HERBERT SMITH FREEHILLS PROMOTES THREE ARBITRATION SPECIALISTS TO ITS GLOBAL PARTNERSHIP

Herbert Smith Freehills has promoted seven disputes lawyers to its partnership, out of a total of 22 worldwide. The promotions in the disputes practice, which take effect on 1 May, 2019, span right across the firm’s global network including: London, Paris, Dubai, Singapore, Hong Kong, and Sydney.

Of these new partners, three are arbitration specialists, reflecting the strength and importance of this ever growing practice area to the firm.

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FUNDING IN SINGAPORE AND HONG KONG: HERBERT SMITH FREEHILLS CONTRIBUTES TO LEADING PUBLICATION, ACTS ON FUNDED CASES

Third party funding is a hot topic in Asia.

As noted on this blog, Singapore introduced legislation in 2017 to allow third-party funding in international arbitration and associated proceedings, including enforcement and mediation. Hong Kong’s funding legislation takes effect today.

Our Singapore team is already representing clients in two significant Singapore-seated arbitrations in which the claimants are third-party funded. It is understood that these are amongst the first funded arbitrations in Singapore. We expect Hong Kong arbitrations to generate high levels of interest in funding once the law is in force.

In the light of these exciting developments, Herbert Smith Freehills has contributed the Hong Kong and Singapore chapters of Getting the Deal Through: Litigation Funding 2019. The chapters discuss the trends and legal landscape for funding in both Hong Kong and Singapore.

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Be on time to preserve your right to Active Remedies – the Singapore High Court considers a party’s duty to apply promptly when challenging the jurisdiction of an arbitral tribunal

In Rakna Arakshaka Lanka Ltd (“RALL“) v Avant Garde Maritime Services (Private) Limited (“AGMS“) [2018] SGHC 78, the Singapore High Court dismissed an application to set aside an award on jurisdiction, on the basis that the applicant had failed to challenge the tribunal’s preliminary ruling on jurisdiction within the deadline stipulated under section 10(3) of the International Arbitration Act (“IAA“) and Article 16(3) of the UNCITRAL Model Law. The decision provides guidance on the distinction between active and passive remedies in the context of applicable deadlines when seeking to set aside an award on grounds of jurisdiction, and resisting enforcement on the same basis.

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Join us in Singapore to celebrate 60 years of the NY Convention

Enforcement of arbitration awards in SE Asia

This year marks the 60th anniversary of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly referred to as the “New York Convention”.  As one of the most successful international treaties of the 20th century, and a primary tool in the promotion of arbitration worldwide, the Convention established a regime to facilitate international enforcement of arbitration awards in 159 countries.

This event will discuss the impact of the Convention in Southeast Asia, and whether its objectives have been successful in practice.  Following a keynote address by Justice Anselmo Reyes of the Singapore International Commercial Court, a series of presentations and panels will discuss the history of the Convention; how it shapes the day-to-day conduct of international arbitration; practical experience of enforcement in ASEAN states (with data from a new survey); and future prospects for similar regimes that aim to support international litigation and mediated settlements.

This event is jointly hosted by Singapore Management University (a premier university, internationally recognised for world-class research in the field of international arbitration); Singapore International Dispute Resolution Academy (a non-profit organization supported by the Ministry of Law, and Asia’s global thought leader for learning and research in negotiation and dispute resolution); and Herbert Smith Freehills (one of the world’s leading law firms, with a global reputation for international arbitration).

The event will be a SILE accredited CPD activity.

For more information on the programme and speakers, please click here.
Date:     Tuesday, 12 June 2018
Time:     Registration: 4:30pm
Event: 5:00pm to 7:30pm, followed by a cocktail reception
Venue:
NTUC Centre,
1 Marina Boulevard
Level 7, Stephen Riady Auditorium @ NTUC
Singapore 018989

Please click here to view map
RSVP: To respond to this e-invitation, click here

Please RSVP by Tuesday, 29 May 2018 to secure your seat. Spaces are limited and will be offered on a first come, first served basis.
 

Inside Arbitration: Issue #5 of the publication from Herbert Smith Freehills’ Global Arbitration Practice

We are delighted to share with you the latest issue of the publication from the Herbert Smith Freehills Global Arbitration Practice, Inside Arbitration.

