Author: Lawyer Zhang Jingxinyue, PRC-qualified Lawyer | Singapore Registered Foreign Lawyer
Note: China and Singapore are important trade and investment partners. With more and more Chinese enterprises "going global" and participating in international competition, disputes involving cross-border investment are increasing. International arbitration has become increasingly important in resolving commercial disputes between China and Singapore and across the world, and Singapore's status as an important international arbitration center in the world has become even more prominent.
In Asia, Singapore has surpassed Hong Kong as the most preferred seat of arbitration. According to the 2021 International Arbitration Survey released by the School of International Arbitration at Queen Mary University of London, Singapore and Hong Kong were ranked second and third respectively among the world's most preferred arbitral seats, with Singapore second only to London in first place.
This article by China-Singapore Legal News aims to introduce the advantages and limitations of Singapore's international arbitration regime and explain to readers why Singapore is often chosen as the seat of arbitration for cross-border disputes.
01 Advantages of International Arbitration in Singapore
In recent years, with the further deepening of economic globalization, the development trends of international commercial arbitration have mainly been reflected in the following: case numbers have grown at a geometric rate; arbitration institutions have shifted from the traditional European model to the Asia-Pacific model; the approach to choice of law has shifted from the traditional civil law system to the common law system, showing a trend toward diversified legal application and choice; arbitration legislation has shifted from piecemeal legislation to unified substantive law legislation; and the international community has formulated global international conventions and legal instruments. These development trends are mainly driven by the defining characteristics of international commercial arbitration, namely its broad international nature, high degree of party autonomy, mandatory enforceability, and the authority of arbitral awards. These trends have all contributed to the advantages of Singapore's international arbitration influence. The specific manifestations are as follows:
一、Mature Arbitration Institutions
Research shows that the five most popular arbitration institutions at present are the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Centre (HKIAC), the London Court of International Arbitration (LCIA), and the China International Economic and Trade Arbitration Commission (CIETAC). Among them, the ICC is an international non-governmental economic organization under the United Nations Economic and Social Council. In other words, SIAC is the most popular arbitration institution at the governmental level. At the same time, SIAC has surpassed the ICC to become the preferred arbitration institution in the Asia-Pacific region, and SIAC also ranks among the top five in all regions. As a mature international arbitration institution in Singapore, SIAC is an important factor when many parties choose Singapore as the seat of arbitration in dispute resolution. On the one hand, SIAC has top arbitration experts, panel arbitrators, a secretariat composed of lawyers from multiple countries, and innovative, progressive, user-friendly, and efficient rules. It continuously updates and improves its international arbitration rules, making the arbitration process fairer and more transparent and improving arbitration efficiency. On the other hand, as global economic integration advances, economic exchanges between the Asia-Pacific region and other regions have become increasingly frequent. Parties with commercial interests in the Asia-Pacific region are increasingly willing to resolve disputes "locally," which further increases the influence and attractiveness of Singapore's international arbitration institutions.
二、Supportive Approach of the Singapore Courts and Judiciary Toward Arbitration
In our previous articles on Singapore arbitration and third-party funding, we mentioned that Singapore is an international "arbitration-friendly jurisdiction." Its courts and judicial authorities have adopted a positive attitude toward the use of arbitration as a dispute resolution mechanism. The judicial system gives arbitration maximum support and minimal intervention. Where possible, the courts will uphold the validity of arbitration agreements. At the same time, the Singapore courts also respect the commercial intentions of the parties, which encourages parties to international arbitration to use arbitration to have their awards enforced. In addition, the courts may stay litigation in favor of arbitration. If a party brings a court action in breach of an arbitration agreement, any party may apply to the court to stay the proceedings before submitting its defence, and the court shall order a stay unless it considers that the arbitration agreement is null and void or incapable of being performed (Section 6 of the IAA). Judicial practice shows that when reviewing the validity of an arbitration agreement, the Singapore courts conduct only a prima facie review. As long as the arbitration agreement is preliminarily found to be valid, the court will stay the litigation. This also reflects Singapore's strong support for arbitration.
