Mark Sachs Singapore Arbitration talk at the 2015 ICMA Conference in Hong Kong
Singapore Arbitration - Divergence and Harmony in the Shared Common Law Experience
This article starts from the premise that in commercial and shipping spheres, Singapore substantive law is, in its essentials, the same as English law. It also makes the assumption that international parties who arbitrate in Singapore broadly expect a similar experience as would be the case if they were arbitrating in London (or in terms of speed and cost maybe better) save that it is taking place in Asia where their businesses are located.
However, there are two areas where there are significant divergences between England and Singapore that may in some instances militate against common treatment or outcome. It is worth exploring these divergences and considering whether they are beneficial or whether change is warranted.
The areas of divergence I identify are (1) curial supervision of arbitration and specifically the right of appeal on points of law as exists under s. 69 of the English Arbitration Act 1996 and (2) procedural differences due to England’s adoption of the Civil Procedure Rules (“CPR”).
I should say at the outset, that it is England and not Singapore that is the outlier on both counts. In the case of rights of appeal, England has not followed the UNCITRAL Model Law as most other jurisdictions have done. England also chose to re-write the rules of court pretty much completely in the CPR casting adrift many other common law jurisdictions 2 which had previously largely adopted and followed earlier versions of the English Rules of Court.
However, with England having made the legislative choices it has, the question is whether it is in Singapore’s interest to continue on a separate path or to follow the changes in England. The answer to that question may change over time and therefore it is worth revisiting these issues from time to time and I attempt to do so here, albeit briefly in the context of these two questions as they relate to arbitration.
I also expect that at least some of the points I make can equally be made about arbitration in Hong Kong. Indeed, in some respects there is a broader issue of whether divergence in common law jurisdictions may eventually undermine and weaken the system in all jurisdictions that employ it, including England.
How “Common” is the Common Law?
The English common law has proved to be a viable export that has taken firm root in a number of jurisdictions. That is not necessarily the expected result when one considers that the common law is at its core experiential, built up through decided cases and the principle of stare decis. If one were to start with a goal of developing a set of rules to govern a society, the rational answer would be to write them down in an organized and logical pattern, grouped with headings and sub-headings so that one could easily look them up. This is broadly the path followed in civil systems. Developing a system from scratch would be incredibly daunting and the adoption of civil law systems by newly independent or states engaging in wholesale legal reform makes sense and does not simply arise from colonial history.
Indeed, the common law as developed and spread from English roots presents some unique challenges. Despite this, English common law seems to have advantages in the international commercial sphere. Some may say that this has to do with economic power wielded by powerful governments and corporations. There are certainly historical factors growing out of colonialism, the historical pre-eminence of England in shipping, trade and insurance and to a lesser extent the development of commercial structures appropriate to harnessing capital in the industrial revolution that may account for English law’s prevalence in international commercial transactions. But I expect there is more to it than this.
By now, one would expect that the historical advantage should have eroded, particularly if English common law was the lesser quality system. By now, competition should have ensured that if there were a better system, the common law would have been supplanted, particularly in the international sphere where it is difficult to monopolise rule making across borders.
Centralising and Centrifugal Forces in Common Law Jurisdictions
A digression to posit why the legal system of the United States, the world economic superpower with its own brand of common law, does not dominate international transactions: there are a number of possible factors but a very significant one must be that in fact there is no single United States jurisdiction. The United States is in fact 50 separate legal jurisdictions. In commercial law, despite a fair degree of harmonization in the Uniform Commercial Code1, decision making is still down to state judges whose decisions vary widely and are often coloured by local conditions and the United States’ own particular brand of the democratic ideal: the continued broad use of civil juries being perhaps the most influential. The intricate appeal system and the relative rarity of important commercial cases coming before the Supreme Court also militate against uniformity of approach.
Decentralisation is also a factor in other former colonies such as Canada which hinders centralised judicial decision making in the commercial sphere. Canada has 10 separate jurisdictions in its federal system. Australia has five jurisdictions. This often means that judges do not have the opportunity to specialise in areas of law to the degree this happens in England, say, with the Commercial Court. This consideration does not apply to Singapore and Hong Kong, two leading commercial jurisdictions in Asia2.
