International Arbitration (Amendment) Bill

(7 min) Mr Louis Ng Kok Kwang (Nee Soon): Sir, Singapore has emerged as one of the leading hubs for international arbitration in recent years. In 2019, the Singapore International Arbitration Centre or SIAC set a new record with 479 new case filings and parties from over 59 jurisdictions chose Singapore as their destination for arbitration.

The amendments in this Bill will further strengthen our international arbitration regime and raise Singapore’s profile as a global centre for international arbitration. Parties who require arbitration services will also have access to a wider range of options best tailored to their needs.

That said, I have a few clarifications on the Bill, many of which, Minister Edwin has already clarified on.

My first clarification is on the default mode of appointment of arbitrators in multi-party arbitration. It is good that we recognise that we need to provide for the appointment of arbitrators in multi-party disputes which are on the rise. They occur, for instance, in disputes involving joint ventures, mergers and oil and gas acquisition.

The new section 9B details the default mode of appointment for multi-party situations. There is some concern about point 4 of this section, which states: if either the claimants or the respondents fail to appoint an arbitrator, the appointing authority must appoint all three arbitrators. The authority can also reappoint or revoke any appointments made.

It is unclear why the failure of just one side to appoint an arbitrator means that the appointing authority must now step in to appoint all three arbitrators even if the other side managed to agree on their arbitrator.

Essentially, this means that failure to agree by one side, makes the agreement reached by the other side ineffective.

I do understand that it is common for arbitration institutions to require the appointing authority to appoint all three arbitrators if either the claimants or the respondents are unable to come to an agreement on an arbitrator.

However, there is a permutation on this model under article 8(1) of the 2020 London Court of International Arbitration Rules. It says: where all parties have agreed in writing for each side to nominate a single arbitrator, but one side is not able to come to an agreement on a nomination, the other side is free to make its nomination.

Party autonomy is a significant feature of arbitration.

To ensure that parties’ agreements are given consideration, can the Minister confirm that the appointing authority should take into account the agreement reached by parties on one side on their arbitrator when appointing the three arbitrators?

My second clarification is on the amendment to expressly recognise the powers of the arbitral tribunal and the High Court to enforce obligations of confidentiality.

This amendment is welcome and will assist in tightening the process and preserving confidentiality of the proceedings.

That said, despite the express recognition, the Bill does not codify confidentiality obligations that the Minister mentioned.

Given that one of the main draws of arbitration is the confidentiality of proceedings, and codifying confidentiality obligations will assist in reducing uncertainty and potential disputes over these obligations, can the Minister clarify the reasoning behind deciding against codifying confidentiality obligations?

For a good example, we can take a look at the arbitration scene in Hong Kong. The Hong Kong Arbitration Ordinance expressly provides for a statutory duty of confidentiality in arbitration.

Under section 18(1) of the Arbitration Ordinance, unless agreed by the parties, no party may publish, disclose or communicate information relating to the arbitral proceedings and awards.

Notably, this confidentiality extends to the existence of arbitration proceedings. This position is also mirrored in article 45.1 of the 2018 Hong Kong International Arbitration Centre Rules.

Hong Kong was ranked among the top five seats of arbitration worldwide in 2018 and still continues to have a lead over our own SIAC in 2019.

We note that codifying confidentiality obligations may lead to some challenges. For instance, there may be difficulties in defining the scope of the duty of confidentiality and its exceptions.

However, such difficulties are already present in our current approach of implying the duty of confidentiality in arbitration.

In fact, it is not uncommon for arbitration proceedings to be delayed because of parties disputing over their scope of implied duty of confidentiality. The delay reduces one of the main draws of arbitration – its efficiency.

I hope the Minister will consider codifying confidentiality obligations, whether in the Act itself or in subsidiary legislation, as this would encourage parties to arbitrate in Singapore.

My final clarification is on the exclusion of the proposed opt-in mechanism for parties to incorporate a right to appeal to the High Court, on a question of law arising out of an arbitral award.