三、Neutrality and Impartiality of Singapore as a Seat of Arbitration
Singapore is located on the Strait of Malacca, with commercial shipping routes connecting the Asia-Pacific region with Europe and the Americas. It is an important international trade and services center. As a former British colony, it follows the common law system and is also situated at the geopolitical intersection of East and West. This highly special geographical location and its inclusive history and culture have promoted recognition of Singapore as a neutral seat of arbitration. Taking the arbitration process as an example, SIAC has hearing centers in major Asia-Pacific cities such as Seoul, Shanghai, Hong Kong, Mumbai, and Gujarat. It can determine which country's law applies according to the parties' needs. Hearing arrangements can also follow the parties' preferences; the venue, language used, and selection of arbitrators can all be customized and adjusted. The aim is to reduce arbitration costs as far as possible, improve arbitration efficiency, and continuously optimize its rules to ensure its professionalism and neutrality. In the context of the Belt and Road Initiative, if the arbitration matter is a complex project dispute, the parties may not even need to go to the courts and juries of another country to resolve it. They can choose industry experts to help make decisions, thereby avoiding local judicial protectionism. In addition, Singapore is also very strict in maintaining confidentiality of information for parties in international arbitration. Arbitration awards can also be enforced in the 168 contracting states of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards worldwide.
四、Electronic Convenience of International Arbitration in the Post-Pandemic Era
Historically, although most stages of international arbitration proceedings had a relatively high degree of paperless and online operation, hearings were always conducted in person. For this reason, the social distancing requirements during the COVID-19 pandemic had a significant impact on in-person hearings. In August 2020, the Singapore International Arbitration Centre published the SIAC Remote Hearing Protocol and installed advanced video conferencing equipment and related software in its hearing building, with technical support provided by experienced IT companies. This has given parties who have recently participated in online hearings at SIAC a good user experience: the arbitrators hearing the case used the remote hearing facilities, while parties located as far away as London, Taipei, and Sydney were able to participate by video link. Parties also increasingly expect the seat of arbitration to provide judicial and/or political convenience and to adapt quickly to changing user needs, such as the ability to use high technology to ensure procedural efficiency and effectiveness. As awards may be signed electronically, this need has received increasing attention after the COVID-19 pandemic.
02 Limitations of International Arbitration in Singapore
一、International Arbitration Mainly Targets Cases with Relatively Large Amounts in Dispute
We need to recognize that, due to the inherent complexity of international arbitration, the process is relatively slow, and arbitration costs are relatively high. Even though Singapore has established expedited arbitration procedures, their scope of application is not universal. These are unfavorable factors that parties to cross-border disputes must consider when choosing the seat and method of arbitration. It is difficult for parties seeking low-cost, high-quality international arbitration services to have that demand satisfied through Singapore's large international arbitration institutions. This requires relevant sectors in Singapore to pay greater attention to the convenience of international arbitration for small and medium-sized cases, so as to further reduce the time and monetary costs for parties using international arbitration and improve arbitration efficiency and quality.
二、Large Institutions Are Relatively Unable to Adapt to the Diversification Trend in International Arbitration
In today's world, where regional economic and cultural integration continues to deepen and issues such as human rights and ESG are receiving increasing attention, respecting and realizing gender diversity, geographical diversity, historical diversity, and diversity of general rules among parties is also an important part of advancing international arbitration. As important components of Singapore's judicial system, Singapore's large international arbitration institutions are governed by the International Arbitration Act and the rules formulated by the respective institutions. Even though Singapore is continuously updating and improving its judicial system with the times, there is still a certain lag in timeliness, making it difficult to cover every concern and demand raised by the parties.
- For more information on arbitration and dispute resolution in Singapore, please contact a professional consultant at China-Singapore Legal News.
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Author | Yu Tianlong
This article is for informational reference only and does not constitute formal legal advice.
This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.