Not only are there centrifugal factors in common law jurisdictions such as the United States and Canada but England also possesses some unique centralising factors that have served to concentrate key skills in London. The specialised Commercial Court is one factor as is the commercial bar itself from which judges on the court are selected—almost always at a stage in their careers where they are particularly well versed in the commercial law and issues of the day. The separate bar also concentrates skills so that trial practice is developed among a cadre of specialists.
Given that the heart of the common law are case decisions, a well-functioning system that is responsive to developments in society and the commercial arena needs a sufficient number of disputes coming before its courts to keep the law current. England itself is a reasonably sized economy geared towards international trade producing a certain flow of commercial cases. Yet England, and in particular the Commercial Court, has continued to attract cases in many areas of commercial law from beyond England’s borders. One need only look down a list of the cast of party names in the law reports to see the international character of disputes dealt with by the English courts. Indeed, in the year 2013/2014 a foreign party was involved in 81% of the 1,100 claims issued in the English Commercial Court and in 48% of cases all parties were from outside the UK3. That this has happened historically is no assurance that it will continue into the future but the stars continue to largely align at least at present4.
English common law also faces centrifugal stresses. English judges are perhaps increasingly hemmed in by European law. Although usually European rule making is not a direct incursion into the commercial areas of the common law, it can have an impact in curtailing the cases that come before the English courts due to jurisdictional rules or may in some instances supervene the application of common law principles altogether.
There are also divergent forces at work when considering the influence of English common law outside England. A very significant factor has been the differing approaches to procedural reform undertaken in the past two decades. The UK’s adoption of the Civil Procedure Rules in 1997 marked an abrupt change, making a good deal of prior judge-made interpretation of the former Rules of Court inapplicable. Other common law jurisdictions such as Canada, Australia and Singapore were, at around the same time, adopting various aspects of case management in their own civil procedure rules but none adopted as radical a rewriting of procedural rules as is found in the Woolf reforms. This has meant that there has been a decided severing of the evolutionary chain where there was previously considerable cross-fertilisation of case law interpreting procedural rules between England and other aligned common law systems such as Canada, Australia, Singapore and Hong Kong. What one now finds is that there are a number of common law jurisdictions using the former English Rules of Court, variously amended. However, England is going it alone in terms of wholesale re-engineering of the rules.
Those of us working in the sphere of international commercial transactions and the law that supports them, have an interest in avoiding excessive parochialism and supporting a relatively harmonised and predictable body of current law that attempts to address the pressing issues of the day and turns out quality judgments at the highest attainable level.
Whatever the factors at play as briefly outlined above, the English Commercial Court and the appellate courts above probably have the best track record of producing high quality reasoned judgments on a consistent basis and in the volume required to keep alive the ideal of an evolving and current common law system in the international commercial arena.
Singapore Arbitration and the Role of English Law
Particularly in the commercial sphere, the Singapore courts routinely adopt English high court decisions thereby incorporating them into Singapore common law. Indeed, I expect that Singapore High Court judges would think long and hard before departing from a principle or rule of law established in English commercial law. This is particularly so in maritime law where harmonisation between jurisdictions is of particular value.
Singapore, with a population of only five million, cannot produce on its own a sufficient volume of cases to go it alone in developing a stand-alone common law system. Indeed, a great strength of commercial Singapore is its openness to international ideas, people and businesses from other parts of the world. Just as Singapore could not on its own develop a modern medical system with such a small patient base, of necessity Singapore needs to align itself with the best set of rules for international trade and transactions. That system is English common law. Whether by happy historical accident or choice, I think this is broadly understood as being one of the pillars of Singapore’s miracle.
In the field of international arbitration, Singapore is attempting to do more than follow, it wants to compete and perhaps lead at least for disputes involving Asian parties. Fundamentally, the message Singapore is sending is that parties can expect the application of English commercial common law to their disputes, but in a forum closer to home with arbitrators and counsel who may be more attuned to their cultures. Until recently, the Singapore Chamber of Maritime Arbitration (“SCMA”) made the application of English law the default option in its model arbitration clause. The model clause now gives Singapore and English law equal billing requiring the parties to strike out one or the other.