In addition to sharing knowledge and insights about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

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Amendments to the Singapore International Commercial Court Regime to strengthen Singapore as an international arbitration seat of choice

On 9 January 2018, amendments were passed to the Supreme Court of Judicature (Amendment) Act (“SCJA “) which clarify that the Singapore International Commercial Court (“SICC“) has jurisdiction to hear proceedings relating to international commercial arbitration.  The amendments also abolish the pre-action certificate procedure for applications to the SICC.

Established in 2015 as the ‘international’ division of the Singapore High Court, the SICC has gone from strength to strength in a short span of time, gaining a reputation for the quality and speed of judgments rendered. Since its establishment the SICC has heard 17 cases on matters ranging from construction, investment, banking and finance, and shipbuilding, all of which are high value cases involving international parties and counsel.

These latest amendments, along with the addition of four new esteemed international jurists to the SICC bench, are intended to further increase the popularity and usage of the SICC, and Singapore as a preferred seat of international arbitration. Continue reading

Singapore High Court holds mandatory arbitration agreement in company constitution operative despite earlier litigation

The Singapore High Court ("Singapore Court") has clarified a number of issues concerning the content, scope and operability of arbitration agreements.  Of particular note is the Singapore Court's view on the extent to which a party's choice to subject a dispute, which may otherwise be the subject of an arbitration agreement, to litigation may act as a bar to that party subsequently choosing to refer the dispute to arbitration as a result of the doctrines of waiver or promissory estoppel. The Singapore Court also considered a number of additional issues which serve as a useful reminder as to best practice in drafting and enforcing arbitration agreements.   We discuss the case and the practical issues flowing from it in detail below. 

Facts

In BMO v BMP [2017] SGHC 127 the underlying dispute concerned the ownership of shares in a Vietnamese subsidiary of BMP (the "Subsidiary").  The Defendant, BMP, alleged that its shareholding in the Subsidiary had been substantially reduced by a series of unauthorized and unlawful share transfers which had eventually resulted in the Plaintiff, BMO, becoming the Subsidiary's majority shareholder.  The share transfers were purportedly effected by two individual shareholders in the Plaintiff, with the assistance of the Plaintiff itself.

In July 2014, the Defendant commenced litigation against the Plaintiff and the two individual shareholders in the courts of the British Virgin Islands in relation to the share transfers (the "BVI Litigation"). The Plaintiff acknowledged service of the claim and the parties made a series of interlocutory applications and filings in the courts of the British Virgin Islands.  Subsequently, in May 2015, the Defendant commenced arbitration against the Plaintiff alone (the "Arbitration"), pursuing the same cause of action and relief as it had sought against the Plaintiff in the BVI Litigation.

In March 2016, the BVI Litigation came to an end after the Defendant's claim was struck out.  In the Arbitration, the Plaintiff challenged the jurisdiction of the Tribunal to determine the Defendant's claims, on the basis that the Defendant had lost the right to arbitrate by its decision to pursue the BVI Litigation.  In April 2016, the Tribunal held that it had jurisdiction and ordered the Arbitration to proceed on the merits of the case.  The Plaintiff applied to the Singapore Court to set aside the Tribunal's ruling on its jurisdiction.

Decision of the Singapore High Court

The Singapore Court dismissed the Plaintiff's application and upheld the Tribunal's determination on jurisdiction.  In giving its decision, the Singapore Court discussed a number of important issues. 

  1. Governing law where no express choice is made

The arbitration agreement in this case was contained in the Subsidiary's company charter (i.e. the Subsidiary's constitution), which included no express choice of governing law.  The Court therefore had to determine the proper law of the charter and the arbitration agreement within it. 

The Singapore Court considered the historically divergent case law on this topic, specifically the English case SulAmérica Cia Nacional de Seguros SA and others v Enesa Engelharia SA and others [2013] 1 WLR 102 and the Singapore case FirstLink Investments Corp Ltd v GT Payment Pte Ltd and others [2014] SGHCR 12.  In short, while SulAmérica stands for the proposition that there is a rebuttable presumption that an implied choice of governing law of the arbitration agreement is the law of the substantive contract, FirstLink took the position that in a competition between an expressly chosen substantive law and the law of the chosen seat of arbitration, it is the law of the chosen seat that prevails.  Both of those decisions have been recently considered by the Singapore Court in BCY v BCZ [2016] SGHC 249 and Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd [2017] 3 SLR 267.  In both BCY and Dyna-Jet, the Singapore Court preferred the approach taken in SulAmérica.  Those decisions were discussed previously on this blog (see posts on BCY and Dyna-Jet).

