Earlier this year Singapore's Ministry of Law completed public consultations on proposed amendments to the International Arbitration Act 1994 ("IAA"). Specifically, the Ministry sought views on recommendations that: (i) the Singapore courts should be given the authority to make costs orders following a successful set-aside application; (ii) no separate cost principles should be introduced for unsuccessful set-aside applications; (iii) a leave requirement should be introduced for appeals to the Court of Appeal following an unsuccessful set-aside application before the High Court; and (iv) the time limit for filing setting aside applications should not be reduced.
This post reviews the recommendations and highlights nuances that could help improve the efficiency and user-friendliness of the set-aside regime. Herbert Smith Freehills Kramer has submitted more detailed comments to the Law Ministry as part of its public consultation process.
Whether Singapore courts should be empowered to make costs orders for arbitral proceedings following a successful setting aside application
There is currently a lacuna in the IAA framework: while Section 10(7) of the IAA empowers courts to make costs orders when a party successfully challenges a preliminary ruling regarding jurisdiction by an arbitral tribunal, a similar power is not available when courts consider set-aside applications under Section 24 of the IAA or Section 34(2) of the Model Law. This lacuna was noted the Singapore Court of Appeal in CBX v CBZ.
The proposal therefore contemplates giving Singapore courts the discretion to make a costs order following a successful set-aside application or to remit the case back to the arbitral tribunal (but only if both parties agree to the remission and it is required in the interests of justice).
While the intention behind the recommendation is constructive, requiring party consent as a pre-condition to remission may hinder the process in cases where the reasons for the set-aside do not reflect negatively on the tribunal's conduct, and where the tribunal is better positioned to determine the costs to be imposed. This proposal also raises several additional concerns whether: (i) the tribunal's approach to costs should be given prima facie precedence; (ii) parties should be prevented from revisiting the merits of the underlying dispute under the pretext of further submissions on costs; and (iii) a tribunal's decision on costs, once remitted by the court, would itself be subject to further set-aside applications.
Whether there should be separate costs principles for unsuccessful setting aside applications
Currently there are no separate costs principles for set-aside applications. In the Singapore High Court, costs are normally awarded by reference to a fixed scale or on an indemnity basis only in exceptional circumstances (such as when a party has acted very unreasonably). Conversely, the rules of the Singapore International Commercial Court ("SICC") set out a non-exhaustive list of factors that may be considered when awarding costs, including the complexity of the case, the conduct of the parties, and the amount or value of the claim. As a result, successful parties are generally more likely to recover a greater proportion of their incurred costs from the SICC than when their costs are assessed on an indemnity basis in the High Court.
There have been calls to reform the more limited cost shifting regime in the High Court on the basis that it incentivises unmeritorious set-aside applications and is inconsistent with the parallel cost shifting regime in the SICC. However, the recommendation in the consultation is to maintain separate costs principles for setting-aside applications in the High Court. It suggests that, as the SICC grows to hear more international arbitration-related disputes, the issue of whether indemnity costs should be imposed as a default for setting-aside applications should become less relevant.
While it is true that the SICC is gaining in popularity, there remains a risk that unmeritorious set-aside applications may be filed in the High Court to delay proceedings without facing adverse cost consequences. To mitigate this risk, it may be prudent to align the cost regimes for set-aside applications in international arbitration cases by integrating the SICC costs regime into the High Court framework. Such measures would promote uniformity, ensure certainty, and enhance Singapore's reputation as a leading destination for international arbitration.
Whether to introduce a leave requirement for appeals to the Court of Appeal following an unsuccessful application to set aside an arbitral award in the High Court
Singapore law permits an automatic right of appeal against decisions of the High Court on applications for set aside or resisting enforcement. The recommendation: (i) would require parties to obtain permission to appeal such decisions (whether successful or otherwise); and (ii) such an application for permission would be determined without a hearing unless deemed necessary by the Court. The recommendation is consistent with the position in Hong Kong and England & Wales.
Should the requirement for leave to appeal be incorporated, safeguards could be considered to ensure that it aids in the efficiency of dispute resolution and does not unnecessarily lengthen proceedings or add to legal costs. This could be achieved, for instance, by imposing time limits on the disposal of such an application, amending the gatekeeper test to require that the issue appealed must substantially affect the rights of one of the parties (as per Section 69(3)(a) of the English Arbitration Act 1996 and requiring that any sums awarded by the arbitral award be deposited by the award-debtor with the Court as a security for appeal.
Should the time limit for filing setting aside applications be reduced?
Under Article 34(3) of the Model Law, the time limit for filing a setting aside application is three months from "the date on which the party making that application had received the award or, if a request had been made under [A]rticle 33, from the date on which that request had been disposed of by the arbitral tribunal". This is also applicable to challenges made under Section 24 of the IAA.
The recommendation is to maintain the current time limit, but suggests giving courts discretion to extend it for set aside applications involving fraud or corruption under Section 24(a) of the IAA, as such cases may involve facts which come to light later or may be too complex for a timely application within three months.
Although there are instances where the facts justifying a challenge for fraud or corruption might not become apparent until more than three months have passed, these cases are not typical. On the contrary,Singapore law may benefit from reducing the time-period for set-aside applications to two months while granting Singapore courts discretion, similar to English law, to extend this period in exceptional circumstances including for cases under Section 24(a) of the IAA.
Comment
Singapore has a track record of keeping its arbitration legislation under review and ensure it is calibrated to ensure Singapore's position as a leading hub for international arbitration and dispute resolution.
The changes proposed to Singapore's set-aside regime are well considered and may assist with making the post-arbitral process in Singapore more efficient. However, some fine-tuning and adjustments may be necessary to ensure that the overall scheme remains efficient, certain and competitive. The Ministry's proactive public consultation process, however, underscores why Singapore remains one of the most used arbitral seats in the world.
We will provide a further update once the scope of proposed changes are submitted to Parliament for a first reading.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