However, is it correct that parties can expect that the experience of maritime arbitration in Singapore will be much the same as in England, albeit geographically elsewhere? In asking this question I do not suggest that arbitration in Singapore needs to be in all respects the same as in England nor do I suggest that English arbitration is automatically superior. Indeed, London arbitration has come in for criticism, principally on issues of costs5 (lawyers’ fees and counsel perhaps more than arbitrators) and timeliness. However, as I think I have shown, the underlying premise of arbitration in Singapore is that English law (or a very close facsimile) will be applied and therefore the expectation would naturally be that arbitration in Singapore should largely be similar to England if not pretty much the same product.
As outlined in my introduction, I think there two areas, however, in which divergence between England and Singapore (along with the other common law jurisdictions discussed) means that arbitration varies significantly between England and the rest.
Right of Appeal on Points of Law
The English arbitration statute6 is unique by virtue of s.68 and s.69 of Arbitration Act 1996. Singapore as with most other major jurisdictions adopted the UNCITRAL model law in enacting its International Arbitration Act in 1994. The premise of the Model Law was that to make arbitration effective and a true alternative to court adjudication the grounds upon which national courts could intervene were required to be extremely limited. England opted to retain a limited right for judicial review of arbitration awards, for either serious irregularity (s. 68) or errors of law that are “obviously wrong” or where the question was one of “general importance” and the decision made was open to serious doubt.
Given that the Model Law represented an aspiration on the part of UNCITRAL and some governments and trade bodies to boost international arbitration and that excessive court intervention was indeed an issue in many states this may well be a laudable requirement. One can see that in many jurisdictions that do not have specialised commercial courts or where federal systems also create a diffused and variable approach to decision making, the Model Law approach continues to make sense.
When the s. 68 and s. 69 provisions were adopted, England already had a well-established arbitration system that included rights of appeal or review to the courts in prescribed circumstances and a considerable body of case law governing that process. England opted to modify that system rather than to do away with it altogether. Curial intervention was considerably restricted and the general ethos of the Model Law was adopted save for limited exceptions, principally as found in ss. 68 and 69. At the time the 1996 Act was adopted it was not known whether these modifications would achieve the right balance. However, almost 20 years has now passed since its enactment and an assessment can be made. In England s.68 and s. 69 challenges set a significant hurdle that is not easy to meet and the vast majority of arbitration awards are not successfully challenged. Applications for leave under ss. 68 and 69 are dealt with by the Commercial Court summarily and on paper allowing for quick and inexpensive dismissal of unmeritorious challenges. Although successful challenges under ss.68 and 69 may possibly have increased recently, there does not appear to have been a flood of successful challenges and curial intervention in English arbitration has been kept at a modest level. I think it is fair to say that arbitration has not been undermined and the system is working.
Although the necessity of this sort of supervisory role for the courts might be open to debate, the fact is that the possibility of a second look by well-qualified commercial law judges as to whether the arbitrators have made a serious legal error and have not allowed the process to go seriously off the rails provides an incentive for arbitrators to do a reasonably thorough and competent job. Another element of s. 69 not to be overlooked is that issues of true general importance will see the light of day in court allowing for the development of the common law on those issues. Indeed, if arbitration were too successful such that all cases in an area of the law were referred to private arbitration, development of the common law would cease to function.
Another factor that should enter the equation is the expectations of those who fund arbitrations. Often in maritime arbitration the repeat users of the system are P&I clubs and other insurers that fund shipping arbitrations. The costs of taking an arbitration through full hearing are similar to (if not sometimes greater) than court proceedings. Given the resources it takes to test an issue through trial, whether in arbitration or in court, it seems to me that those paying the costs reasonably expect a high level of legal rigour in the process. The curial supervision provided by ss. 68 and 69 recognises that arbitration is part of the overall process and expected to achieve comparable results, albeit hopefully through a more streamlined and flexible procedure.
It is understandable that early on Singapore would have opted to follow the mainstream and adopt the UNCITRAL Model Law as so many other jurisdictions did. However, this may now be worth a second look. The fact is that without a ss. 68/69 procedure, arbitration in Singapore is significantly different than in England.