In this case, the Singapore Court determined that the parties had impliedly chosen Vietnamese law to govern the charter on the basis that the charter included references in certain clauses to the requirements of Vietnamese law and it is unlikely that that the parties would intend for different laws to govern different parts of the charter.  Thus, the Singapore Court again adopted the logic of SulAmérica and applied it to the facts of the case holding that, as the parties' impliedly chose Vietnamese law for the substance of the charter, Vietnamese law also governed the arbitration agreement contained within it.

  1. Scope of the arbitration agreement contained in a company constitutional document

The Plaintiff argued that the Defendant's claims in the Arbitration did not fall within the scope of the arbitration agreement in the charter. The Singapore Court reaffirmed the broad approach to interpreting the scope of arbitration agreements, holding that arbitration agreements "should be generously construed such that all manner of claims, whether common law or statutory, should be regarded as falling within their scope unless there is good reason to conclude otherwise".

The Singapore Court also noted that the arbitration agreement used the phrase "all arising disputes" which could refer to all disputes "arising under", "arising out of", "in connection with", "connected with" or "relating to" the charter. The arbitration agreement was therefore wide enough to extend to disputes between the members of the Subsidiary that were not directly premised on the rights and duties created by the charter. 

  1. Had the Defendant lost the right to arbitrate?

In advancing its case that the Tribunal did not have jurisdiction, the Plaintiff relied on the fact that the Defendant had commenced the BVI Litigation to support three legal arguments:

  1. first, the Defendant had elected not to proceed to arbitration and had thereby waived its right to arbitrate;
  2. second, the Defendant had committed a repudiatory breach of the arbitration agreement; and/or
  3. third, the Defendant was estopped from relying on the arbitration agreement.
  1. Waiver

The Plaintiff argued that by commencing the BVI Litigation, the Defendant had elected not to proceed to arbitration and had thereby waived its right to arbitrate.  The Singapore Court considered this issue and made the following key observations:

  • The terms "waiver" and "election" share an immediate and intimate link: the consequence of election, if established, is the abandonment (i.e. the waiver) of a right.
  • It follows that there can be no "election" when there is no choice to be exercised. There is only election when a party with knowledge of its rights chooses between two inconsistent rights.
  • In the context of a breach of contract, waiver by election focuses on the conduct of the innocent party after the wrongdoing party's breach.  The choice between the two inconsistent rights belongs to the innocent party: namely, affirmation or termination of the contract.

Applying these principles, the Singapore Court held that there was no election available to the Defendant, as the party which had breached the contract by starting the BVI Litigation in breach of the arbitration agreement.  It was the Plaintiff, which then faced a choice between two inconsistent rights (to affirm or terminate) and which, if/when it exercised one of those rights, would be said to have made a waiver by election.  The Plaintiff's argument on waiver by election therefore failed.

The Singapore Court noted that if the arbitration agreement had given the Defendant a choice between arbitration and litigation, and if the Defendant had then initiated the BVI Litigation instead of choosing to arbitrate, this would have amounted to a different type of waiver, namely the unilateral waiver of one of two valid but inconsistent rights.  However, that was not the situation in this case.  Here, it was not correct to argue that a simple breach of contract could amount to a waiver by election.

  1. Repudiation

The Plaintiff argued that the Defendant's commencement of the BVI Litigation was a repudiatory breach of the arbitration agreement, which the Plaintiff had accepted through its participation in the BVI Litigation.  The Singapore Court also rejected this view, finding that breach of an arbitration agreement is not necessarily repudiatory in nature if there was some reason for the breach, such as confusion as to the correct course of action to take to purse a claim.  As in any other case of repudiation, it is necessary to analyse the facts in order to understand whether they indicate an intention not to be bound by the contract.  If not, the breach is not repudiatory. 

In this case, the Singapore Court accepted that the reason for the Defendant's decision to commence the BVI Litigation was that it was simply not aware of its obligation to arbitrate and, therefore, that there was no repudiatory breach.  In reaching this decision, the Singapore Court was mindful that after the Arbitration commenced, the Defendant had applied for a stay of the BVI Litigation in favour of the Arbitration and, therefore, this was not a case where the Defendant was maintaining parallel proceedings in breach of the arbitration agreement.

  1. Estoppel

Finally, the Singapore Court considered whether the Defendant, by commencing the BVI Litigation, had represented that it would no longer be relying on the arbitration agreement, such that it was precluded by promissory estoppel from taking a contrary position.

