SIAC Arbitration Rules 2016 come into effect
Global | Publication | September 2016
Upping the stakes for arbitration in Singapore
The SIAC Arbitration Rules 2016 are now in effect. SIAC has improved on the provisions in its prior rules dealing with expedited procedures and emergency arbitrator proceedings, and incorporated comprehensive new provisions for multi-contract and multi-party disputes. However it is SIAC’s inclusion of an early dismissal procedure that is expected to be a game-changer for parties arbitrating in Singapore.
The sixth edition of the Singapore International Arbitration Centre’s Arbitration Rules (SIAC Rules 2016) came into effect on August 1, 2016. They are the product of an extensive revision process undertaken by the SIAC Court of Arbitration and the SIAC Secretariat which included lengthy public stakeholder consultation. The new rules are a substantial improvement on a set of arbitration rules that was already highly regarded. SIAC’s commitment to respond to market feedback and its refusal to rest on its laurels (it has revised its arbitration rules every three years since 2007) have contributed to its own growth as an arbitral institution (with 271 new cases in 2015), and to Singapore’s establishment as one the most popular arbitration jurisdictions in the world. We set out below the key changes.
Early Dismissal of Claims and Defences
The SIAC Rules 2016 are the first set of arbitration rules published by a major arbitration institution to incorporate an early dismissal procedure. Its introduction appears to be SIAC’s answer to the criticism that international arbitration has no equivalent to the summary judgment and striking-out procedures found in litigation, thereby allowing parties to advance unmeritorious claims or defences.
Under the SIAC Rules 2016, a party may request the tribunal to dismiss a claim or defence at an early stage of the proceedings where the claim or defence is either ‘manifestly without legal merit’ or ‘manifestly outside the jurisdiction of the tribunal’ (rule 29). The legal test to be satisfied is therefore a stringent one. Only claims and defences which ‘manifestly’ do not withstand scrutiny, whether on the legal merits or on the jurisdictional basis asserted, may be dismissed.
As a safeguard against unmeritorious applications for early dismissal, the tribunal has the discretion whether to allow the application to proceed. If it does, the tribunal is then required to render its decision on the application, with reasons in summary form, within 60 days of the date of application – unless, in exceptional circumstances, the registrar extends the time. We don’t know yet how SIAC tribunals will deal with applications for early dismissal but the imposition of this deadline of 60 days suggests that parties may have relatively limited time to make their submissions on early dismissal, whether in writing or at a hearing.
From a practical perspective, the introduction of the early dismissal procedure may place an increased emphasis on the ‘Response to Notice of Arbitration’ (Response). A respondent may no longer be able to safely defer setting out its defence until the submission of its Statement of Defence by making bare denials against the claimant’s claims in its Response. The risk is that a claimant may apply for early dismissal, which would compel the respondent to assert the prima facie strength of the defence set out (if at all) in the Response against the ‘manifestly without legal merit’ test. Respondents in any SIAC arbitrations commenced after August 1 should be prepared to include in their Response substantive comments on the defence arguments that are likely to be relied on in the arbitration.
Multiple contracts, joinder of third parties and consolidation of arbitrations
The SIAC rules include new provisions on how arbitral proceedings involving multiple contracts and/or multiple parties may be administered in a more cost-effective way.
Arbitral proceedings involving multiple arbitration agreements may now be commenced by way of a single filing. Unless the SIAC Court of Arbitration concludes that the disputes may not be determined in a consolidated proceeding, the claimant will only be required to pay a single filing fee.
The SIAC Rules 2016 also allow for consolidation applications to be made, either before or after the appointment of the tribunal, on any of the following grounds:
- all parties have agreed to the consolidation
- all of the claims in the relevant arbitrations are made under the same arbitration agreement
- the arbitration agreements are compatible and the disputes arise out of the same legal relationship(s) or out of contracts consisting of a principal contract and its ancillary contract(s) or out of the same transaction or series of transactions.
Under the prior rules, the tribunal had the power to join third parties to arbitration upon an application by an existing party to the arbitration. Under the SIAC Rules 2016, an application for joinder may be made by an existing party to the arbitration (as before) or by a non-party seeking to join the proceedings. The application may be made to the SIAC Court of Arbitration before the appointment of the tribunal or to the tribunal after it has been appointed. Parties thus gain flexibility and the opportunity to optimize the efficiency of the arbitral process.
Improvements to Expedited Procedure and Emergency Arbitrator proceedings
Expedited Procedure and Emergency Arbitrator proceedings were first introduced in the 2010 edition of the SIAC Rules. Since then, SIAC has received more than 260 applications for the Expedited Procedure and more than 45 applications under the Emergency Arbitrator procedure. The SIAC Rules 2016 build on these successes, offering practical improvements. These largely were motivated by demand for quicker, more cost-effective proceedings and for arbitrators and counsel to handle proceedings more efficiently.
SIAC responded by extending the Expedited Procedure – whereby the tribunal must render its award on merits within six months of appointment – to a wider range of cases. Now the procedure may apply to any case where the maximum aggregate amount in dispute is SG$6 million (US$5.4 million). This is an increase from the prior rules which set the cap at SG$5 million (US$3.7 million).
Also, arbitrations conducted under the Expedited Procedure may now be decided on the basis of documentary evidence only – whereas, under the pre-2016 rules, the tribunal had no discretion to decide whether a hearing was required. This expansion of the tribunal’s power to determine appropriate procedures for arbitrations conducted under the Expedited Procedure may lead to further cost and time savings.
Emergency Arbitrator proceedings were introduced in the SIAC Rules to assist parties in need of emergency interim relief before the tribunal is constituted. Upon application, an emergency arbitrator can be appointed ad hoc by SIAC to exercise interim jurisdiction over a specific application. The earlier rules provided no deadline within which the emergency arbitrator should render his/her order or award. Under the SIAC Rules 2016, an emergency arbitrator must render an order or award within 14 days of appointment – unless the deadline is extended by the registrar in exceptional circumstances. This amendment has offered welcome clarity that a party in need of specific urgent interim relief has a relatively short window to make an application for such relief to the emergency arbitrator.
SIAC introduces remedy against party refusing to pay deposits
It is not uncommon for claimants to be forced to bear the financial burden of the entire amount of the parties’ deposits for the cost of the tribunal’s and SIAC’s fees and expenses. While this was obviously unsatisfactory, unless the respondent had asserted a counterclaim there was little that the SIAC Secretariat could do to compel an unwilling respondent to pay its share. In such a situation, the claimant would usually be required to pay the respondent’s share of the deposits in order for the arbitration to continue.
Under the SIAC Rules 2016, the tribunal has the power to issue an order or award against a party which is refusing to comply with SIAC’s directions to pay its share of the deposits on the costs of arbitration (rule 27 (g)). This allows a party to begin recovering the amount paid on the refusing party’s behalf, even before the award on merits has been rendered.