Recent decisions from the Singapore courts show this to be the case as the courts wrestle with arbitration decisions that may have gone wrong in the court’s view. However, the courts in Singapore are not permitted to address legal errors directly. When adopting the Model Law Singapore added an additional ground permitting curial intervention for breach of rules of natural justice on the part of the arbitrators. This ground for intervention has produced several challenges of arbitration decisions in the Singapore courts in recent years that allowed challenges to awards based on a fairly wide interpretation of the rules of natural justice, including where an award appears to omit to deal with submissions made to the tribunal and have involved the courts in detailed reviews of awards.
Recently, however, the Singapore Court of Appeal has limited the basis for curial review for breach of natural justice to issues only of procedural unfairness emphasising that indeed the arbitrators are allowed to get the case wrong both on the facts and the law and natural justice challenges cannot be a disguised appeal7. The Singapore courts have also expressed disquiet about the way in which challenges to arbitration awards come before them with parties often filing full records of the arbitration process requiring a review of the entire arbitration. The tension inherent in curial review of arbitration awards in Singapore has recently been well illustrated in the judgment of Chan J in TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd  SGHC 186:
However good or bad in the eyes of a party, the decision of an arbitral tribunal with the requisite jurisdiction is final and binding. The general proposition of law is a manifestation of the fundamental principle of interest reipublica ut sit finis litium or finality in proceedings. Arbitration will not survive, much less flourish, if this core precept is not followed through by the courts. The integrity and efficacy of arbitration as a parallel dispute resolution system will be subverted if the courts appear unable or unwilling to restrain themselves from entering into the merits of every arbitral decision that comes before it. As is well-established under Singapore arbitration jurisprudence, the power to intervene in arbitrations generally, and more specifically to set aside awards, must and should only be exercised charily, in accordance with the rules under the applicable arbitral framework.
Although parties have the right and expectation to a fair arbitral process and the courts should give maximum effect to these safeguards in deserving cases, parties must not be encouraged to dress up and massage their unhappiness with the substantive outcome into an established ground for challenging an award. Particularly for international commercial arbitration under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”), it is imperative that an application to set aside an award under s.24 read with Art. 34(2) of the UNCITRAL Model Law for International Commercial Arbitration 1985 (“Model Law”) is not a guise for rehearing of the merits. Unfortunately, as this case exemplifies, sieving out the genuine challenges from those which are effectively appeals on the merits is not easy under the present law.
I think it can be openly posited whether a limited right of appeal on points of law might result in less litigation not more. At least the debate could focus directly on legal error rather than more difficult issues of natural justice. Appeals on points of law are usually on discrete issues of law and, properly controlled by the courts, need not be excessively time consuming.
Viewed as a positive step towards harmonisation, I suggest that Singapore is in fact in an ideal circumstance to consider adopting a similar regime to ss. 68/69. It, like England, is a unitary legal jurisdiction. It need not worry about a judiciary running amok in a far-flung federal system. It also has its share of commercial and shipping cases and a judiciary of a high order well-able to maintain a disciplined approach to curial intervention in arbitration. To the degree Singapore helps feed the joint body of commercial and shipping common law decisions, the views of its judiciary on important issues of the day are welcome and excluding Singapore cases that are diverted to arbitration and completely shielded from judicial comment may unnecessarily remove a body of cases that could contribute to the development of the common law.
One possible solution would be for Singapore arbitral bodies such as the SCMA to consider incorporating a right of appeal on points of law into their rules. This would appear to have been provided for in Singapore’s arbitration legislation. Singapore has two pieces of legislation governing arbitration, the Arbitration Act applicable to domestic arbitration and the International Arbitration Act. The domestic act preserves the right of appeal on issues of law in a manner essentially the same as the English position. Section 15(1) of the International Arbitration Act permits the parties to opt out of the Model Law provisions and it would therefore appear open to the SCMA to amend its rules to allow for such appeals.
I acknowledge that this would not necessarily be a full answer as the question of how appeals should be dealt with procedurally by the courts would still need to be addressed. In particular, there would be the problem of whether an oral hearing and full argument would be permitted in all cases. Possibly, procedural issues for bringing appeals could be dealt with through specific provisions in the rules of court or even a practice direction.