The Singapore Court clarified that the doctrine of promissory estoppel is applicable only in relation to a promise not to enforce legal rights.  The Defendant's commencement of the BVI Litigation was not a forgoing of any right and therefore the doctrine of promissory estoppel did not apply. Estoppel, like waiver by election, is an argument that may be raised against a party seeking to enforce its rights in response to another party's breach. The position here was reversed: the argument was raised by, not against, the party seeking to enforce its rights.

Conclusions and practical guidance

The decision in BMO v BMP provides a detailed legal analysis of a number of important issues with considerable practical impact.  Specifically, this case serves as a reminder of the following points:

  • There is now a trend of the Singapore Courts preferring to adopt the position in SulAmérica in relation to the applicable choice of governing law for arbitration agreements.  However, it remains to be seen what position the Singapore Court of Appeal will take.  In any event, specifying – in addition to the chosen seat of the arbitration – what law should govern the arbitration agreement, will help avoid uncertainty.  Parties should therefore take great care to consider carefully what law should govern the arbitration agreement, regardless of whether the arbitration agreement is contained in a commercial contract, a shareholders' agreement or a company's constitutional documents.
  • The Singapore Courts will continue to interpret arbitration agreements broadly so as to give maximum effect to parties' decision to arbitrate.  Parties should therefore carefully consider the precise scope of disputes which are intended to be the subject of an arbitration clause.  Where the scope is to be restricted, clear and effective language should be used to achieve any such restriction.
  • When determining the most appropriate forum in which to commence proceedings in relation to a dispute, clients should carefully review all relevant documentation and obtain advice as whether the dispute is required to be commenced by arbitration or litigation.  Commencing a dispute in the wrong forum can result in wasted time and costs and, potentially, the loss of substantive as well as procedural rights.

For further information about this case or arbitration in general, please contact Alastair Henderson, Partner, Daniel Waldek, Senior Associate, or your usual Herbert Smith Freehills contact.

 

Alastair Henderson
Alastair Henderson
Partner
+65 6 868 8000
Daniel Waldek
Daniel Waldek
Senior Associate
+65 6 868 8068

The European Court of Justice renders its opinion on the EU-Singapore free trade agreement: investment chapter is not within EU’s exclusive competence

On 16 May, 2017 the European Court of Justice (the Court) rendered its Opinion on the competence of the European Union to conclude the Free Trade Agreement (FTA) with Singapore. The Opinion recognises exclusive EU competence over most of the agreement and largely settles a long-standing dispute between the Commission and the Member States on the division of competences under the Lisbon Treaty.

Importantly, in the context of investor-state dispute resolution, the Court's Opinion is likely to render any agreement including protection for non-direct foreign investments or investor-state dispute settlement (ISDS) provisions a so-called "mixed agreement" which requires each of the Member States as well as the EU itself to become party, unless certain aspects commonly found in such agreements are removed or the Member States otherwise agree (discussed further below).  

The Opinion will have a major impact on the negotiation of future EU trade agreements, whether pending or anticipated (including the potential FTA between the UK and the EU following Brexit).

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Singapore Court of Appeal confirms the validity of “unilateral option to arbitrate” clauses

In the recent decision of Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd [2017] SGCA 32, the Singapore Court of Appeal confirmed that the Singapore courts will enforce a dispute resolution clause which gives only one party the option to arbitrate.  The court also clarified the requirements and threshold for a stay of proceedings to be granted under section 6 of the Singapore International Arbitration Act ("IAA")

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Should I stay or should I go? Singapore High Court declines to stay arbitration pending review of jurisdictional ruling

Overview

In a recent ex tempore judgment in the case of Loblaw Companies Limited v Origin & Co Ltd & Another [2017] SGHC 59 ("Loblaw v Origin"), the Singapore High Court declined to exercise its discretion under s10(9) of the International Arbitration Act ("IAA"), and refused to stay an arbitration pending final determination by the Singapore courts of a separate application by Loblaw to review the Tribunal's finding on its jurisdiction.

In its decision the High Court acknowledged the lack of authority on when and how a court shall exercise its discretion under s10(9) of the IAA, finding that "[u]ltimately, very much depends on the unique facts and circumstances of each case". However, an applicant would generally be required to show "special circumstances" justifying a stay, over and above the (alleged) merits of the jurisdictional objection or the obvious risk of wasted time and costs.

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