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Singapore International Arbitration Commission Adopts New Rules
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July 16, 2007
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By Michael Evan Jaffe and Meg Utterback
Thelen Reid Brown Raysman & Steiner LLP
Companies throughout Asia Pacific grapple with choice of law and choice of forum issues in every contract. The prevailing view in China is that a foreign company is best served by moving arbitration offshore in hopes of a more level playing ground than might be found under the traditional Chinese arbitration body, the China International Economic and Trade Arbitration Commission (CIETAC), or some of the newer PRC local arbitration commissions.
The preferred venues for arbitration currently are Singapore and Hong Kong. Thus, it is important for companies to be aware of changes to the Singapore International Arbitration Commission (SIAC) Rules and how those changes might influence their decisions on venue in drafting contractual dispute resolution provisions.
SIAC has published the third edition of its Arbitration Rules, which took effect on July 1, 2007. The new rules replace the second edition of the Arbitration Rules, which were issued in 1997. The new rules revise the procedures for appointment and challenge of arbitrators, allow written submissions during the pre-hearing phase and initiate a new fee structure. The new rules also shift powers previously held by the Arbitral Tribunal and the Appointing Authority to the SIAC Registrar, giving the Registrar greater control over the administration of arbitration proceedings. In most instances, the changes tend to bring the SIAC rules into closer accord with the widely recognized ICC Rules of Arbitration. The new rules aim to improve efficiency by employing the best practices available for resolving international commercial disputes.
Revised Procedure for Appointing Arbitrators and Determining the Number of Them
The new rules change the procedure for determining the number of arbitrators in a proceeding. Under the old rules, a sole arbitrator presided over the arbitration unless the parties agreed otherwise (Old Rule 6). As a default, the new rules also provide for a sole arbitrator but afford the Registrar discretion to increase the size of the Tribunal to three arbitrators when warranted based on quantum in dispute, complexity of subject matter, proposals by the parties and other circumstances (New Rule 5.1). This new rule is very similar to Article 8 of the ICC Rules, which creates a default sole arbitrator but provides that the ICC Court may increase the size of the Tribunal based on the circumstances of the case (ICC Rules, Article 8, §2).
The new rules also change the manner in which arbitrators are appointed. Under the old rules, in a sole arbitrator proceeding, both parties were encouraged to agree on an arbitrator, and if the parties failed to agree, the arbitrator would be appointed by an "Appointing Authority" selected by the parties (Old Rule 7). In three-arbitrator panel proceedings, each party appointed its own arbitrator, and the two party arbitrators, in turn, selected the Presiding Arbitrator (Old Rule 8.1). If either of the parties failed to appoint an arbitrator or if the first two appointed arbitrators failed to agree on a Presiding Arbitrator, the Appointing Authority would appoint the Chair (Old Rule 8.3).
The new rules eliminate the role of the Appointing Authority. Under the new rules, parties do not appoint but rather "nominate" arbitrators; the nominations are subject to confirmation by the chairman of SIAC (New Rules 5.3, 6.1, 7.1). An arbitrator is not empanelled until the SIAC Chairman confirms the nomination (New Rule 5.5). This "nominate and confirm" procedure tracks the "nominate and confirm" procedure provided in Article 9 of the ICC Rules. The new rule reduces the number of participants in the appointment process and formally recognizes the chairman as the final authority on the Tribunal's composition, resulting in a more streamlined and definitive system.
One way in which the new rules depart from both the old rules and the ICC Rules is the nationality of the arbitrators. The old rules provide that the SIAC chairman should consider the nationality of the arbitrators in relation to the nationality of the parties (Old Rule 11.1). Similarly, Article 9 of the ICC Rules contains several provisions that instruct the General Secretary to consider the nationality of arbitrators in making appointment decisions. The new SIAC rules have deleted the nationality provision entirely. Generally, parties still believe that nationality of the arbitrators may have some influence over the process and the outcome. Certainly arbitrators trained in a civil versus common law jurisdiction have differing views on the presentation of evidence. Further, an Asian arbitrator may have a differing view on a contractual dispute than might his equally learned colleague from Europe. This new rule may be ahead of its time in assuming that disputes are sufficiently globalized that nationality has become irrelevant.
Revised Procedure for Challenging Arbitrators
The old rules required that upon a party's challenge of an arbitrator, the Registrar automatically suspended the arbitration while the SIAC Chairman decided the merits of the challenge (Old Rule 13.2). Under the new rules, the Registrar has discretion to suspend the proceedings. Absent exercise of that discretion, the arbitration may proceed while the SIAC Chairman decides the merits of the challenge. Similarly, the ICC challenge provisions do not require suspension of the arbitration upon challenge of an arbitrator. The deletion of an automatic suspension provision ensures that parties cannot unilaterally invoke the challenge procedure and thereby halt the progress of the arbitration proceeding.
Under the new rules, if the SIAC Chairman upholds the challenge (or if the arbitrator is otherwise dismissed), the parties must proceed to the "nominate and confirm" procedure under the revised selection procedures (New Rules 10, 11,12). The new rules also give the SIAC Chairman exclusive authority to fix costs associated with challenges (New Rule 12).
Revised Procedures for Filing Written Documents
The new rules add to the information that parties must include in the Notice of Arbitration. In addition to the parties' names and addresses, the notice now must include phone numbers, fax numbers and e-mail addresses (New Rule 3.1). The Notice of Arbitration also must include a quantification of the amount in dispute (if known), comments regarding the language of the arbitration, and confirmation that the other party has been served and the filing fee has been paid (New Rule 3.1). The new requirements for additional information - and particularly the requirement that the notice state the amount in dispute - bring the SIAC's Notice of Arbitration into close conformity with an ICC Request for Arbitration (ICC Rules Article 3, §4). The amount in dispute requirement will facilitate establishing arbitration fees and costs, as these amounts are in proportion to the amount at issue.
