Singapore resolves ‘last mile’ in application of Chinese arbitration rules

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In recent years, Singapore has emerged as one of the world’s leading centres for international commercial arbitration. One of the main reasons for its success is that its government and courts have a reputation for integrity and competence. This fosters a good environment for development of Singapore as the hub of arbitration, which in turn assists the development of the various types of local arbitration institutions and arbitration service companies. More parties have expressly indicated in their arbitration agreement that Singapore will be the seat of arbitration, with the venue of the hearing to be held in other countries, for example in China.

Foo_Maw_Shen
Foo Maw Shen

With China becoming one of the world’s leading economies, we see more and more Chinese companies being involved in international trade and commercial transactions. With this, disputes are inevitable. In their commercial contracts, Chinese parties have a tendency to insist on the use of the arbitration rules of Chinese arbitration institutions, with the hearing being held in China (and with the seat of arbitration being China).

However, certain sets of Chinese international commercial arbitration rules cannot be applied when the seat of arbitration is China, even in the various contexts of free trades zones in China. Take the tribunal’s powers to order interim measures as an example. Examples of such provisions are set out at article 21 of the arbitration rules of the China International Economic and Trade Arbitration Commission (CIETAC, 2012), articles 21 and 22 of the arbitration rules of the China (Shanghai) Pilot Free Trade Zone (2014) and article 25 of the arbitration rules of the Shenzhen Court of International Arbitration (SCIA, 2014). These provisions conflict with the Arbitration Law (articles 28, 46 and 68) and the Civil Procedure Law (articles 81 and 101), and any exercise of the powers by the tribunal to grant interim remedies pursuant to these provisions will be void and/or illegal (the conflict problem).

Ge_Huangbin
Ge Huangbin

Singapore’s International Arbitration Act, which is modeled after the UN Model Law on International Commercial Arbitration and the New York Convention, is applicable to international commercial arbitration procedures that have Singapore as their seat of arbitration. The Singapore International Arbitration Centre (SIAC) rules (2013 edition) also provides that the arbitral tribunal has wide-ranging powers, which include granting interim and emergency relief. Where it is provided that Singapore is chosen by parties to be the seat of arbitration, Singapore’s International Arbitration Act, and possibly the SIAC rules, may apply.

In the authors’ opinion, one way to solve the conflict problem is for a Chinese party to include in the arbitration agreement an offshore arbitration clause, which would take the following form: for any disputes arising in connection with this contract, Singapore shall be the seat of arbitration (or Singapore’s International Arbitration Act shall apply) and hearings shall be held in X in accordance with parties’ own choice of Chinese international commercial arbitration rules. For example, the parties could specify Singapore as the seat of arbitration and mainland China as the venue for hearing of the case. With this proposed solution, a Chinese party can overcome the conflict problem and at the same time enjoy the practical benefits which may be derived from having the hearing in China.

Singapore’s recent judicial case, First Link Investments v GT Payment and others (2014), the court found that there was a distinction between the juridical seat (place) of arbitration and the venue where the hearings of the arbitration took place, and the proper law of the arbitration agreement was generally the law of the seat of the arbitration. It again shows that the designation by parties in their arbitration clause of Singapore as the seat of arbitration indicates that the parties have selected Singapore’s International Arbitration Act as the law governing their arbitration agreement and governing their arbitration procedure.

Taking the clauses on the ordering of interim measures by arbitral tribunal as an example, both arbitral tribunals and emergency arbitrator provided for in Singapore’s International Arbitration Act have the power to order such interim measures. Even if the arbitration is held in China, different from the seat of arbitration (Singapore), the arbitral tribunal is bound by the procedural rules of Singapore (the seat of arbitration) and any exercising of the powers by the tribunal to grant interim remedies pursuant to these provisions will be legally valid.

This authors’ proposed solution to the conflict problem is further supported by all of China’s international commercial arbitration rules, which provide that an arbitral tribunal can appropriate interim measures pursuant to the proper law of the seat of arbitration. Explaining this from another perspective, Chinese arbitration institutions have taken into consideration that – notwithstanding the fact that current Chinese laws restrict the effective application of international commercial arbitration procedural rules – parties can designate a country or jurisdiction other than mainland China as the seat of arbitration, thereby allowing the parties and the arbitral tribunal to apply the procedural law and rules of the seat of arbitration, notwithstanding that such rules may be in conflict with Chinese law.

It needs to be mentioned that where parties specify Singapore as the seat of arbitration in their agreement, the procedural orders, orders for interim measures and awards rendered by arbitral tribunals under the various sets of Chinese international commercial arbitration rules will be treated as orders and awards made in Singapore, and after registration with and permission of a Singapore court, they can be enforced in the same manner as a judgment or order of the court to the same effect.

Where a country in which a Chinese party seeks enforcement of an arbitral award is not a member of the New York Convention, consideration may be given to using the provisions of Singapore’s Reciprocal Enforcement of Commonwealth Judgments Act and Reciprocal Enforcement of Foreign Judgments Act to enforce the above-mentioned arbitral award, after registering it as a judgment of a Singapore court, thereby extending the enforcement effectiveness of an arbitral award that is made under any one of Chinese international commercial arbitration rules.

Furthermore, taking into account factors such as the cultural similarity, legal neutrality, judicial transparency, procedural certainty, same language of communication, no work/time difference, and convenience of transportation of the country of the seat of arbitration, the specifying by Chinese parties of Singapore as the seat of arbitration is without a doubt the perfect choice for resolving the “last mile” of distance in realising the application of Chinese international commercial arbitration rules.

Foo Maw Shen is a partner in Rodyk & Davidson’s Litigation & Arbitration Practice Group and heads the firm’s China Practice.
Prof Ge Huangbin is Head of China Desk (International Arbitration) at Rodyk & Davidson. He is a panel arbitrator with International Arbitration Management Services (Singapore) Centre, CIETAC, Shanghai International Arbitration Centre, Shenzhen Court of International Arbitration and various arbitration commissions in China.