user.
c. We have a first-class judiciary that is supportive of arbitration as a dispute resolution mechanism.

And these are amongst the main reasons why Singapore is the most preferred seat of arbitration in the world today.

4. We have come far, in the last 25 years, since the Singapore International Arbitration Centre (SIAC) was set up.

5. Today, Singapore is a popular seat for arbitration, and also recognised as the third most preferred in international arbitration in the world. It is also the third most preferred arbitral institution - the SIAC - globally. In 2019, the SIAC saw a new high of 479 case filings. This is the third consecutive year that SIAC’s caseload has exceeded 400, and we will aim to do even better in the coming years.

6. This growth has only been possible with the close partnership between the Government and the entire legal fraternity. We share a common understanding about the value of alternative dispute resolution to Singapore’s position as a legal services hub.

7. At the same time, the arbitration landscape is constantly evolving. We must be ever-alert to changing needs, and continue to improve Singapore’s value propositions as a hub for international commercial arbitration.

8. With the uncertainties facing the global economy, it is now even more important that we regularly review and enhance our legislation, so as to continue to build on our reputation for being a trusted and neutral jurisdiction, under-girded by a strong rule of law, and a legal framework that is responsive and remains relevant to the users’ evolving needs.

9. This Bill, Mr Speaker, is moved in that spirit.

10. In 2019, the Ministry of Law conducted a broad public consultation on a number of proposals to improve and to enhance, and to consider for amendment of the International Arbitration Act. These proposals were aimed at enhancing our offerings in the international arbitration arena. They included:
    a. The introduction of a default mode of appointment of arbitrators in multi-party situations;
    b. Recognising that an arbitral tribunal and the High Court ought to have powers to enforce obligations of confidentiality;
    c. Allowing a party to the arbitral proceedings to appeal to the High Court on a question of law arising out of an award, provided that parties have agreed to opt into this mechanism; and
    d. Allowing parties to agree to waive or limit the annulment grounds under the Model Law or the IAA;

These are amongst the several proposals that were considered in the consultation in 2019.

11. We consulted widely, and received feedback from arbitral institutions, from professional bodies, from practitioners, from academics, from multi-national companies who are themselves users of arbitration in the international arena, and key industry experts, both local and foreign.

12. We have studied the feedback and the views very carefully. We have received a broad range of views, because this really represents the end user and the market. We received views on whether to implement them, and if so, how these changes ought to be implemented. After extensive consultation with stakeholders, we have decided to proceed with two of the proposals first.

13. This Bill therefore introduces two amendments:

a. First, it sets out a default mechanism for the appointment of arbitrators in multiparty situations; and
b. Second, it recognises that the tribunal and the High Court have the power to enforce confidentiality obligations in an arbitration.

The rest of the proposals which were considered in the public consultation, are still being studied and evaluated by my Ministry.

14. And I wish to thank, and place on record our gratitude, to all those who have contributed their views, their time, and suggestions. They’ve been very welcome and most helpful in shaping our views. I would like to emphasise that the Government remains committed to working with our stakeholders, to strengthen the international arbitration regime, so as to ensure that our regime remains attractive and continues to serve the needs of international businesses.

15. Sir, let me now take Members briefly through each of the amendments.

Default Mode of Appointment of Arbitrators in Multi-Party Situations

16. At present, the IAA provides a procedure for default appointment of arbitrators only where –

a. There are only two parties to a dispute; and

b. Where these parties have:

i. adopted an ad hoc arbitration instead of institutional arbitration, or
ii. have chosen not to apply institutional arbitration rules.

17. There is currently no similar procedure in the IAA or in the UNCITRAL Model Law on International Commercial Arbitration, for arbitrations where the dispute involves more than two parties.

18. As Members know, today, as transactions become more complex, disputes become more complex, multi-party arbitrations have been a growing trend. It is no longer often that we see a case where there is a single claimant with a single respondent. The increasingly complex and diverse nature of contracts means that more often than not, these disputes will be multi-party in nature.

19. Where there are multiple parties, they may not be able to collectively agree on an arbitrator. Indeed, it is sometimes not in their interest to do so. A group of Claimants will probably find it easier to be aligned, but in some multi-party cases, the interests of the disputing parties are not necessarily aligned neatly into two opposing sides. Very often, they are not. As a result, it is not easy for these two groups of parties to agree on who they wish to nominate as their respective arbitrator.

