Singapore International Arbitration Centre Arbitration Rules 2016: key changes and potential impact

As discussed in our earlier blog post, on 1 July 2016, the Singapore International Arbitration Centre ("SIAC") released the sixth edition of its Arbitration Rules (the "2016 Rules"). The 2016 Rules supersede the 2013 version of the SIAC's rules (the "2013 Rules") with effect from 1 August 2016.  The 2016 Rules were jointly produced by the SIAC Secretariat and various subcommittees of the Court of Arbitration of SIAC and were finalised following an extensive public consultation exercise.  

The 2016 Rules aim to further promote the cost-effective and efficient resolution of arbitrations.  Key highlights include new provisions on multi-party arbitrations, consolidation, joinder and a procedure for the early dismissal of claims and defences.  SIAC Registrar, Ms Delphine Ho, stated that the "unprecedented number of comments on the draft rules from users and stakeholders… enabled us to produce what we are confident will be the gold standard of international arbitration rules".

Readers may also be interested to know that the proposed SIAC Investment Arbitration Rules are still being finalised and are due to come into force on around 1 September 2016.

In this post, we summarise the key changes introduced by the 2016 Rules and consider their potential impact.

2016 Rules – notable changes

Multiple contracts

The 2016 Rules introduce a simplified process for the commencement of disputes arising out of multiple contracts.  A claimant in a multi-contract dispute may: 

1. file multiple Notices of Arbitration in respect of disputes under each contract, and concurrently apply to consolidate the proceedings; or
2. file a single Notice of Arbitration for all disputes, which will be deemed to be an application to consolidate all proceedings (Rule 6).

Any party may also make an application for consolidation even after separate sets of arbitration proceedings have been commenced.  The new rules governing the consolidation of proceedings (Rule 8) will apply.

Where a claimant files multiple Notices of Arbitration, the Registrar will accept a single filing fee for all arbitrations sought to be consolidated, although additional filing fees would have to be paid where the application for consolidation is rejected.  Similarly, where a claimant has its request for consolidation rejected when filing a single Notice of Arbitration for multiple proceedings, it will have to file further Notices of Arbitration in respect of each arbitration that has not been consolidated and pay additional filing fees for each.

Consolidation 

Consolidation is a process through which two or more separate proceedings are combined into one single set of proceedings. Rule 8 of the 2016 Rules states that parties can consolidate proceedings by either applying to the Court of Arbitration of SIAC (the "Court") prior to the constitution of the Tribunal, or the Tribunal itself, if consolidation is requested after its constitution. 

A party may file an application for consolidation if:

1. all parties have agreed to the consolidation;
2. all the claims in the arbitration are made under the same arbitration agreement; or
3. the arbitration agreements are compatible, and:
   • the disputes arise out of the same legal relationship;
   • the disputes arise out of contracts consisting of a principal contract and its ancillary contract; or
   • the disputes arise out of the same transaction or series of transactions. (Rule 8.1)

If a Tribunal has already been constituted, the arbitrations can only be consolidated if the same Tribunal has been constituted in each of the arbitrations or no Tribunal has been constituted in the other arbitration(s).

These changes are an improvement to the 2013 Rules, which were silent on consolidation.[1] This new provision, in tandem with the new rules on joinder and multiple contracts, therefore provides an important measure of certainty to parties dealing with multiple contract scenarios.

Joinder of additional parties

Under Rule 7, both parties and non-parties to an arbitration may now apply for joinder or intervention either prior to or after the constitution of the Tribunal provided that:

1. the additional party to be joined is prima facie bound by the arbitration agreement; or
2. all parties, including the additional party, have consented to the joinder of the additional party. (Rules 7.1 and 7.8)

Applications for joinder of additional parties made prior to the constitution of the Tribunal are to be made to the Registrar, whereas applications after the constitution of the Tribunal are to be made to the Tribunal itself.

It is important to note that where an application for joinder is granted, the date of receipt of the application for joinder shall be deemed to be the date of commencement of the arbitration in respect of the additional party (Rule 7.5).

Where an application for joinder is granted, the Court may revoke the appointment of any arbitrators appointed prior to the decision on joinder (Rule 7.6), although this is without prejudice to the validitof any act done or Award made by the arbitrator prior to the joinder of the additional party (Rule 7.7).

