SIAC’s New Pricing Policy

With effect from 1 September 2002, the Singapore International Arbitration Centre (‘SIAC’) has revised its policy in regard to fees for managing arbitration cases that come under its auspices and for appointment of arbitrators in ad hoc cases.

The new management fees represent a reduction from the old administration fees by as much as 40% in international cases and as much as 25% in domestic cases. These fees are significantly lower than fees charged by other major international arbitral institutions.

The new fee structure for appointment of arbitrators is a rationalisation of existing practice. They are generally higher but they include more value added services rendered by SIAC in connection with the appointment of arbitrators.

These revisions are steps towards strengthening the position of SIAC as the leading arbitral institution in Asia by attracting more users to the services it provides.

Part I: Management Fees

Introduction

Before 1 September 2002, the application of the administration fee scales was tied to the set of SIAC’s arbitration rules the parties had adopted for their arbitration — the general 1997 Rules of Arbitration (‘general 1997 Rules’) or the 2001 Domestic Arbitration Rules (‘Domestic Rules’). The domestic rates were applied to cases arbitrated under the Domestic Rules, and the substantially higher international rates were applied to cases under the general 1997 Rules.

However, it has become evident that in many cases — which should be considered as domestic cases by ordinary standards — parties adopt the general 1997 Rules. In these cases, there is no reason why they should pay the higher international rates. Some rationalisation is therefore necessary.

Rationalisation — International v domestic cases

SIAC has decided to rationalise this incongruity by de-linking the scales of fees from the SIAC arbitration rules which the parties have adopted. It has opted to link the fee scale application with whether the arbitration should rationally be considered as international or domestic. The statutory definitions of ‘international’ and ‘domestic’ arbitration are adopted in this regard.

An ‘international arbitration’ is defined by the International Arbitration Act (‘IAA’) (Cap 143A) as one in which at least one of the parties has its place of business outside Singapore, or in which the subject matter of the dispute is closely connected with a country outside Singapore or a substantial part of the contractual obligations is to be performed outside Singapore. A ‘domestic arbitration’ is defined by the (domestic) Arbitration Act 2001 (‘AA’) (Cap 10) as any arbitration that does not fall within the definition of ‘international arbitration’.

This broad distinction in the law fits in well with a rational basis for charging different scales of fees for the two different types of cases. The demands of parties are different, the amount of time and effort generally needed are different and the logistics considerations are also different.

The new management fees

Under the new management fee structure effective from 1 September 2002, therefore, the international scale is applicable to cases defined by the IAA as international arbitration, and the domestic scale is applicable to all other cases. The Domestic Rules provide a definition of ‘domestic’ cases, and this will generally be followed. Parties who have adopted the general 1997 Rules in cases which fall within the definition of ‘domestic’ cases will pay the domestic rates, and not the international rates, as before.

Registrar to decide borderline cases

Statutory definitions cannot cover every situation that may arise. In the event of any doubt as to whether a case is international or domestic and which scale should therefore apply, the question is to be resolved by the Registrar of SIAC. The Registrar will give the benefit of the doubt in favour of the parties. The Registrar’s decision must be accepted as final.

The Registrar’s decision, however, is purely for the purpose of deciding what management fees should be charged for the case. It has no bearing for general legal purposes (eg whether an application to set aside an award is governed by the IAA or the AA).

Amount of management fees pegged to value of claim

SIAC’s new fee scales are pegged to the value of the claim or the counterclaim, not unlike the old fee scale. This is a simple and sound basis for charging fees. Experience shows that the larger a claim, the harder the case tends to be contested, the longer it tends to take to resolve and the more demanding it is of SIAC’s services.

Pegging the fees to the value of the claim is a common practice of international arbitral institutions. It is fairer than a flat fee. It is easier and simpler to administer and more transparent than a fee based on time spent and hourly rates of staff.

What the new management fees include

The new management fees, in both international and domestic cases, are applicable where the parties have adopted SIAC’s arbitration rules. They are intended to cover the whole suite of facilitation services which SIAC renders to the parties from the commencement of an arbitration to its conclusion. These include:

• appointment of the arbitrator, including scanning for potential candidates, screening for possible conflicts of interest, negotiating and fixing fees and terms of appointment;
• management of all the financial aspects of the arbitration according to SIAC’s transparency guidelines on arbitrators’ fees, including the collection of deposits, the monitoring of time spent on the case, the processing of the Tribunal’s bills and generally keeping the accounts between the parties and the Tribunal;
• monitoring and supervising the progress of the case;
• performing all the duties and functions which the Chairman, the Registrar and other officers of SIAC are required by the arbitration rules to perform (eg challenge and replacement of arbitrators, settling the costs of the arbitration etc);
• arranging the logistics, facilities and services for hearings — including hearing rooms, transcription of evidence and interpretation; and
• attending to all other clerical and administrative services.
  

No separate appointment fee for cases administered under SIAC arbitration rules

Under the new streamlined management fee structure, parties arbitrating under SIAC arbitration rules do not have to pay a separate fee for the appointment of arbitrators. Before 1 September 2002, they would have had to do so. This aims to encourage parties to leave the appointment process to SIAC, instead of trying to agree on an appointment themselves, with all the tedium and frustration which this process often entails.

What the new management fees do not include

The items of cost which are not included in the new management fees are the following:

• the fees and expenses of the Tribunal;
• the usage cost of facilities and support services for and in connection with the hearing (eg hearing rooms and equipment, transcription and interpretation services etc); and
• SIAC’s out-of-pocket expenses.
  

(SIAC’s New Management Fees are shown in Annex A.)

Annex A

Part II: Fees for Appointment of Arbitrators

Where they apply

As stated earlier, parties to an arbitration conducted under SIAC’s arbitration rules do not have to pay a separate fee for the appointment of arbitrators by the SIAC. Appointment fees are required only for cases falling outside SIAC’s arbitration rules. These cases include:

• appointments under the default appointment provisions of the IAA and AA;
• appointments required by the contract between the parties or otherwise required by the parties; and
• appointments resulting from being designated appointing authority by parties adopting the UNCITRAL Arbitration Rules or by the Permanent Court of Arbitration under the same Rules.

The appointment fees are also pegged to the value of the claim and different fee scales apply depending on whether a case is international or domestic.

Inclusion of financial management services

Financial management services are now part of SIAC’s package when it is asked to appoint an arbitrator in all cases falling outside SIAC’s arbitration rules.

Recent experience here and abroad shows that misunderstandings over the financial aspects of an arbitration can lead to difficulties and misgivings in the relationship between the parties and the Tribunal.

The Practice Notes on Arbitrator’s Fees — SIAC’s transparency guidelines for the management of the fees of arbitrators and other financial aspects of the arbitration — have been adopted to avoid such difficulties and to promote a healthy and respectful relationship between the Tribunal and the parties.

The financial management system also requires periodical returns on the progress of the case. This helps SIAC to monitor the case and promote quality delivery.

The transparency guidelines have been well received, as they are designed to protect the integrity of the ad hoc arbitration process and safeguard the interests of the arbitrators and the parties.

(SIAC’s New Appointment Fees are shown in Annex B.)

Annex B

Singapore International Arbitration Centre