20. Such situations could also occur in disputes arising from multi-shareholder or multi-joint venture party disputes. In one example that was cited to us, the dispute comprised a state, ministry, and joint venture vehicle as the respondent; on the side of the claimants was a consortium of oil companies. The claimants were more easily able to co-ordinate and appoint an arbitrator. But when it came to the respondents, it was a lot more difficult, as the different parties comprising the respondent group comprised different entities with divergent interests. This would result in one side not having the benefit of a party appointed member on the tribunal, through no fault of their own, except that their interests did not coincide with the rest of the respondent group.

21. Other examples include claims by a developer against two contractors, in a situation where each of the contractors might have had a distinct role and each of the contractors might well have a reason for suggesting that the other contractor is at fault. In those situations, you would not expect the respondent parties to be coincident or aligned in terms of their choice of arbitrators.

22. It is also not uncommon for respondents to try and delay or frustrate an arbitration, by either failing to appoint an arbitrator or dragging their feet, or just not taking part in the proceedings for nomination at all.

23. These examples are just some, but they demonstrate the importance of having clear rules or procedures, upfront, to help parties to quickly resolve their differences, at the procedural stage.

24. This is not a problem where parties have decided on a set of institutional rules, but it does become critical in the context of multi-party ad hoc arbitration situations where –

a. there is no agreed mechanism for the constitution of the arbitral tribunal, and

b. where the parties’ inability to agree on the appointment of their arbitrators would invariably lead to disagreement and delays in commencing the proceedings.

25. This invariably adds to costs, and unnecessary time spent on process and procedure, when the parties really ought to get into the heart of the substance of the dispute and resolve those disputes.

26. We also want to ensure that, as far as possible, all parties receive equal treatment in the formation of the tribunal.

27. Sir, to address these concerns, Clause 3 of the Bill introduces a new section 9B to the Act, to provide for the default procedure for the appointment of arbitrators in multi-party arbitrations. It will apply where there are three or more parties and three arbitrators. The default procedure will only apply where parties have not agreed on a procedure for the appointment of the arbitrators.

28. Let me now take members briefly through the steps involved in this procedure.
    
    a. The claimant must first appoint an arbitrator on or before the date of its request for arbitration.

i. If there is more than one claimant, then all the claimants should make the appointment by agreement.
ii. The claimant or claimants must inform the respondent(s) of the appointment and state the appointed arbitrator together with the notice of arbitration.

b. The respondent must then appoint an arbitrator after the receipt of the request for arbitration.

i. Again, if there is more than one respondent, all the respondents need to make or agree to the appointment by agreement.
ii. The respondent must inform the claimant or claimants of the appointment.

c. Finally, the two appointed arbitrators on both sides will then get together and appoint the third arbitrator, who will be the presiding arbitrator.

29. However, when parties are unable to come to an agreement on their choice of arbitrator, then the new section 9B(2) provides that the appointing authority must then in that situation and upon the request of any party, appoint all three arbitrators. In doing so, the appointing authority is required to have regard to “all relevant circumstances.” So, a broad discretion, to consider all the facts, all the matters which arise in the context of that appointment exercise. Section 9B(2) also allows for the appointing authority, to consider the choices already made by the parties at that stage, if any, and at what stage the proceedings might be at.

30. Let me elaborate a little on this. Under the IAA, where the parties have not agreed on who should be the appointing authority, then the default appointing authority will be the President of the Court of Arbitration of the SIAC and any other person nominated by the Chief Justice to exercise the powers of that appointing authority.

31. In doing so, the appointing authority may have regard to all relevant circumstances, as I have mentioned, and that authority may reappoint or may revoke any appointment that has already been made. The appointing authority may also designate any one of the three arbitrators as the presiding arbitrator. This process seeks to strike a balance between party autonomy and equality in the arbitration process. This process is itself aligned with the rules of leading arbitral institutions on the multi-party appointment of arbitrators – so the process that we have designed in this is, in terms of philosophy, aligned with that of leading institutions around the world.

32. In similar fashion, the appointing authority will appoint the third arbitrator upon the request of any party, and if the two arbitrators appointed by the parties fail to agree on the appointment of the third arbitrator within the timeframe specified.

33. Again, the appointing authority is granted discretion to consider all relevant circumstances, in coming to its decision. These may include the reasons why the two appointed arbitrators are not able to agree on the third arbitrator or their reasons for failing to come to an agreement within a specified time.