This new rule on joinder provides a welcome clarification on the circumstances in which parties can be joined to or intervene in an arbitration under an agreement to which they are a party.

Early dismissal of claims and defences

 Rule 29 introduces an early dismissal mechanism for claims or defences which are manifestly without legal merit, or which are manifestly outside the jurisdiction of the Tribunal. This is conceptually similar to summary judgment procedures available in the courts of some jurisdictions. 

An application for early dismissal must state in detail the facts and legal basis supporting the application. The Tribunal may, in its discretion, allow the application to proceed (and may therefore also decide not to hear an application that it considers to be wholly unmeritorious). If the Tribunal decides to hear the application, it must after giving the parties the opportunity to be heard, decide whether to grant, in whole or in part, the application for early dismissal.

If the application is granted the Tribunal shall make an order or Award on the application, which may be in summary form, within 60 days of the filing of the arbitration.  The process is therefore intended to be relatively fast.

The SIAC is the first major arbitration centre to introduce such a rule and it will be welcomed by many, particularly those in the banking sector wishing to easily and quickly enforce loan agreements, although the draft upcoming rules of the Stockholm Chamber of Commerce (SCC) also include a similar provision.  Nonetheless, while in theory the ability to dismiss manifestly unmeritorious claims and defences will increase efficiency and discourage the use of arbitration as an oppressive tool, in practice it remains to be seen how wiling arbitrators will be to use the mechanism to dismiss anything but the most obviously abusive cases given the seemingly draconian nature of the remedy and considerations of natural justice (Rule 29.4).

Enhancing Emergency Arbitration proceedings

The 2016 Rules introduce some refinements to the existing Emergency Arbitrator regime:

1. an Emergency Arbitrator is to now be appointed within one calendar day of receipt by the Registrar of an application for emergency interim relief and payment of the relevant fees, rather than one business day, as in the 2013 Rules.
2. any challenge to the appointment of the Emergency Arbitrator must be made within two days of the Emergency Arbitrator's appointment, rather than one business day.
3. the 2016 Rules require the Emergency Arbitrator to make an interim order or Award within 14 days of his or her appointment unless exceptional circumstances prevent this.
4. The fees of an Emergency Arbitrator are also now fixed at SGD 25,000, rather than being calculated as a proportion of a sole arbitrator's maximum fee,

As with the 2013 Rules, the main Tribunal may subsequently reconsider, modify or vacate any interim Award issued by the Emergency Arbitrator. The 2016 Rules further empowers the Tribunal to consider an Emergency Arbitrator's ruling on his own jurisdiction.

The use of Emergency Arbitrators is increasing in Singapore. The latest amendments to the Emergency Arbitration regime mean this trend is likely to continue as parties become more familiar with the proceedings and SIAC continues to tailor the use of the Emergency Arbitrators to commercial parties, as they have done with these amendments. 

Expedited Procedure

The 2016 Rules provide parties with the option of applying for Expedited Procedure where (i) the amount in dispute does not exceed SGD 6,000,000 (as opposed to SGD 5,000,000 under the 2013 Rules”); (ii) where the parties so agree, or (iii)  in cases of exceptional urgency.

The Expedited Procedure allows parties access to a more efficient and simplified arbitration procedure.  Amongst other things, the Registrar can abbreviate any time limits provided under the Rules, the disputes will be decided by a sole arbitrator, who may now decide (in consultation with the parties) if the dispute is to be determined on the basis of documentary evidence only.  The 2016 Rules now confirm that if the Expedited Procedure is used, the applicable rules will apply even where the arbitration agreement contains conflicting provisions (Rule 5.3). Conversely, the Tribunal may also order that arbitral proceedings no longer be conducted in accordance with the Expedited Procedure. If so, the arbitration will continue under the normal SIAC procedures.

As with the new summary dismissal procedure, the Expedited Procedure is likely to continue to attractive particularly in the context of financial services disputes where some have suggested that the use of arbitration is less popular than it could be due to the standard rules of major arbitral institutions not necessarily offering business users in the sector the certainty and expedition that they seek.

Seat of the Arbitration

The increasingly international nature of SIAC's caseload is reflected in the fact that Singapore will no longer be the default seat of arbitration. Unless the parties otherwise agree, the Tribunal will determine the seat having regard to all the circumstances of the case (Rule 20.1). The exception to this rule is that the default seat of the arbitration shall be Singapore of proceedings for emergency interim relief using an emergency arbitrator. This reinforces the need for parties to carefully consider their arbitration clause so there are no unwanted surprises if a dispute arises.

