On 10 January 2016, the Singapore Academy of Law (SAL) published the results of its study on preferences for the choice of governing law and jurisdiction made by those involved in cross-border transactions "in Singapore and the region" (the Study). The Study, which was commissioned by the SAL's International Promotion of Singapore Law Committee, reflects the views of around 500 commercial law practitioners and in-house counsel who have involvement in cross-border transactions. The Study results can be accessed here.
The Study responses suggest the growth in (i) the internationalisation of transactions in the region, (ii) the importance of Singapore law and (iii) Singapore as a preferred choice of forum for the resolution of disputes. The most noteworthy points are highlighted below.
However, the value in the Study in signalling the comparative strength of Singapore's position as an international centre of dispute resolution will be determined by the demographics of the Study population, and, in particular, how many of the respondents are based outside Singapore and in which jurisdictions.
The most noteworthy points arising out of the Study are:
- The most preferred choice of governing law in cross-border transactions was English law at 48%. Singapore law was second at 25%, with New York at 7% and Hong Kong at 3%. Amongst the Study population, Singapore law was widely accepted as a valid choice for the governing law of cross-border agreements in the region.
- The most preferred venue for dispute resolution amongst study participants was Singapore at 52%, with Hong Kong second at 22%. The UK was only preferred by 7% of the respondents. The top three reasons cited in the Study for choosing Singapore as a venue were proximity, efficiency, and neutrality. The former of these qualities suggests that the Study population was based in or near Singapore.
- 71% of respondents indicated that arbitration was the favoured method of dispute resolution, compared to 24% for litigation and 5% for mediation. Enforceability of decisions was cited as a key priority. Mediation's low score is perhaps surprising and the outcome may reflect the way the Study question was framed, given that mediation is often attempted within the framework of litigation or arbitration and should not be selected as a sole method of dispute resolution on the basis that it may not reach a determinative outcome. Given the importance of enforceability in choosing litigation or arbitration, the introduction of the hybrid Arb-Med-Arb protocol by the Singapore International Mediation Centre in partnership with the SIAC may encourage the use of mediation in Singapore in the future. As described in our previous blog post, the combined process can result in a consent award enforceable under the New York Convention 1958.
- All industry sectors represented by the Study showed a strong preference for arbitration. Consistent with our own experience, the highest scores were shown in the Construction and Oil & Gas sectors, at 84% and 82% respectively. The highest score for litigation was the Banking and Finance sector at 30%.
The general trend suggested by results of the Study matches our own experience both in Singapore and across our network that international arbitration is the most popular choice of dispute resolution mechanism for cross-border transactions. This was also reflected in the 2015 Queen Mary University of London International Arbitration Survey published in October 2015 where survey respondents were predominantly from Europe and Asia (see our earlier blog post here).
Whilst the potential limitations of the Study are noted, undoubtedly Singapore continues to increase in popularity as a venue for dispute resolution and Singapore law may begin to challenge the established use of English law as the preferred choice of governing law in cross-border transactions in the region.
It will be interesting to see if the SAL continues to commission such studies in the future, as this will provide the ability to track how these trends change over the coming years. Further, a comparison with the data from the Global Pound Conference (GPC) series, which Herbert Smith Freehills is sponsoring, may also prove informative. The series expects to generate considerable data worldwide over an extensive 18 month period from stakeholders on their use of various dispute resolution processes (see here for more details on the GPC series).
For further information, please contact Alastair Henderson (Partner), Daniel Waldek (Senior Associate), Yosuke Homma (Associate) or your usual Herbert Smith Freehills contact.