This article discusses some of the key changes in the arbitration regime, in line with the aim of making Singapore an Asian arbitration hub, that were brought about by the new Arbitration Act 2001 and the International Arbitration (Amendment) Act.
Introduction
Over the last few years, Singapore has been attempting to foster an image as a centre for arbitration in the Asian region. Various steps have been taken by the authorities to further this image, including the new Singapore International Arbitration Centre ('SIAC') domestic arbitration rules, SIAC fast-track arbitration and a general upgrading of the SIAC. These steps have been aimed at increasing party autonomy in the arbitration process, reducing court interference and, where possible, the replacement of the court with the tribunal. There have also been attempts to reduce the time spent in arbitration, making it a more attractive option for businesses as a dispute resolution mechanism. The latest step in this process has been the amendment of the domestic and international arbitration regimes of Singapore.
The new Arbitration Act 2001 (Act 37 of 2001) ('AA 2001') was passed by Parliament on 5 October 2001 but has not yet been brought into force. The AA 2001 will completely re-vamp the domestic arbitration regime in Singapore by repealing the Arbitration Act (Cap 10) ('AA'), which is the present regime for domestic arbitration in Singapore. In line with this, the International Arbitration (Amendment) Act which amends the International Arbitration Act (Cap 143A) ('IAA') was also passed by Parliament on 5 October 2001 and came into force on 1 November 2001.
Coming into Existence of an Arbitration Agreement
Both the AA 2001 and the International Arbitration (Amendment) Act make their respective arbitration regimes more liberal in terms of how an arbitration agreement comes into existence. Section 2 of the IAA and s 4 of the AA 2001 extend the definition of an arbitration agreement to include an agreement which is triggered by an assertion of one party to legal or arbitral proceedings of the existence of an arbitration agreement, which assertion calls for a reply and which is not denied by the other party. In other words, failure to deny the existence of an arbitration agreement will also give rise to an arbitration agreement.
Applicability of IAA or AA Where One or the Other Excluded
Section 15 of the IAA provides that:
... if the parties to an arbitration agreement have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled or resolved otherwise than in accordance with the [IAA] or the Model Law, [the IAA] or the Model Law shall not apply in relation to the settlement or resolution of that dispute.
This created confusion as to whether the exclusion of the IAA would automatically exclude the UNCITRAL Model Law ('Model Law') which forms Sch II to the IAA and vice versa. There was also the question of whether the application of the IAA and/or the Model Law to an arbitration agreement excluded the AA. The case of John Holland Pty Ltd v Toyo Engineering Corporation [2001] is the latest in the saga of the courts attempting to resolve the confusion.
To resolve these questions, the International Arbitration (Amendment) Act re-enacts s 15 of the IAA to provide that if the parties to an arbitration agreement agree that the Model Law or the IAA shall not apply to the arbitration, then neither the Model Law nor the IAA will apply to the agreement. Instead, the AA will automatically become applicable to the agreement. Similarly, if the agreement makes the AA applicable to the arbitration, then both the Model Law and the IAA will be excluded from that agreement.
Similarly, s 3 of the AA 2001 provides that it shall apply to any arbitration where the place of arbitration is Singapore and where the IAA does not apply to that arbitration.
The amendment to s 15 of the IAA also clarifies that a provision in an arbitration agreement referring to or adopting any rules of an arbitral institution shall not of itself be sufficient to exclude the application of the Model Law or the IAA to that arbitration. To this extent, the decision in John Holland Pty Ltd v Toyo Engineering Corporation [2001] has been reversed.
Appointing Authority
One of the areas in which the parties to an arbitration often have to turn to the court is in the area of appointment of an arbitrator when one of the parties is not co-operative. Section 2 of the AA 2001, as well as of the IAA as amended by the International Arbitration (Amendment) Act, define a new term, 'appointing authority', as the Chairman of the SIAC. In both the new regimes, the appointing authority may step in where one of the parties proves non co-operative in the appointment of a tribunal, thus doing away with the necessity for a party seeking arbitration to approach the court at this initial stage of the arbitration.
This appointing authority is granted immunity from prosecution for the performance of his functions of appointment, unless this can be shown to have been in bad faith.
Place of Arbitration
The place or situs of arbitration determines the procedural laws applicable to an arbitration. One lacuna in the AA was that in the absence of an agreed place of the arbitration by the parties, there were no rules to determine what the place of the arbitration should be. This would then have to be determined in accordance with the conflict of law principles, which are by no means clear.
To fill this lacuna, the AA 2001 defines a place of arbitration as the juridical seat of the arbitration chosen by the parties in the agreement and further provides guidelines for the determination of the place of arbitration. If there is no agreement as to the place of arbitration, it is to be chosen by a person authorised by the arbitration agreement to choose the situs. If no person is identified to choose the place of arbitration, it is to be determined by the arbitral tribunal as authorised by the parties. If there is no designation of someone to determine the place of arbitration, it is to be determined having regard to the arbitration agreement and all the relevant circumstances. It should be mentioned that this brings the domestic arbitration regime in line with the present international regime, as art 20 of the Model Law makes a similar provision for international arbitration.
