Tuesday, August 7, 2012

Singapore thrives as arbitration seat in Asia

Business Times: Tue, Aug 07

DESPITE having one of the most efficient court systems in the world, Singapore is witnessing a significant increase in cases of local and foreign parties choosing to settle disputes outside the courtroom, through arbitrations.

A sound arbitration infrastructure, updated laws, the presence of abundant local and foreign legal talent and being located in a pleasant country with ease of communications - while resolving an unpleasant dispute - will mean that Singapore will continue to lead as a regional arbitration centre for years to come.

Many factors contribute to the growth of arbitration. Firstly, in international transactions, parties may be reluctant to submit to the judicial process of the country in which the other contracting party is domiciled.

Unfamiliarity with the rules and procedures of a foreign court, or the language used, suspicions as to whether a foreign party will be treated with equality, doubts regarding the quality and reliability of the judicial system, and delays in the judicial process of various countries, are contributing factors.

In arbitrations, parties have flexibility to agree on a neutral venue, to select or agree on a method of selecting one or more independent, impartial and qualified arbitrators, to agree on the rules and procedure to be adopted and to agree on the language to be used, with simultaneous translations arranged if necessary.

A second major advantage is that the award is not only binding on the parties, but is enforceable against the assets of the losing party in many countries worldwide. Since its inception in 1958, more than 150 countries have become signatories to the New York Convention, which obliges contracting states to recognise and enforce foreign arbitral awards.

Thirdly, parties are free to appoint arbitrators from an appropriate field of profession, which is particularly advantageous in technical disputes such as construction and engineering disputes.

Fourthly, the arbitral process offers privacy and, to some extent, confidentiality, unlike proceedings in State Courts which are usually open to the public.

While arbitration costs in Singapore are generally comparable to litigation in court, there is no appeal against an award in an international arbitration in Singapore. For domestic arbitration there is a limited right of appeal in Singapore, but only on questions of law. Even so, the parties may by agreement exclude the right to appeal. Removing one or more layers of appeal does result in savings in costs.

With the rising popularity of arbitration, Singapore expects to remain a preferred venue due to a confluence of factors. In deciding where to spend days or weeks or months for the hearing of a commercial dispute, parties will be attracted to a venue which is politically stable, safe, comfortable, and at which modern reliable facilities are available to communicate with their offices and families. Singapore has all that and more to offer.

Furthermore, Singapore's arbitration laws are of international standards, supportive of arbitrations, and are constantly updated to be in line with internationally accepted norms. Local courts are also fully supportive of arbitrations, endorsing the international expectations of minimal intervention and party autonomy. The courts in Singapore will uphold an arbitral award without reviewing the merits, and may set aside an award only on very limited and fundamental grounds.

It is also not uncommon for parties to adopt Singapore law as the law governing the contract, even though the transaction may have no connection whatsoever with Singapore. With an open legal system, parties in dispute may appoint renowned foreign arbitrators and counsel. There is no shortage of talent, both locally and from abroad, to assist the parties in the resolution of their disputes. The pool of foreign international law firms establishing a physical presence in Singapore has also grown and the legal environment is conducive to attracting large foreign arbitrations to Singapore.

Apart from the efficiency and reputation of the Singapore International Arbitration Centre as an administrative institution, parties may alternatively choose other international institutions, such as the International Chamber of Commerce headquartered in Paris and the American Arbitration Association. Alternatively, parties are free to engage in ad hoc arbitrations without the involvement of an administering body, thus reducing the cost of arbitration.

Singapore offers various schemes to encourage low-cost domestic arbitrations for the benefit of society, such as the Law Society Arbitration Scheme, and industry-centred arbitrations such as the Council for Estate Agencies Arbitration Scheme and the Council for Private Education Arbitration Scheme. The Subordinate Courts have recently introduced a Presumption of Alternative Dispute Resolution Scheme whereby cases will be referred to mediation or arbitration unless the parties opt out.

Despite growing competition from the region, Singapore is likely to remain a preferred arbitration venue in Asia for years to come.

The writer is a partner, litigation and dispute resolution, KhattarWong LLP

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
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Email: marshe_inc@yahoo.com.sg
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