Singapore is becoming a world leader in arbitration
Sign up to myFT Daily Digest to be the first to know about Charoen Sirivadhanabhakdi news.
When a legal dispute first erupted over a joint venture in Myanmar in 2013, the case was closely watched by the wider business community. One side of the tussle was Singapore-based Fraser and Neave, owned by one of Thailand’s richest men, Charoen Sirivadhanabhakdi. On the other was Myanmar Economic Holdings, a conglomerate with links to the military, which was at odds with its partner over the future of their Myanmar Brewery joint venture.
The legal tussle was seen as an important test for foreign investment in Myanmar as the country opened up after decades of dictatorship. But instead of rushing to the courts for a bitter, lengthy bout of litigation, the parties turned to arbitration, in a country fast becoming a global centre for it: Singapore.
Arbitration is the process of settling legal disputes privately and confidentially outside the public court system. The advantages are that parties can decide the location and the language used for the hearings as well as picking the arbitrators they prefer.
Arbitration is typically quicker and cheaper than traditional litigation, but because it has a court-like process, a rapid and low-cost conclusion is not guaranteed, and there are limited ways of appealing a ruling. The decisions are handed down privately by the arbitration panel and the awards are enforceable in 150 countries.
Singapore is challenging established centres for arbitration such as London, Paris and Stockholm. Case filings at the Singapore International Arbitration Centre (SIAC) have increased by more than 300 per cent in the past 15 years. In 2000, Singapore handled 58 cases but numbers rose dramatically after the financial crisis. In 2015 there were 271 filings. This was a 22 per cent increase on 2014’s total. By contrast, the London Court of Arbitration had 326 arbitrations referred to it in 2015, up 10 per cent on 2014. Singapore is fast catching up.
The secrecy of the arbitration process means that obtaining costs of a typical arbitration is difficult. The London Court of International Arbitration last year published figures showing the median duration of an LCIA arbitration is 16 months with median costs of $99,000, although the cost of any individual case can vary considerably depending on its complexity.
Increasing numbers of clients from India are using Singapore for arbitration. China, South Korea, the US and British Virgin Islands are also among a Top 10 ranking of users. More than 40 per cent of the cases have no connection with Singapore, which shows the growing use of Singaporean law to underpin business contracts in Asia. Michael Davison, global head of litigation and arbitration at Hogan Lovells, says Singapore “attracts companies from India, China and Russia as Russian companies increasingly look eastward rather than towards the west”.
“The trend was that multinational corporates would use English law but . . . increasingly Singaporean law rather than English law is being used by Indonesian and South Korean companies, for example,” says Lakshanthi Fernando, director of Singapore law firm Holborn Law, which has a non-exclusive association with London-based law firm Olswang for Singaporean dispute resolution services.
“English is widely spoken in Singapore. It along with Hong Kong and India are the only common law jurisdictions in Asia and that makes Singapore an attractive, international arbitration centre,” says Professor Loukas Mistelis, director of the School of International Arbitration at Queen Mary University of London. A survey by Queen Mary and law firm White & Case in 2015 pinpoints Singapore as the most improved arbitral seat, followed by Hong Kong. The most widely used seats are London, Paris, Hong Kong, Singapore and Geneva.
If arbitration is too aggressive for a company, Singapore also offers mediation and conciliation services. The country’s International Mediation Centre opened in November 2014 and has collaborated with the SIAC to offer a service known as Arbitration-Mediation-Arbitration (Arb-Med-Arb). This allows parties to attempt mediation after they start arbitration proceedings. If they settle their dispute, this is classed as a consent award, which can be enforced in more than 150 countries. If they cannot settle, the parties continue to arbitration. Three such Arb-Med-Arb cases were filed in 2015.
“The legal community in Singapore is seen as very smart as they have given users a menu of options to satisfy various needs,” says Christopher Tahbaz, co-chair of Asian litigation at Debevoise & Plimpton, one of the biggest law firms in the world. “If parties don’t want to jump to arbitration they can go to mediation.” Mr Davison of Hogan Lovells says companies often opt for a less aggressive approach to resolving differences, particularly if they have complex relationships with the partner. “If there are multiple ongoing business relationships between two companies then parties are often reluctant to press the button on court action if it’s just one glitch over one contract.”
Get alerts on Charoen Sirivadhanabhakdi when a new story is published