Can the Minister clarify the reasoning behind deciding against including this right to appeal on a question of law?

As things stand, parties may only apply to the High Court to set aside an arbitral award on relatively limited grounds. These grounds include fraud, corruption, breach of the rules of natural justice or contravention of Singapore’s public policy.

One of the key components of arbitration proceedings is finality. However, this should not be at the expense of leaving questions of law unresolved. This may potentially have significant impact on the substantive rights of parties.

Furthermore, the opt-in mechanism allows parties to choose to exercise this right or to rely on the default position. This adds to Singapore’s commitment in giving parties the flexibility to determine certain issues and procedures in their arbitral proceedings, as compared to court proceedings.

In fact, the right to appeal on a question of law has already been expressly recognised in our domestic arbitration. Section 49 of our Arbitration Act provides that a party to arbitral proceedings may, with the agreement of all parties and with the leave of the Court, appeal to the Court on a question of law arising out of an arbitral award.

Giving parties this option to have a right to appeal on a question of law may not only encourage more parties to arbitrate in Singapore, but also assist in determining case law in Singapore.

Sir, in conclusion, I look forward to Singapore increasing its global standing as a centre for international arbitration.

Notwithstanding my clarifications, I stand in support of the Bill. If I may add, Sir, I slowed down my speech and spaced it out significantly so that I did not deliver my speech in a quick-fire fashion as Minister Edwin mentioned at the last Sitting about my speeches. I took into account the Minister’s previous feedback and I hope that he will now agree to all my proposals in this speech.

Response Mr Edwin Tong Chun Fai: Mr Speaker, Sir, I thank all the Members, particularly Mr Ng for slowing his speech, but I will have a response for him, perhaps in a less quick-fire fashion.

Sir, I am very grateful that the Members have highlighted that the principle of party autonomy, which really has been one of the key considerations in the way in which we have organised arbitration rules or laws. And obviously, our whole eco-system in encouraging parties to come into Singapore and choose Singapore as a neutral, trusted venue.

We understand and agree with this principle which really undergirds the amendments that we have proposed in this Bill.

Members have sought various clarifications and I will address these in turn.

Mr Ng’s first question relates to the question of whether the appointing authority should also take into account the agreement that had already been reached by the parties at the stage where the appointing party’s role is triggered, and whether it should take that into account when deciding on the appointment all three arbitrators.

Sir, that was a very good question and let me just give a little bit of background before I answer Mr Ng’s question. In the feedback we that we received from the various consultations, the principle of equal treatment of the parties in the context especially of the appointment of the tribunal was something which was emphasised to us. It is part of the adjudicative system.

Arbitral institutional rules and also the national laws unanimously impose a requirement, whether express or implied, that the parties be treated equally throughout the process.

Although the solutions adopted differ in some particulars, most major institutional rules, including the LCIA Arbitration Rules that Mr Louis Ng referred to, now either permit or, in fact, require the institutions to designate the entire tribunal in multi-party proceedings. In other words, the moment there is a disagreement on one party's nomination, then the rules either permit or, in fact, they require the appointing authority to designate the entire tribunal. That is the position in LCIA and also some other major institutions. The reason behind this is to preclude imbalance or, at least, the perception of imbalance in the way in which the tribunal is subsequently appointed and avoid a situation where just one party has a say on his or her nominee for the arbitration.

In scoping section 9B, we can see that there are many reasons why a party may not be able to agree or has chosen not to agree to the arbitrator. It could be because parties do not identify with the same “side” as the party nominating it even though we may be co-respondents to the arbitration, or it may be because one party is intentionally delaying the proceedings, not nominating, or dragging its feet, as I have mentioned earlier, so as to trigger the default mechanism to appoint all three and, in that process, hope to sideline the choice put up by the other party. And we are very much alive to that possibility.

