The Appeal of the Law: Singapore’s decision to hold off introduction option to appeal on point of law and other changes

Nov 2020

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The Singapore Ministry of Law has just completed an extended consultation on a series of proposed amendments to the International Arbitration Act (the “IAA”).  The aim is to provide parties with more options in tailoring international arbitration agreements to suit their specific purposes.  The two changes to be adopted are:

  • introducing a default mode of appointing arbitrators in multi-party situations: the current mode of appointment only applies to cases where there are two parties to an agreement whereas increasingly, disputed transactions and projects have become more complex involving more integrated relationships between a multiplicity of counterparties; and
  • providing arbitral tribunals and the Singapore High Court with powers to support enforcement of obligations of confidentiality in arbitration: although parties and the tribunal are under a common law duty to maintain confidentiality and the rules of many arbitral institutions provide for this explicitly (e.g. SIAC’s Rule 39), this change will provide explicit recognition of tribunal and courts’ powers of enforcement.

Neither of these amendments proved controversial.  However, two proposals which have presented the Ministry with more to consider and which have not yet been adopted, include:

  • allowing parties, by agreement, to request the arbitral tribunal to decide on jurisdiction at the preliminary award stage: currently, a tribunal may decide on jurisdiction at any stage but this proposed amendment permits the parties to require a decision at an early stage so as to save the time and costs of progressing further in circumstances where it may later be determined that the tribunal had no jurisdiction; and
  • allowing parties to appeal to the Singapore High Court on questions of law arising out of an arbitral award where parties have opted-in to such a mechanism: currently, appeals in relation to errors of law are only possible in a domestic Singapore arbitration. The proposed amendment would enable parties to an international arbitration to agree that an appeal on a point of law may be sought in certain circumstances.

It is the second of these amendments that has generated the most debate.  Currently, parties may only apply to set aside an award on the grounds of fraud, corruption or a breach of natural justice in the making of the award.  For reasons of finality, a desire that any interference by the courts is kept to a minimum and in recognition of the principle of party autonomy, the option to appeal an award on a point of law is generally not available in most jurisdictions around the world.  However, the Singapore Ministry of Law has proposed allowing parties to agree an ‘opt-in’ provision if they would prefer the option of a potential appeal on a point of law.  The rationale for this being to allow those parties who might prefer court supervision on questions of law to make their own choice for supervision while retaining the finality of arbitration for those who would prefer not to have an appeal.  Permission of the court would be required and would only be available in cases where determination of the legal issue in question will substantially affect the rights of one or more of the parties, and the tribunal’s decision is either obviously wrong, or is one of general public importance and open to serious doubt.

At a time when arbitration is under fire for taking too long and costing too much, the prospect of adding yet another stage, in the form of an appeal, has met with opposition from some corners.

Nevertheless, there are also those who believe that with few opportunities to review the kinds of complex, international commercial cases that are increasingly being resolved in private through arbitration, the development of the common law through the courts will not keep pace with changes in practice in sectors such as construction, shipping, commodities and insurance.

Of the major international arbitral seats, England is an exception in that a right to appeal on a question of law is available under s.69 of the English Arbitration Act.  It is not a mandatory provision – it is an ‘opt-out’ provision in that parties to an arbitration agreement may agree to exclude the right to appeal, and in practice, they frequently do.  For example, an agreement to use the ICC or LCIA Rules serves to waive the right to appeal on a point of law.[1]  However, the key point is that if parties wish to exclude the option, the legislation puts the onus on the parties to do so – the opposite of what is proposed in Singapore where parties would have to take a positive step to include the option.

Of relevance in this context is the fact that from 2015 to 2019, a total of 288 applications to appeal on a point of law were made in England but only 7 succeeded.[2]  The figures show that not only are less than approximately 20% of applications granted leave to appeal, even if they get that far, they are still far more likely to fail than succeed.  There is a high threshold for challenging an arbitral award under s.69 and the figures make clear that an award will only be overturned in extreme cases, demonstrating the courts’ pro-arbitration position.

Hong Kong is another jurisdiction where in theory the possibility of appealing an award on a question of law exists.  However, as with the model currently under consideration in Singapore, the right to appeal is only available by way of an opt-in provision under the Hong Kong Arbitration Ordinance such that (save in the case of certain construction contracts and contracts referring to ‘domestic’ arbitration), parties must expressly agree that there should be a right to appeal on a point of law.  Unsurprisingly, this rarely happens in practice – even if the rules of arbitration that the parties adopt do not expressly exclude the right to do so,[3] few commercial parties focus on the dispute resolution provisions in their contracts with much enthusiasm, let alone the remote prospect of pursuing an appeal on a question of law.

This is to say nothing of the fact that in any event both the Hong Kong and Singapore courts employ strict non-interventionist approaches to arbitration and do not easily entertain challenges to arbitral awards on any grounds.

So is there really any cause for concern on the part of those who are against introducing such a right of appeal in Singapore?  Or should the real focus of any concern be that perhaps the proposed changes not go far enough and instead, the Ministry of Law should mirror the position in England by incorporating an opt-out rather than opt-in provision?

If one were to calculate the total number of arbitrations conducted in England over the last five years (a figure in the thousands), the fact that there have only been 7 successful appeals is evidence that even with an ‘opt-out’ mechanism, there is virtually no prospect of its introduction leading to a flood of appeal applications and increased costs etc.  (Equally, however, the likelihood of many cases reaching the courts and adding to the existing body of Singapore case law must also be low.)

Parties adopting SIAC’s Rules already agree to waive any right to pursue an appeal, review or take recourse against an award and so one would expect that the majority of arbitrations in Singapore would in any event see parties excluding the right to appeal even if introduced on an opt-out basis by the Ministry of Law.

It appears to be more a question of optics – a concern that by introducing a right of appeal, users may perceive the development as a sign that instead of finding more ways to make the process more efficient and less costly, Singapore is instead just adding another level of costs and delay into the overall process.  In an often-quoted talk given by Lord Chief Justice Thomas in 2016[4], he noted that the restriction to appeal “reduces the potential for the courts to develop and explain the law and undermines the strength of the development of the common law as the framework to underpin the international markets, trade and commerce.”  But do parties already spending great sums owe some higher duty to the advancement of the common law (and in the process give up on their carefully designed aim of securing confidentiality and finality)?

Ultimately, perhaps, the debate comes back to the parties’ original choice, that is, to have their dispute resolved in accordance with the governing law.  By providing parties with an option to add a layer of scrutiny by the courts, arguably, Singapore would simply be helping to ensure that parties’ original choice is satisfied.  Indeed, this may be said to be the best way of safeguarding the principle of party autonomy.

[1] In contrast, London market arbitrations generally take a different approach and do not exclude the right to appeal on a question of law – e.g. see the arbitration rules for the RSA, GAFTA, FOSFA and the LMAA (although the LMAA rules do contain an express optionality

[2] The English Commercial Court Users’ Group Meeting Report 2019

[3] HKIAC’s Rules also contain a waiver to any form of recourse on the part of the parties

[4] Developing Commercial Law Through the Courts: rebalancing the relationship between the courts and arbitration

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