34. Introducing this default mode of appointment in multi-party arbitrations will reduce potential delay in the conduct of arbitration proceedings. And this might arise where –
    a. parties are unable to agree or refuse to agree as I mentioned earlier, or
    b. if the party-appointed arbitrators are themselves unable to agree on a third appointment.

35. With the amendment, the parties’ failure to agree on joint nominations or indeed their refusals to agree will not prevent the arbitral tribunal from being constituted expeditiously. As any party in this default mode of appointment would have the right to make a request to the appointing authority, to cite reasons and to request the authority to make the appointment, this would also, as I mentioned, avoid the problem of parties seeking to delay or frustrate the arbitration by not taking part in the process at all.

36. And we believe that ultimately, this default mechanism that is set out upfront:

a. will save time for parties,

b. will increase the overall efficiency of the process, and

c. will be a further step in continuing to make Singapore an attractive seat for complex international arbitration disputes, including those which include multiple parties.

Recognising that an arbitral tribunal and the High Court have the power to enforce obligations of confidentiality in an arbitration

37. Sir, I now move on to broadly outline the second amendment.

38. Currently, unless parties otherwise agree, the parties and the arbitral tribunal have a duty of confidentiality. This can arise in a number of ways –

a. First, as a result of agreement between the parties;

b. Second, under any written law or rule of law – and this includes the common law; and

c. Third, under the rules of arbitration, including the rules of arbitration of any institution or organisation which the parties have agreed to, or have been adopted by the parties.

39. Confidential information obtained in arbitration proceedings is protected from disclosure or use for any other collateral purpose i.e. not the purposes for which the information was obtained, which is the arbitration.

40. The scope and content of such a duty might differ. In other words, what does this duty cover – what kind of information, what type of documents? They might differ from case to case, and depending on the circumstances of each case, that duty could cover the documents used or disclosed in the proceedings.

41. Our courts, over several decided cases, have recognised that, in the absence of an express agreement between the parties regarding the existence and scope of a duty of confidentiality, parties to the arbitration have an implied duty of confidentiality.

42. At the same time, our courts have also commented that there ought not be any generalisations of what the duty of confidentiality would encompass. In other words, do not set out upfront for every case, for each type of categories of documents, what that scope of confidentiality covers, because each case ought to be evaluated and contextualised in its own circumstances, and the implied duty reflects the needs and expectations of the parties as well.

43. A distinction has to be drawn between different types of confidentiality attaching to different types of documents, or the evidence that has been obtained in these proceedings. So, for example, arbitration awards may be treated differently from the underlying materials used, or disclosed in the course of arbitration proceedings. This duty is not absolute, and the extent to which the duty is preserved will depend on the individual circumstances.

44. Given the centrality of confidentiality in arbitrations, parties expect that their various obligations of confidentiality can be protected.

45. However, the International Arbitration Act as it currently stands does not expressly recognise that the arbitral tribunal or the Courts have the power to enforce existing confidentiality obligations in the event of any such breach.

46. The Bill therefore seeks to insert a new section 12(1)(j) in the IAA, to expressly recognise the powers of the arbitral tribunal and the High Court in terms of enforcing such a duty, and to give effect to such obligations by making orders or giving directions as may be appropriate.

47. This power will apply, regardless of whether the obligations arise under any of the limbs, which I mentioned earlier – whether the obligations arise by written law, by rule of law, under common law, rules of arbitration, or by agreement between parties.

48. The amendment recognises that confidentiality is an important attribute of arbitration, and that the common law is still developing as to the precise extent of the obligation – in other words, whom it should bind, and the exceptions, if any, to the rules.

49. The Bill therefore does not codify obligations of confidentiality, but seeks to strengthen the parties’ ability to enforce existing obligations. It does not impose any new or additional obligations on parties, beyond what has been set out in those three broad categories I have mentioned. So, for instance, the new provision will not require a plaintiff in arbitration-related court proceedings to have to apply for the sealing of court files and redaction of the papers when commencing such proceedings. And, that is the position currently.

Conclusion

50. Sir, in summary, this Bill will:

a. strengthen our international arbitration framework,

b. it keeps us up to date, and

c. will ensure that Singapore remains an attractive venue for international arbitrations.

51. It will also show the international arbitration community that we have a continued commitment to provide strong legislative support for international arbitration.

52. Mr Speaker, I beg to move.

Last updated on 05 Oct 2020