Citation(2009) 21 SAcLJ 429
Date01 December 2009
Published date01 December 2009
AuthorLYE Kah Cheong LLB (Hons) (National University of Singapore), LLM (King’s College, London); FSIArb; Advocate & Solicitor (Singapore), Solicitor (England & Wales); Of Counsel, Norton Rose (Asia) LLP. YEO Chuan Tat LLB (Hons) (National University of Singapore); Advocate & Solicitor (Singapore), Solicitor (England & Wales); Associate, Norton Rose (Asia) LLP. CHOO Zheng Xi LLM (New York University). LLM candidate at New York University for the forthcoming year.

Time for the Deus Ex Machina?

Does a Singapore court have the power to issue interim orders in aid of a foreign-seated arbitration? There have been a series of recent decisions by the Singapore courts on this question. Following the Court of Appeal decision in Swift-Fortune Ltd v Magnifica Marine SA[2007] 1 SLR 629, the present position is that, whilst the answer is unclear, it is at least clear that the answer lies in the interpretation of s 4( 10) of the Civil Law Act. This article will argue that it is not helpful to look to s 4(10) of the Civil Law Act to discern the policy direction of the Legislature on the question. Whether or not the Singapore court has the power to issue interim orders in aid of a foreign seated arbitration impacts on Singapore’s overall reputation and attractiveness as a centre for international arbitration. This article will suggest that resolution of the issue is ultimately a policy decision best made by the Legislature. It will identify the competing policy priorities, including Singapore’s aim to be a leading centre for international arbitration. This article will also explain the secondary policy question of whether to adopt the “reciprocity” or “competition” approach to promoting Singapore as an international arbitration centre. This article will conclude that the best way forward is for the Legislature to make its will clear by amending the International Arbitration Act.

I. Competing policy priorities — Striking the balance

1 The question of whether or not the Singapore court should have the power to grant interim relief in aid of foreign-seated arbitration proceedings is at heart a question of policy best resolved by the Legislature. Two questions of policy shape the debate on the granting of interim relief in this context.

2 First, in respect of this issue, there is a potential tension between two competing policy goals of Singapore — Singapore aims to be an international arbitration centre, and at the same time seeks to be a leading centre for wealth management.

3 Second, with respect to Singapore’s goal of being a centre for international arbitration, there is a difference of view over whether this is best achieved by adopting a “competition” approach or a “reciprocity” approach. The former would deliberately discriminate against arbitrations seated outside of Singapore. The latter would support international arbitration irrespective of the seat of the arbitration.

A. Singapore as a centre for international arbitration

4 It is no secret that Singapore aims to be a centre for international arbitration. This is acknowledged by practitioners, by the courts and by the Executive. A leading arbitration practitioner notes that “since the early 1990s, Singapore has been keen to position itself as the premier arbitration centre in Asia”.1

5 Similarly, the Singapore Court of Appeal observed in Swift-Fortune Ltd v Magnifica Marine SA (“Swift-Fortune (CA)”)2 that “this objective is clearly expressed in … the second reading speech made on 31 October 1994 by the Parliamentary Secretary to the Minister for Law, and the speech of the Government Parliamentary Committee Chairman for Law and Home Affairs who spoke in support of the Bill at the same parliamentary session”.3

6 The following excerpts from the Second Reading speech by the Parliamentary Secretary to the Minister for Law, Associate Professor Ho Peng Kee are especially illuminating:4

The 1985 Economic Committee recommended that to develop into a centre for legal services, we should speed up the settlement of commercial disputes and set up an international commercial arbitration centre.

The Singapore International Arbitration Centre (SIAC) commenced operations in 1991. This Bill will facilitate the settlement of commercial disputes in Singapore. As Singapore businessmen expand overseas, there will be greater contacts with foreign parties. Currently, foreign businessmen are uncomfortable with unfamiliar arbitration laws and excessive intervention from local courts if they select Singapore as the venue for arbitration. They will therefore welcome the application of the Model Law in Singapore.

Sir, international arbitration is a highly competitive business. Businessmen are able to choose from a variety of attractive international centres including Hong Kong, Hawaii, Kuala Lumpur, Melbourne and Vancouver. Currently, a glaring disadvantage of the SIAC is the non-applicability of the Model Law in Singapore.

