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SIAC broadens its appeal beyond Singapore with new model clauses

SIAC broadens its appeal beyond Singapore with new model clauses

Kent Philips, Partner, Head of International Arbitration BLP

Rimma Malinskaya, Dispute Resolution Practice, Head of Group in the Goltsblat BLP

The Singapore International Arbitration Centre (“SIAC”) has revised its model arbitration clause and expedited procedure model clause to allow parties to choose the seat of arbitration. However, parties should continue to choose arbitration-friendly jurisdictions as the seat of arbitration.

New model arbitration clauses from SIAC

The Singapore International Arbitration Centre (“SIAC”) has seen an impressive rise in its international caseload.  In 2014, 81% of its cases involved disputes where one or both parties were not Singaporean.

In line with the increasing international nature of the portfolio of cases it is administering, on 1 September 2015 SIAC announced the release of a revised model arbitration clause. 

The revised model clause provides as follows:

“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The seat of the arbitration shall be [Singapore].*

The Tribunal shall consist of _________________** arbitrator(s).

The language of the arbitration shall be ________________.”

* Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace “[Singapore]” with the city and country of choice (e.g., “[City, Country]”).

 ** State an odd number. Either state one, or state three.

The new model clauses now expressly offer the parties the option of selecting the seat of arbitration, which need not be Singapore, while designating SIAC as the arbitral institution to administer their disputes in accordance with the SIAC Rules.  This gives parties the flexibility of choosing an arbitral seat in any jurisdiction that will suit their needs.

Choice of the seat of arbitration is critical

The choice of the seat, or legal place of an arbitration, is significant as it will determine which country’s arbitration law and courts will have jurisdiction to supervise and support the arbitration.  It is important that parties choose an arbitration-friendly jurisdiction as the seat of the arbitration.

To address a common misconception, the seat of the arbitration is distinct from the venue of the arbitration (i.e. where the hearings physically take place). In other words, arbitration hearings in an arbitration seated in London need not take place in London itself.  The parties are free to agree that hearings should take place in a more convenient venue, such as a place closer to the disputed project site, or at a venue which is cheaper or more geographically convenient to the parties, their lawyers, the expert and factual witnesses or the Tribunal.

By allowing parties the flexibility to choose the seat of arbitration, SIAC is broadening its appeal as an arbitral institution to international parties who do not necessarily have a link to Singapore.

Previously, international parties were free to modify the SIAC model arbitration clause of their own accord and choose SIAC to administer their arbitration without choosing Singapore as the seat of the arbitration.  With this latest revision of its model clauses, which expressly allows the parties to choose the seat of arbitration, SIAC is acknowledging its increasing popularity as the arbitral institution of choice for international parties and has re-positioned itself more prominently as an international arbitral body without necessarily being wholly linked to Singapore. 

The revised model clauses also highlight the importance of careful drafting of arbitration clauses; something which is often under-estimated by those drafting and negotiating commercial agreements.

It is very important that parties choose an arbitration-friendly jurisdiction as the seat of the arbitration.  Two key considerations for parties when choosing a seat of arbitration are:

The ease of enforcement of any arbitral award and whether the seat of arbitration is in a country that is a party to the New York Convention; and

The relief available from the national courts in the seat of arbitration. Such relief can include a freezing injunction to prevent dissipation of the other party’s assets, other interim injunctions in support of the arbitration, and setting aside an arbitral award for certain irregularities. For example, if parties were to choose Singapore as the seat of the arbitration, those parties would be able to avail themselves of relief from the courts in Singapore in aid of the arbitration (irrespective of the governing law of the contract).

Another important argument when selecting a seat of arbitration might be the state courts' approach to applications for setting aside arbitral awards, as these are filed with courts of the country of arbitration.

On the one hand, parties choosing a seat of arbitration want to ensure that arbitral awards might, in principle, be set aside if there are certain irregularities. 

On the other hand, one of arbitration's merits is that there is no multi-stage system for examining arbitral awards, unlike state court decisions. This is precisely why jurisdictions with pro-arbitration state courts reluctant to set aside arbitral awards usually hold the most appeal as the seat of arbitration.

Singapore is a popular seat of arbitration for good reason, including the prevailing pro-arbitration judicial attitude in Singapore courts and arbitral awards set aside being more of an exception. Such an approach has recently been emphasised yet again by the Singapore Court of Appeal, which noted, in its decision on AKN and another v ALC and others and other appeals [2015] SGCA 18, that it was inadmissible to use the procedure of setting aside arbitral awards as a means for correcting procedural steps that a party might come to regret or offer the losing party a second chance. It also pointed out that arbitral awards may not be set aside on the basis of obscure descriptions of procedural breaches: the arguments must be clear and focused and must demonstrate obvious violation of procedural equality.

Parties should continue to consider Singapore as the seat of arbitration regardless of the express option of a choice of seat of arbitration in the SIAC model clauses.

Governing law of the arbitration agreement (arbitration clause)

We have reported previously on the divergent approaches taken by the courts in Singapore and England and Wales when questions of the law of the arbitration clause have come before them.  We think that SIAC’s model clauses could be further improved by including express provisions requiring parties to specify the governing law of the arbitration agreement as well.

Currently, the only relevant part in SIAC’s model clauses is the optional phrase “This contract is governed by the laws of …” in the SIAC model arbitration clause. However, even by including this phrase, it is unclear whether “contract” refers to the main contract or the arbitration agreement and where the law of the contract and the law of the seat are different, there is still a risk of jurisdictional disputes rearing their heads.

We suggest that an express provision be included such as “The law of this arbitration clause shall be _____________*. (*State the applicable law e.g. Singapore law.)”. Such an express provision will address the uncertainty arising from courts in various jurisdictions applying different laws to govern an arbitration clause.

Similar amendments to their respective model arbitration clauses have already been adopted by other leading arbitration centres such as the Hong Kong International Arbitration Centre and the London Court of International Arbitration. It may be that this issue will be addressed in the revision of SIAC’s 2013 Arbitration Rules expected in 2016.

Tags: GeneralSingaporeDispute ResolutionInternational Arbitration

This document provides a general summary only and is not intended to be comprehensive or legal advice. Specific legal advice should always be sought in relation to the particular facts of a given situation. 

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