So, to allow the appointing authority some flexibility and the discretion to take into account what I have just articulated and, indeed, what Mr Louis Ng had put forward in his speech, the appointing authority is now clothed with the ability to look at all relevant circumstances and we do not define upfront what that might be precisely because it may differ from case to case and the antecedent conduct of the parties in terms of the choice of the arbitrator would be something that the appointing authority would look at.

So, to that extent, the authority can look at factors, such as whether the parties on one side may have reached an agreement or not in the way that Mr Louis Ng has put it, or the reasons why one side was not able to come to an agreement. That is also relevant. It may not be because of trying to frustrate the process or trying to delay the proceedings. That is also relevant. And the appointing authority will have the ability to look at and study all these factors.

In the context of appointing the three arbitrators, we have given broad remit to the authority to do so. So, it may reappoint. We have expressly said it may reappoint, meaning if one party has already chosen, it may reappoint, or it may decide to revoke the appointment altogether and decide afresh.

We believe that this strikes the right balance between the principles of equality and also party autonomy, something that Mr Louis Ng and Mr Vikram Nair also spoke about.

On the question of confidentiality, the amendment is to recognise that the tribunal and the High Court will have power to enforce these obligations. The amendments do not seek to change the law or add new obligations, but seeks to ensure that it is clear beyond the pale that the tribunal and the High Court will have the power to enforce these obligations.

Mr Patrick Tay asked for clarifications on instances where the obligations might be waived. Sir, the duty has its roots in common law. As Mr Patrick Tay mentioned, Justice Kan mentioned this in a 2003 decision that it is implied that parties who choose arbitration are more likely to take into account the fact that these are private hearings and have the cloak of confidentiality.

The Courts, however, have also noted – and I think Mr Patrick Tay also briefly alluded to that – that we should take care not to generalise what that duty would encompass upfront, that is, not to spell it out upfront. Mr Vikram Nair also noted that this gives a degree of flexibility because, as a case proceeds, the quality and nature of confidentiality over a specific piece of information or document might change. Likewise, whether or when a confidentiality obligation is to be waived must also be assessed in the context of the facts in which the issue arises.

I would add that, in any given case, regard must also be given to the chosen institutional rules that the parties have agreed will apply to their own arbitration and whether or not there are any specific rules in that setting relevant to the way in which they look at confidentiality.

To a reference that Mr Louis Ng brought up about institutional rules, I should add that the Singapore International Arbitration Centre (SIAC) Rules do stipulate the scope of confidentiality and that it is stated to cover the existence of the proceedings itself, like the Hong Kong position that Mr Louis Ng mentioned – the pleadings, evidence and what other materials might arise in the context of the proceedings and, of course, all documents produced in discovery in those proceedings, and, finally, the award that was issued at the culmination of the proceedings.

I will come back to this point in a moment as I address Mr Louis Ng's other point in a less quick-fire way.

Some examples of situations where the Courts have found that confidentiality obligations have been waived or where disclosure of confidential information is accepted include the following:

(a) where the award is registered as a Singapore judgment and, obviously, it then enters into the realm of the public domain and privacy can no longer be attached to those proceedings and, therefore, the award itself;

(b) alternatively, where parties have, by their own conduct, indicated for an agreement for the confidentiality to be waived, for example, by not requesting that an open Court proceeding in which confidential information is to be discussed or would be brought up in those proceedings, not requesting that those proceedings be heard in-camera; and

(c) where there is reasonable suspicion of criminal conduct and there is a “public interest” behind why that information ought to be disclosed and an exception made for the confidential information arising out of the arbitration proceedings to be disclosed.

Moving to Mr Louis Ng's question as to why the obligation of confidentiality is not codified and whether we would consider doing so, let me again give a bit of background.