Continuation of Court Proceedings
Stay
Section 6(1) of the IAA provides that a defendant in legal proceedings may (subject to the fulfilment of certain criteria) apply to the court to stay the proceedings on the grounds that there is an arbitration agreement between the parties. The International Arbitration (Amendment) Act amends s 6(1) so that a court can only grant a stay of proceedings 'so far as the proceedings relate to the matter'. Accordingly, it is only that part of a court proceeding which is the subject of an arbitration agreement that may be stayed, while the rest of the matter will continue in court.
In line with this, s 6(1) of the AA 2001 also allows a court to grant a stay of proceedings 'so far as the proceedings relate to the matter' on an application by a party to an arbitration agreement.
Discontinuance
A new provision is introduced by s 6(4) of the AA 2001 and a new s 6(4) to the IAA for the discontinuance of an action. Where none of the parties to the arbitration has taken any 'further step in the proceedings' for a period of two years after the court orders the stay of proceedings under s 6(1) of the AA 2001 or of the IAA, the court may, on its own motion, discontinue the proceedings. This is, however, subject to the parties' right to apply for the discontinued proceedings to be reinstated.
Application of the Limitation Act
New ss 11 and 8A are introduced by the AA 2001 and the International Arbitration (Amendment) Act respectively to make the Limitation Act (Cap 163) applicable to arbitration proceedings in the same manner as it would apply to court proceedings. Wherever a reference is made in the Limitation Act (Cap 163) to 'commencement' of an action, this is to be taken, in the context of the AA 2001 and the IAA, to be a reference to the commencement of an arbitration.
Sections 11 and 8A of the AA 2001 and the IAA respectively are mandatory and cannot be excluded by the parties. Any clause in an arbitration agreement to the effect that the limitation period will only start to run upon the making of an arbitral award in respect of a dispute under the agreement is inoperative. Despite such a clause, the time will commence on the date it would have in the absence of such a clause.
This is expected to deter parties from using arbitration as a mere stepping stone to litigation.
Challenge and Removal of an Arbitrator
The grounds under the AA for challenge or removal of an arbitrator are streamlined and brought more into line with the grounds under the IAA by the AA 2001.
Challenge
Section 14(3) of the AA 2001 provides that the arbitrator may only be challenged if:
Removal of an arbitrator
Additional to the grounds for the challenge of the arbitrator, s 16 of the AA 2001 provides grounds for the removal of an arbitrator. Section 16 allows a party to apply to the court to remove an arbitrator:
If the applicant seeking the removal of an arbitrator has a recourse to the tribunal or any arbitral institution for the removal of an arbitrator, the court will only exercise its power of removal after the applicant has exhausted that recourse. The order of the court is not subject to appeal.
Power of the Arbitral Tribunal To Rule On Its Own Jurisdiction
One common problem in arbitration is to what extent the arbitrator has power to determine his own jurisdiction? For instance, if an arbitrator is called upon to determine his jurisdiction and comes to the conclusion that for some reason he does not have the jurisdiction to arbitrate the dispute, the question as to whether this decision of the arbitrator is valid then arises, since in fact he had no jurisdiction to determine any part of the dispute, including his jurisdiction under the agreement. To get over this 'chicken-and-egg' dilemma, s 21 of the AA 2001 provides that the arbitral tribunal may rule on a question concerning its own jurisdiction, including the validity of the arbitration agreement. Section 21 also imports into the AA, the common law doctrine of severability, according to which this determination by the arbitrator of his own jurisdiction will then be severed from the rest of the arbitration agreement and shall be valid, notwithstanding the invalidity of the arbitration agreement. This section is substantially identical to art 16 of the Model Law, thus bringing the domestic arbitration regime in line with the international arbitration regime.
Under s 21 of the AA 2001, a challenge that the tribunal does not have jurisdiction may be decided by the tribunal as a preliminary question or as part of the award on merits. Where decided as a preliminary question, the aggrieved party may challenge the ruling before the court within 30 days of the ruling. Any appeal against the decision of the court requires leave of the court.
General Powers of the Tribunal
Section 28 of the AA 2001 extends the powers of the tribunal much beyond the present powers given to the arbitrator under s 13 of the AA. Only some of the additional powers are discussed here.
Power to order security for costs
The AA 2001 and the International Arbitration (Amendment) Act provide that the power of the tribunal to order security for costs should not be exercised merely because the claimant is ordinarily resident (if an individual) or incorporated (if a company) outside Singapore. This brings the arbitration regime in line with decided cases under the Rules of Court and sends the message that Singapore is a desirable forum for arbitrations involving foreign parties.
Powers of the tribunal on the default of the parties in the conduct of the arbitration
Section 29 of the AA 2001 sets out the powers exercisable by the arbitral tribunal in the event that the parties fail to ensure proper and expeditious conduct of the arbitration proceedings.