The new rules require that the respondent submit a Response to the Notice of Arbitration (New Rule 4.1). This response was optional under Old Rule 4. The new rules also provide alternative time limits for respondent's Statement of Defense. Respondent may submit the statement within 30 days of receipt of claimant's statement or within 30 days of notice that the Tribunal has been formed (New Rule 16.4).
The most significant change in the new rules is the addition of a "Memorandum of Issues" to the pre-hearing phase of the proceeding. Under New Rule 17, within 45 days after completion of the submission of written statements, the Tribunal must consult with the parties and prepare a Memorandum of Issues to be decided in the arbitration. If any party refuses to participate in drawing up the Memorandum of Issues, the Tribunal still must submit that document to the Registrar for approval (New Rule 17.3). The Memorandum of Issues closely resembles the "Terms of Reference" assembled jointly by the Tribunal and the parties during the pre-hearing phase of an ICC proceeding (ICC Rules, Article 18). Most practitioners will view this addition as a positive step, allowing the parties and the Tribunal to well-define the issues early on, with the goal of streamlining the issues and expediting the process.
SIAC Scrutiny of the Tribunal's Award
Under the old rules, the Tribunal issued its award to the parties directly (Old Rule 28.1). Under the New Rules, the Tribunal must submit a draft award for the Registrar's review (New Rule 27.1). The Registrar may suggest modifications as to the form of the award and, without affecting the Tribunal's liberty of decision, also may draw its attention to points of substance. The rule states that no award shall be issued by the Tribunal until it has been approved as to form. The language of the New SIAC scrutiny provision replicates the language of the ICC provision for scrutiny of draft awards (ICC Rules, Article 27). This scrutiny provision promotes integrity in the Tribunal's decision-making and ensures uniformity as to all users regarding form.
Revised Fee Structure
Under the old rules, the Tribunal, in consultation with the Registrar, fixed the fees and costs of arbitration and included those amounts in the award (Old Rule 30.1). The Tribunal enjoyed considerable discretion in setting its fees, provided the fees were reasonable, considering such factors as the amount in dispute, time spent, diligence of the arbitrators and complexity of the subject matter (Old Rule 31.1). The New Rules have removed this discretionary system and introduced a structure that sets fees based on a sliding scale in accordance with the amount in controversy (New Rule 30.1). In exceptional circumstances, the Registrar may raise or lower the costs of arbitration (New Rule 30.1). This new fee structure is similar to the fee provisions in the ICC Rules, Article 31. The new fee structure may result in somewhat higher fees in larger and more complex cases. In this regard, parties will monitor the way the Registrar exercises its fee-setting discretion.
Increased Role of SIAC Practice Notes in Administering Arbitration Proceedings
The old rules made no mention of the Centre's "practice notes" rulings issued by the Registrar, which provide guidance on administration of arbitrations. The New Rules explicitly refer to practice notes: New Rule 5.4 states that the Registrar shall fix the arbitrators' fees in accordance with the practice notes, and New Rule 30.2 states the Tribunal's out-of-pocket expenses shall be charged to the parties in accordance with the practice notes. Further, New Rule 35.4 vests in the Registrar the power to issue practice notes as needed. This is consistent with the ICC's Internal Rules, which vest in the Secretariat the power to issue practice notes as necessary to the proper conduct of the proceedings (ICC Internal Rules, Article 5, §2).
Increased Control by the SIAC Registrar Over Arbitration Proceedings
The new rules delegate to the Registrar many of the duties that previously were the province of the Tribunal or the Appointing Authority. Rule 5.1 vests in the Registrar the power to determine whether to use three arbitrators in certain cases. Rules 17.2 and 28.4 give the Registrar the power to extend time limits on the Memorandum of Issues and on the Tribunal's corrected award. Rule 17.1 vests in the Registrar the power to scrutinize the draft awards of the Tribunal. Rule 18.1 gives the Registrar the power to change the seat of arbitration from Singapore in certain circumstances. Rule 35.4 vests in the Registrar the power to issue practice notes to assist in the administration of arbitral proceedings.
Changes to the Powers Afforded the Tribunal
The new rules generally afford the same powers to the Tribunal that it had under the old rules. The old rules, however, made the powers of the Tribunal subject to modification by agreement between the parties (Old Rule 25) while the new rules do not provide for any such modification (New Rule 24). The new rules also designate the Tribunal's power to extend or abbreviate certain time limits (for example, New Rules 17.2, 27.1, 28.4). The Tribunal also enjoys less discretion in setting the fees and costs of arbitration due to the revised fee structure.
Conclusion
In adopting these rules, SIAC may be recognizing its natural move from a regional player to an international player. The SIAC staff is well-organized and experienced in dealing with international parties. Adoption of the new rules, while resulting in potentially higher fees, also may provide greater infrastructure and oversight of the proceedings, lending greater confidence in the institution and the outcome.
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For more information about the issues covered in this report, please contact Michael Evan Jaffe in our Washington, D.C. office at 202-508-4215 or at mjaffe@thelen.com, Meg Utterback in our Shanghai office at +86-21-6137-7988 or at mutterback@thelen.com, or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2007 Thelen Reid Brown Raysman & Steiner LLP
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