The second major area of divergence I have identified between England and Singapore are the procedural rules of court. One might ask why this is of significance in arbitration which is not bound by the rules of court procedure. However, although arbitration does not follow the letter of the procedural rules of court, the rules tend to underpin what is perceived as fair. Whether arbitration differs from court, it is usually because the parties or arbitrators perceive that particular aspects of procedure (e.g. the formalities of the disclosure process, rules of pleading or rules governing witness evidence a trial) can be truncated, dispensed with or varied. However, when procedural disputes arise in arbitration, issues are often resolved against a backdrop of what the CPR Rule requires. This presents a particular conundrum because arbitration procedure is largely unwritten and has been developed by its practitioners.
Counsel on both sides of a dispute will generally have in mind the procedural rules with which they are familiar and which set a standard of procedural fairness in their own jurisdiction. This is certainly my experience in Singapore and, so far at least, Singapore arbitrations tend to be guided by the Singapore Rules of Court. This does mean that arbitration procedure in Singapore tends to differ from England in a number of areas. I do not propose to be exhaustive here but refer to a few points for illustration. Letter format statements of case do not tend to be used, with parties tending to more formally plead out their cases. In my experience this makes arbitration in Singapore, particularly in smaller cases, closer to litigating in court than is my experience with London arbitration. Witness statements in Singapore arbitration tend to follow those employed in court and this usually means appending much of the relevant documentation as exhibits as this is the method used to prove documents in court. As such, witness statements therefore tend to be voluminous. Formal lists of documents are employed with parties usually engaging in a Redfern Schedule request and response format. Perhaps the most significant difference between England and Singapore is how final submissions are addressed. In Singapore oral final submissions are not the norm and the parties usually exchange written final submissions 14 or more days after the close of evidence with a further round of written replies another 14 days thereafter. Taken together, I find that arbitration in Singapore largely replicates court procedure. Particularly for smaller cases, there is a considerable variation in practice as compared to London where documents-only arbitrations are common place.
Another significant factor that impacts on how arbitrations are run is that Singapore has not yet developed a cadre of full-time arbitrators. Where arbitrators are largely practicing lawyers, it makes sense that the procedure followed will closely model court proceedings.
Most of these items are quite minor but taken together can make for a considerably different arbitration procedure than in English arbitration. Arbitration should be flexible and in many respects international arbitration in Singapore is at an early stage. Particular procedures will no doubt continue to develop. Singapore has also made international arbitrators welcome on its panels with a number of LMAA full-time arbitrators listed on the SCMA panel of arbitrators. This should allow for cross-fertilisation to occur where particular procedures well-adapted to arbitration have been developed in London.
Singapore has made great strides in building an arbitration infrastructure and is indeed well-situated to handle maritime arbitrations involving Asian parties who might previously have chosen London as the default option. Given the expectation of parties that the results achieved should closely parallel those under English law, it makes sense to closely examine those areas that may cause divergence in result to see whether they can or should be addressed. In my view, appeals on points of law would be no bad thing and would achieve laudable goals in adding to the body of common law decisions in maritime law.
As to procedural differences, these are likely to be addressed in a practical way as maritime experience in Singapore grows. Although there is divergence in the rules of court, there is not much we can do about the CPR. Their introduction in England has not been a panacea and is unlikely to be replicated elsewhere. The more minor differences in procedure probably do not matter terribly much in the greater scheme of things. Where convergence on procedural issues is seen as worthwhile, arbitrators in Singapore will likely be flexible.
1 A recommended set of laws covering some specific transactions including leases, negotiable instruments, bank deposits, letters of credit and others adopted in all 50 US states but with variations.
2 India, while acknowledged here as the largest common law system (although it is a civil/common law hybrid in many respects) is not a jurisdiction whose law has significant influence outside of its own borders. The reasons for this are beyond the topic of this paper.
4 Arbitration, which is private in nature, presents challenges to the development of the common law if popularized to the extent that the right number of cases in the appropriate areas are diverted from public decision making in the courts. There is some rebalancing achieved through s. 69 of the English Arbitration Act as discussed further below.
5 Rees PJ, The Conduct of International Arbitration in England: the Challenge has Still to be Met, (2007) Arbitration International 23 3 505.
6 This is the case so far as international arbitration is concerned. As dealt with below, Singapore has adopted the NEMA guidelines in the separate Arbitration Act which applies to domestic arbitration.
7 BLC v. BLB  SGCA 40.