The Law Reform Commissions and Legislatures of Commonwealth countries which have adopted the Model Law have stated that the Law would assist the development of their respective international arbitration centres.

The Hong Kong experience suggests that the adoption of the Model Law will sharpen the competitive edge of the SIAC.

In summary, the reasons why Singapore should adopt the Model Law are as follows … [I]t will promote Singapore’s role as a growing centre for international legal services and international arbitrations.

7 Singapore’s ratification of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”)5 is also clear evidence of Singapore’s desire to be a centre for international arbitration. The New York Convention provides a modality to enforce foreign arbitral agreements and arbitral awards between signatories to the New York Convention. Singapore’s International Arbitration Act (“IAA”)6 consolidates the key statutory provisions on international arbitration, including the New York Convention7 and the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).8

B. Singapore as a wealth management centre

8 It is well accepted that Singapore aims,9 and is well positioned, to be a leading wealth management centre.10

9 As of 2007, Singapore boasts US$200bn—$300bn in assets under management and the financial services sector made up 12% of Gross Domestic Product.11 This sector is continuously growing, seeing an expansion of 17% in 2007 alone.12 Even allowing for the impact of the global financial crisis thereafter, wealth management is likely to remain an important part of Singapore’s economy.

10 The Government is also actively promoting Singapore as a wealth management centre through initiatives such as the abolition of estate duties and the granting of permanent residency to High Net Worth Individuals (“HNWIs”) with assets in Singapore above $3.1m.13

C. A potential conflict of policy goals?

11 Singapore’s twin aims to be a centre for international arbitration as well as a leading wealth management centre are not necessarily inconsistent. The pursuit of one aim does not necessarily prejudice the pursuit of the other.

12 However, there may be a conflict between the two policy aims when considering whether the Singapore court should be empowered to issue interim orders in assistance of foreign-seated arbitrations.

13 As noted above, there are substantial assets being managed by financial institutions in Singapore.14 If the Singapore court were granted the power to issue interim orders in assistance of foreign-seated arbitrations, this could lead to an increased number of applications to the Singapore court for various interim orders (in particular, Mareva injunctions) against such assets. This raises the concern that investors may move their assets out of Singapore if they feel that the security of their assets located in Singapore is sufficiently threatened.15

14 Applications to the Singapore court for various interim orders against assets located in Singapore may also deter potential investors from placing assets in Singapore, thereby adversely affecting Singapore’s aim to be a leading wealth management centre. It is relevant to observe that in practice, Mareva injunctions are a common form of interim relief sought from courts to support foreign legal proceedings.16

15 On the other hand, if Singapore does not confer its courts with the power to issue interim orders in aid of foreign-seated arbitrations, but instead limits the court’s powers to issue interim orders only to Singapore-seated international arbitrations, one could argue that this impacts negatively on Singapore’s standing as a pro-arbitration jurisdiction. This could affect Singapore’s aim to be a leading international arbitration centre, especially if other centres for international arbitration confer such powers on their courts.17

16 Exactly this concern has been articulated by Professor Lawrence Boo, former Deputy Chairman of the Singapore International Arbitration Centre (“SIAC”):18

Singapore has hitherto been seen as a ‘pro-arbitration’ regime. The position as it now lies with the Swift-Fortune decision cuts a different

picture, viz, that Singapore is actually only ‘pro-Singapore arbitration’. If the intention is to pitch Singapore as a serious international arbitration hub, a parochial approach of self-help may actually be self-defeating.

II. Singapore as a centre for international arbitrations: One goal, two roads

17 Concerning the policy goal of making Singapore a centre for international arbitration, a further policy decision needs to be made as to the means by which to achieve that goal.

18 Two competing means to that end can be identified. When stripped to their essence, these schools of thought can be described as “competition” and “reciprocity”. These two competing schools of thought on how to promote Singapore as an international arbitration centre are described below. It will be argued that the “reciprocity” school of thought should be preferred over the “competition” school of thought.

A. The “competition” school of thought

19 The “competition” school of thought holds that discriminating against parties who seat their arbitrations outside of Singapore will encourage parties to choose to seat their arbitrations in Singapore. This view would favour allowing Singapore courts to issue interim orders in support of an international...

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