SIAC announces updated Arbitration Rules and new Investor-State Arbitration Rules

By Robbie McCrea, Associate, Fenwick Elliott

Introduction

The Singapore International Arbitration Centre (“SIAC”) released the sixth edition of its arbitration rules (the “2016 Arbitration Rules”) on 1 July 2016, with the stated aim of providing an updated set of procedures that are “timely, efficient, cost-effective, and user-friendly”.1 The Rules contain a number of significant refinements and innovations, although the most notable development is the introduction of a second set of arbitration rules to deal with investor-state arbitration (the “Investment Arbitration Rules”).

SIAC have stated that the 2016 Arbitration Rules  will come into effect on 1 August 2016. SIAC have indicated that this will be followed by the Investment Arbitration Rules in September 2016. The Arbitration Rules will apply to any arbitration commenced on or after the date these new rules come into force, 1 August 2016, The Investment Arbitration Rules will apply if they have been incorporated into a contract, international treaty, or other instrument applicable to the parties.

We set out below details of the key developments in the updated Arbitration Rules as well as highlighting notable elements of the Investment Arbitration Rules.

The Singapore International Arbitration Centre

SIAC is an increasingly popular forum for international arbitrations.  Earlier this year SIAC reported a 300% increase in its caseload during the past 10 years, and 271 new cases were filed with SIAC in 2015.2 This makes SIAC the fourth most used international arbitration centre, behind the International Chamber of Commerce (801 new cases in 20153), Hong Kong International Arbitration Centre (477 new cases in 20144), and London Court of International Arbitration (326 new cases in 20155).

Over this time Singapore has established itself as a major player in international arbitration, and its output includes the now infamous Persero series of cases which dealt with the enforcement of dispute board decisions under the FIDIC Form of Contract.6 SIAC arbitrations are roughly equivalent to the ICC, HKIAC and LCIA in terms of price and time (on average 9—18 months for a completed arbitration), but even in the rapidly developing world of international arbitration SIAC’s rules have a reputation for being progressive.   

The 2016 Arbitration Rules  

The 2016 Arbitration Rules include three principal amendments: (1) new provisions for multi-party disputes, (2) refined Emergency Arbitrator and Expedited Procedure, and (3) new provisions for early dismissal of claims and time limit to close proceedings.

Multi-party disputes

Disputes in international arbitration, and particularly construction disputes, frequently involve multiple parties and contracts, and there is a trend towards consolidating these disputes into one arbitration. Further to this, while the 2013 Rules allow for third parties to be joined to an arbitration if they are a party to the same arbitration agreement and consent to being joined, the 2016 Rules include significantly broader provisions for multiple party disputes.

First, the 2016 Rules provide two options for including multiple contracts within the same arbitration, whereby a claimant may elect to:

1. file a single Notice of Arbitration that encompasses multiple contracts (Rule 6); or
2. file multiple Notices of Arbitration, one for each contract, but apply to consolidate each of those arbitrations into a single arbitration (Rule 8).

Of particular note is that in both instances above it will not always be necessary to obtain the consent of the party being joined, provided, broadly, that the arbitration agreements in question are “compatible” and the disputes are sufficiently proximate.    

Secondly, the 2016 Rules permit third parties to be joined to an arbitration even if they are not a party to the same arbitration agreement (Rule 7). Of note, third parties will be able to be joined without their consent if they are a party to the arbitration agreement and the joinder application is made before the Tribunal is constituted. It is not clear why SIAC has distinguished between applications made before and after the constitution of the Tribunal, but parties should bear in mind when seeking to join another party that it may pay to make an application early.

The new multi-party provisions are clearly aimed at providing a commercially sensible mechanism for dealing with multi-party disputes. In doing so SIAC has gone a step further than its competitors in an industry-wide trend towards more efficient and cost-effective arbitrations. However, the new provisions also run the risk of contradicting the principle of consent which underpins arbitration. This may be a future battleground for parties joined without consent, and the use of broad concepts such as the “compatibility” of arbitration agreements will inevitably give rise to differences in opinion.  Parties would be well advised to approach consolidation and joinder without consent cautiously.  

Emergency Arbitrator and Expedited Procedure

In respect of the still relatively new Emergency Arbitrator provisions, which allow very fast interim awards or orders to be issued where there is an urgent need for relief, the 2016 Rules refine this procedure by introducing a time limit (the time from receipt of a party’s application to the issuing of an award must be completed within 15 days), and a fixed fee of S$25,000 for the Emergency Arbitrator’s fees (at Rule 30, Schedule 1 and Schedule of Fees).