If without showing sufficient cause:
These powers of the tribunal under the AA 2001 reflect the tribunal's power under art 25 of the Model Law, bringing the domestic arbitration regime in line with the international regime.
Role of the Court is Secondary
Embodying the philosophy of reduced court interference, identified by the author as the basis of the amendments to the AA and the IAA, the AA 2001 clarifies that the court's power to make an order will cease to have effect if the arbitral tribunal or any institution makes an order on the same matter.
Arbitral Award
Choice of law applicable in deciding the dispute
Section 32 of the AA 2001 deals with the question of which laws or rules are to be applied in deciding the substance of the dispute. This new provision prevents delay while the parties establish the laws applicable to the arbitration.
The parties may choose the law applicable to the arbitration. In default of such choice, the tribunal shall apply the law applicable under the conflict of law principles.
If the parties agree, the tribunal can also decide the dispute on 'such other considerations that are agreed by them or determined by the tribunal'. The explanatory statement to the Arbitration Bill when it was introduced in Parliament explained that this section also allows the arbitral tribunal to act as 'amiable compositeur' and make an award 'ex aequo et bono' if the parties so agree.
Correction, interpretation and additional awards
In line with art 33 of the Model Law, s 43 of the AA 2001 provides that after the award is made, the parties may apply to the tribunal for:
Effect of the Award
Section 44 of the AA 2001 and a new s 19B introduced by the International Arbitration (Amendment) Act provide that the arbitral award is final and binding on the parties and their representatives. After an award is made, the tribunal may only interfere with the award to correct or interpret the award, issue an additional award or if an application to set aside or if a challenge to the award is made. In this regard, the award is 'made' when it is signed and delivered to all the parties.
Powers of Court in Relation to Award
An area where the change of arbitration philosophy towards reduced court interference is obvious is the area of the court's powers in relation to the award.
Part IX of the AA 2001 discusses the powers of the court in relation to an award. These include the powers to decide a preliminary issue, set aside or remit the award and the power to enforce an award.
Decision on a preliminary point of law
The court may, under s 45 of the AA 2001, determine a preliminary point of law which substantially affects the rights of one or more of the parties. An application for the determination of a preliminary point of law can only be made with the agreement of all the parties and with the permission of the tribunal. The court should further be satisfied that the determination of the point of law will result in substantial savings and that there was no delay in making the application.
Appeal on the question of whether an issue should be tried as a preliminary point of law can only be brought with the leave of the court. Leave will be given only where the question of law is one of general importance or there is some other special reason to give leave.
Enforcement of the award
Section 46 of the AA 2001 provides that an award may be enforced by the court in the same manner as if it were a judgment of the court.
Setting aside of the award
Section 48 of the AA 2001 sets out the circumstances when an award may be set aside by the court. This may be done where a party who applies to set aside the award satisfies the court that:
Appeal
Under s 49 of the AA 2001, a party to the arbitration proceedings may, with notice to the other parties and to the arbitral tribunal, appeal on a question of law in the award.
The party seeking to appeal must:
Leave of court is only to be given subject to certain guidelines in s 49(5) of the AA 2001 and if it is not possible to remit the award to the tribunal.
This right to appeal can be excluded by the parties by agreement. The right of appeal is also automatically excluded by an agreement by the parties that the tribunal need not give reasons for the award.
Certain restrictions on the powers of the court
Section 50 of the AA 2001 restricts the applications that may be made to the court to interfere with the award. The philosophy of limiting parties' recourse to courts is reflected in s 50, which provides that all recourse to the arbitration process should have been exhausted before the court is approached under s 45 (for determination of a preliminary point of law), s 48 (for setting aside the award) or s 49 (for an appeal against the award).
Mediation
Another reflection of the change of philosophy is the promotion of alternate dispute resolution rather than the court system for dispute resolution. Section 62 of the AA 2001 provides for the appointment of a mediator by the Singapore Mediation Centre, where the agreement provides for mediation. Unless there is an agreement to the contrary, mediation proceedings will terminate if no solution has been found after four months of the appointment of the mediator. If the parties agree to this, the arbitrator may act as a mediator. The AA 2001 provides for the conduct of the mediation proceedings in this case. Similarly, s 16 of the IAA is amended to allow parties, where this is allowed by the agreement, to attempt to settle their disputes by mediation. Currently, the IAA provides for conciliation.
Conclusion
The AA 2001 discussed here shows that this Act when brought into force, will substantially bring the domestic arbitration regime in Singapore in line with the international regime. Since Singapore's international arbitration regime is based on the UNCITRAL regime, which emphasises party autonomy and reduced court involvement, this will make the domestic arbitration regime more liberal and party friendly. This aim is also reflected in the amended IAA. Both the Acts send a strong message of encouraging Singapore's position as an arbitration hub in Asia.
Richa Gautam
Rajah & Tann