Singapore 2010 - A good start to the year - Statutory amendments to empower the Singapore Court to assist Foreign-Seated Arbitrations

12 August 2010

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This article first appeared in Singapore International Arbitration Centre 28/07/2010

As a major centre for international arbitration, Singapore is a popular seat for arbitrations even when none of the disputing parties are based in Singapore. Singapore is also a major financial centre. This means parties to arbitrations seated outside of Singapore will often have assets located in Singapore. In the second situation, a party involved in foreign arbitration proceedings will sometimes want to restrain the other party from dealing with its Singapore assets pending the outcome of the arbitration, to stop the other party from dissipating assets to frustrate an award. In recent years, there has been doubt that the Singapore courts had the power to assist foreign seated arbitrations in this way. Statutory amendments effective January 2010 now expressly empower Singapore courts to do this. The recent amendments enhance Singapore’s reputation as a pro international arbitration jurisdiction.

To secure assets located in Singapore requires a court order from the Singapore court called a Mareva injunction (now known in the UK as a Freezing Order). Prior to the recent amendments, three decisions by the Singapore courts cast doubt on the extent to which the courts had the power to grant interim relief in aid of foreign-seated arbitrations. These were the cases of Swift-Fortune Ltd v Magnifica Marine SA1; Front Carriers v. Atlantic & Orient Shipping Group2 and Multi-Code Electronics Industries (M) Bhd and Another v. Toh Chun Toh Gordon and Others3.

Swift-Fortune was decided by the Court of Appeal, the highest court in Singapore, so the decision was determinative of Singapore law at the time. The upshot of these cases was that whilst it was clear that Singapore courts had the power to render assistance to arbitrations seated in Singapore, it was not clear to what extent this power extended to arbitrations seated outside of Singapore.

The Court of Appeal’s decision was greeted with dismay by many in the arbitration community, with some fearing it would portray Singapore as parochial and self-serving, and undermine Singapore’s ambition of being an international arbitration hub. Various arbitration practitioners and academics called for urgent amendments to the law.4

At the heart of this issue is a choice between two approaches to promoting Singapore as a centre for international arbitration: the “competition” approach and the “reciprocal” approach. The “competition” approach believes that denying the assistance of the Singapore court to foreign seated arbitrations encourages commercial parties to choose to seat their arbitrations in Singapore. The “reciprocal” approach takes a broader view. It believes Singapore enhances its reputation as a centre for international arbitration by being a good global citizen. This includes assisting foreign seated arbitrations, in the hope that other jurisdictions will similarly assist arbitrations seated in Singapore.5

Historically, the Singapore court has favoured the “reciprocal” approach. As an example, in the context of enforcing foreign arbitral awards, Justice Judith Prakash observed in Re an Arbitration between Hainan Machinery Import and Export Corporation and Donald and McArthy Pte Ltd6 that Singapore must recognise foreign awards if it wishes its own awards to be recognised abroad.

In October 2009, the Singapore parliament moved decisively in favour of the “reciprocal” approach by passing the recent amendments to the International Arbitration Act (the IAA). With effect from 1 January 2010, Singapore courts are now expressly empowered to give a range of assistance to foreign seated arbitrations.

The amendments to the IAA deletes s. 12(7) and puts in place a new s. 12A, which grants the Singapore High Court the power to make various orders in aid of an international arbitration, irrespective of whether the seat of arbitration is Singapore. The court may make orders for the giving of evidence by affidavit; the preservation, interim custody or sale of any property which forms part of the subject-matter of the dispute; securing the amount in dispute; an interim injunction or any other interim measure.

Court assistance of arbitrations can be a mixed blessing. There is a thin line between a court “assisting” and a court “interfering”. This is more than just an academic question in some Asian countries. Historically, the Singapore courts have avoided undue interference in arbitral proceedings. There is a long list of Singapore cases where the court articulated exactly this concern. Nonetheless, when moving the recent amendments in the Singapore parliament, the Law Minister stressed that in keeping with Singapore’s policy of minimal curial intervention in arbitration proceedings, the court’s powers under the amendment do not extend to procedural or evidential matters dealing with the actual conduct of the arbitration itself, such as discovery, interrogatories, or security for costs.7

These recent amendments to the IAA are welcome. Empowering Singapore courts to issue interim relief in assistance of foreign-seated arbitrations brings Singapore in line with other major international arbitration centres, such as the UK and Hong Kong, and is consistent with the 2006 version of the UNCITRAL Model Law on International Commercial Arbitration. The speed with which the Singapore parliament moved to align Singapore arbitration law with international norms affirms Singapore’s intention to be a responsible and cooperative player in the world of international arbitration.

Footnotes
  1. [2007] 1 SLR(R) 629
  2. [2006] 3 SLR(R) 854
  3. [2009] 1 SLR(R) 1000
  4. Lawrence Boo, “Arbitration Law” (2006) 7 SAL Ann Rev 51 at Para 3.24.
  5. For a recent exposition of these two approaches, see Lye, Yeo and Choo, “Interim Measures in Aid of Foreign Arbitrations – Time for the Deus Ex Machina?” (2009) 21 SAcLJ 429.
  6. [1995] 3 SLR(R) 354
  7. Singapore Parliamentary Debates, Official Reports (19 October 2009) vol 86 (K Shanmugam, Minister for Law).