The Expedited Procedure, which provides a fast-track procedure for lower-value disputes, has also been tweaked, including an enlarged scope of disputes up to S$6,000,000 (from S$5,000,000 under the 2013 Rules), and refined clauses providing for expedited disputes to be settled by one arbitrator (Rule 5.2.b.) and decided upon documentary evidence rather than a hearing (Rule 5.2.c.).

Early dismissal of claims and reduced time limit to close proceedings

The 2016 Rules also introduce a procedure for the early dismissal of claims (Rule 29) that are manifestly without legal merit or manifestly outside the jurisdiction of the Tribunal. Under the proposed new procedure either party may apply within 30 days of the Tribunal being constituted to have any claim(s) or defence(s) struck out, and the Tribunal must decide the application within 60 days of receiving it. This procedure should result in time and cost savings by allowing frivolous claims to be dealt with quickly, although it could also potentially be used as a strike weapon against unprepared claimants.

Finally, the 2016 Rules require the Tribunal to declare the proceedings closed no later than 30 days after the last hearing or submissions concerning matters to be decided in the award. This amendment is in keeping with the move towards more efficient proceedings, and tightens up the 2013 Rules which do not set a deadline to close proceedings. 

The Investment Arbitration Rules

The release of the Investment Arbitration Rules is a bold move into the field of investment arbitration, where SIAC will be competing with the well-established ICSID and UNCITRAL Rules.

Investment arbitration can provide an effective alternative method of dispute resolution to commercial arbitration, in certain instances. In investment arbitration a party will claim as a foreign investor against a host country based upon either an investment treaty or an agreement, for instance a BIT, or the host state’s national investment laws (rather than as two parties under a contract). A typical claim would be that a foreign investor has suffered prejudice as a result of an organ of the host state exercising a sovereign power in breach of an investment treaty to which it is a signatory, or a domestic investment law.

There are an increasing number of international investment treaties and a strong global trend of effecting domestic laws aimed at promoting foreign investment; however, investment arbitration is still not nearly as popular as commercial arbitration. The most frequent criticisms of investment arbitration are that it is slow (on average three years and eight months from filing a request for arbitration until the final award is issued,7 compared with an average of 9 to 18 months for SIAC commercial arbitrations8), and expensive (average party costs are approximately £3,000,000 plus Tribunal costs of £500,000, which is more expensive than all but the largest commercial arbitrations).

The SIAC Investment Arbitration Rules have clearly been designed to address the above criticisms. This has been done by merging traditional investment arbitration rules with a number of commercial arbitration rules, including: a streamlined process for the appointment of the Tribunal (Rule 6.2) and challenges to the Tribunal (Rule 12), early dismissal of claims manifestly without merit (Rule 25), and an optional Emergency Arbitrator procedure (Rule 24.6), and by setting a time limit for the Tribunal to declare proceedings closed (Rule 29.2).

These proposed amendments introduce some welcome innovation, and reflect a growing understanding of the potential significance of investment arbitration. Upon the release of the draft rules the President of SIAC’s Court of Arbitration, Gary Born, commented as follows:

“As investment arbitration continues to grow, in Asia and elsewhere, the new SIAC Investment Arbitration Rules are intended to provide an efficient and neutral set of procedural rules tailored to the needs of both states and investors.”

Once finalised, the Investment Arbitration Rules will be able to be adopted in new and re-negotiated investment treaties. Negotiating countries will need to consider whether they are best served by including rules designed to make arbitration of those treaties and investment agreements more accessible. International contractors and state-employers should note that through investment arbitration they may find they have a remedy or claim they did not contract for. Whether or not SIAC’s rules signal a move towards more accessible investment arbitration claims, watch this space.

Conclusion

In all, the revised 2016 Arbitration Rules provide a useful update that is in keeping with and contributes to current commercial arbitration trends. The Investment Arbitration Rules are a bold play at investor-state arbitration which still is, and certainly is perceived to be, very inaccessible. We will follow the impact of the new rules and provide further updates in International Quarterly.

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• 1. Gary Born, President of the Court of Arbitration of SIAC.
• 2. SIAC Announcement 25 February 2016.
• 3. ICC Arbitration Statistics 2015.
• 4. PLC (Practical Law Company), New Arbitration/ADR cases received.
• 5. LCIA Registrar’s Report 2015.
• 6. The Persero series are discussed in Fenwick Elliott’s 2015/2016 Annual Review, which can be found here
• 7. Allen & Overy, Investment Treaty Arbitration: How much does it cost? How long does it take, 18 February 2014.
• 8. SIAC FAQs.