Qualifications of arbitrators

The 2016 Rules remove the phrase that arbitrators "shall not act as advocate for any party" but, as in the 2013 Rules, state that the arbitrators "shall be at all times independent and impartial" (Rule 13.1).The removal of this phrase is unlikely to have any significant impact in practice as it is generally accepted that an arbitrator cannot act as an advocate for a party.

Notice of and Decisions on Challenge

The 2016 Rules introduce a non-refundable "Challenge Fee" of S$8,000 (S$8,560 for Singapore parties including GST) payable by a party wishing to challenge the appointment of an arbitrator. If a party fails to pay the Challenge Fee within the time period set by Registrar, the challenge shall be withdrawn. The 2016 Rules remove the ability of the Court to fix the costs of the challenge.  The Court may now request comments on the challenge to an arbitrator from all parties, the challenged arbitrator and any other members of the Tribunal.  These changes provide welcome clarification and certainty as to the process for and costs of a challenge.

Close of proceedings

Under Rule 32, the Tribunal shall declare the proceedings closed "as promptly as possible" after it is satisfied that there is no further evidence to be considered. Whilst the Rules do not specify a fixed deadline for awards to be rendered, the exhortation will serve as a helpful reminder to Tribunals, and is also likely to reduce the time in which awards are rendered (per Rule 32.3, a draft award is to be submitted to the Registrar not later than 45 days from the close of proceedings unless the parties agree or the Registrar decides otherwise.)

Other notable changes

Parties should also take note of the following other changes made in 2016 Rules:

1. Any notice, communication or proposal shall be deemed to have been received if it is delivered if it is delivered to the addressee personally or "to its authorised representative" (Rule 2.1);
2. Responses to Notices of Arbitration should now include, where possible, any plea that the Tribunal lacks jurisdiction – this will encourage parties to raise jurisdiction challenges as early as possible (Rule 4.1(a);
3. Any objection that the Tribunal is exceeding its jurisdiction must now be raised within 14 days after the matter of the Tribunal's jurisdiction arises during the arbitral proceedings, rather than being raised "promptly" (Rule 28.3(b));
4. The President may now, at any stage of the proceedings, request the parties and Tribunal to convene a meeting to discuss the procedures that will be most appropriate and efficient for the case – this additional supervision will assist in avoiding severe delays in the arbitral procedure (Rule 19.7);
5. SIAC will now charge a minimum administration fee of SGD 3,800, payable for all cases, unless the Registrar determines otherwise (set out in the Schedule of Fees). In exceptional circumstances, the Registrar may direct the parties to pay an additional fee in addition to that prescribed in the applicable Schedule of Fees (Rule 34.9) - it is unclear how this discretion will operate in practice, but we anticipate that this would only apply in unusually large and complex cases; and
6. A party will be deemed to have waived its right to object if it proceeds with the arbitration without raising an objection in relation to a failure to comply with any rules, tribunal directions or requirements under the arbitration agreement (Rule 41.1).

Conclusion

While the summary above reflects the major changes made in the 2016 Rules, there are numerous other changes which have been made to increase the certainty of the language of the Rules. These amendments reflect the SIAC’s commitment toward the creation of a "state-of-the-art procedural framework"[2] and will ensure that the SIAC continues to be ahead of the curve and a global international arbitration centre of choice. 

The 2016 Rules are timely in light of growing criticism by some of arbitration as a form of dispute resolution and the growth of international commercial litigation. The certainty and flexibility introduced by the latest round of amendments go some way to meeting the legitimate concerns of commercial parties, and will increase confidence among legal practitioners, arbitrators and commercial user.

Alastair Henderson, head of Herbert Smith Freehills' South-East Asia International Arbitration practice and Managing Partner of the Singapore office, "We welcome the introduction of the SIAC 2016 Rules. Evaluating and re-evaluating the scope, language and practical effect of the SIAC Rules is key to designing a comprehensive set of rules tailored to the commercial needs of international business."

For further information, please contact Alastair Henderson, Partner, Daniel Waldek, Senior Associate, Emmanuel Chua, Senior Associate or your usual Herbert Smith Freehills LLP contact.