As I have mentioned earlier, it has its roots in common law, so it is implied in the proceedings. Mr Louis Ng mentioned that, in Hong Kong, it has been codified and it might then improve or, at least, enhance the proceedings. Let me just clarify that the fact that there is a duty of confidentiality is really quite unarguable. So, what Hong Kong has done is to say that there is a duty of confidentiality. But in our proceedings here in Singapore, especially in the context of what I have mentioned in the SIAC Rules, it is really quite unarguable. What the real issue is, when it comes to confidentiality, is often what are the quality and nature of that confidentiality. What does it do to the information and documents that are exchanged in those proceedings? That, as I have mentioned earlier, might take a different shape or be differently contoured, depending on the context.

So, what exactly is that scope? To whom does it apply? Does it apply only to the parties or the witnesses? You may have to look at what are the facts of that case, bring them up and the context, before you assess that question. When does it apply? Does it apply at the start? But it may not have the same quality as the start if, subsequently, information is disclosed or allowed to be disclosed or divulged by one party. So, the further context as to when you are looking at the issue will also be relevant.

Of course, finally, how is it best enforced? Is it by way of an injunction of some sort, a mandatory injunction, or would the parties be allowed to disclose it in a measured way under a ringfence or redacted.

So, these are all questions that I hope Mr Louis Ng will appreciate, but which arise maybe as a consequence of there being a confidentiality obligation in the first place which, as far as we are concerned, there is no argument over. Which is why we are proposing these amendments to allow the tribunal and the High Court to enforce these obligations.

But the question as to what you do with the confidential obligations, how you enforce, is something that ought to be looked at case to case and context to context. That is something that the High Court here in Singapore and also internationally have espoused. So, for that reason, we have decided against codifying and setting out the exact scope to what it applies and when it applies and let the Courts and the tribunal assess that question on a case-by-case basis.

In addition, we have also taken this view because it is also a recognition that this area of law is still evolving. There have been cases, both locally as well as internationally. Some, Mr Patrick Tay has cited earlier, and also International case law on this and it is a question that is best left to the common law at this stage to develop more fully.

I would add to Mr Louis Ng's point also that where parties to an agreement – if you come to an agreement and you have a specific concern, you have a specific confidentiality attached to, say, an IP patent or to a piece of information that is very sensitive – it is open to the parties to expressly incorporate provisions specific to their own needs in their arbitration agreement and that will be enforced. Members will remember that, at the outset, I mentioned that the confidentiality arises in a number of ways, one of which is through the parties' express agreement in the arbitration agreement itself.

Mr Louis Ng will know that the Courts have consistently looked at the scope of the arbitration agreement and to study that to assess the extent of the confidentiality obligations.

Next, let me move on to the amendments which have considered in the consultation but not brought in this Bill. Both Mr Louis Ng and Mr Zhulkarnain Abdul Rahim have enquired about these amendments and the proposals that were considered. I have briefly outlined these other considerations earlier and they broadly relate to the opt-in right of appeal and the proposal for the waiver or limitation of the annulment grounds.

These are still being studied and are not part of today's Bill, but I welcome Mr Vikram Nair's as well as Mr Zhulkarnain Abdul Rahim's views on them. I think Mr Louis Ng also said that these would add value to our landscape. We agree with the views that are set out. We will add them on to the very many REACH views that we have received so far on this and study them together with the various stakeholders that I have mentioned at the outset. When we are ready with that, we will come back and I am sure we will also consult with Mr Louis Ng and the others who have raised the points here.

In the final analysis, on these points, I want to assure Members and the arbitration community that my Ministry recognises the range of options and the diversity of views on these proposals. As I have said, some go towards whether or not they should be implemented; others have given us suggestions as to how they can be implemented. The operationalisation of these mechanisms also needs some study to ensure that they are consistent and that they lend themselves to fairness.

Sir, in conclusion, we believe that this Bill introduces amendments that best serve the needs of the arbitral community. As I have flagged, this is a process that is on-going and we are always taking into account what users want to see – developments in the law and, of course, international conventions and practices as well. We will continue to make Singapore an attractive seat for arbitration disputes.

Source: Hansard