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Opening Address by Ms Indranee Rajah, Senior Minister of State, Ministry of Law & Ministry of Finance, at the Singapore International Arbitration Centre Hard Talk 2017

Posted in Speeches

The Honourable Mr Dipak Misra, Chief Justice of India,

 

The Honourable Mdm Gita Mittal, Acting Chief Justice of the Delhi High Court,

 

Members of the SIAC Board and Court,

 

Ms Lim Seok Hui, CEO of SIAC,

 

Distinguished guests,

 

Ladies and Gentlemen,

 

1.         This is the “Hard Talk” session in the second part of SIAC’s day-long conference. Earlier this afternoon, in the Conference segment, we did some crystal ball-gazing, to consider the future of arbitration, particularly between India and Singapore.

 

2.         My conclusion in my earlier opening address was that:

 

a.         The future of arbitration in India is bright.

 

b.         It will be an important part of India’s rise and internationalisation.

 

c.         And Singapore and SIAC can play a role in facilitating this.

 

3.         However, as we know, all good things are not without challenges. In my remarks for tonight’s session, I would like to address some of the issues faced by the arbitration industry and address them directly – this being, after all, a Hard Talk session. 

 

Arbitration in Asia – a Long Golden Summer

 

4.         I mentioned this morning that the world’s centre of economic gravity is in Asia. The hive of activity in Asia is reflected by the increasing disputes here.

 

a.         The Global Arbitration Review updates arbitration caseloads regularly. From 2012 to 2016, there was a 37 per cent increase in caseload administered by 11 arbitration institutions worldwide.

 

b.         But if you look closely at the split between Asian and non-Asian institutions, you see that caseloads by institutions outside of Asia grew overall by 13 per cent, whereas caseloads by institutions in Asia grew more than 75 per cent!

 

5.         This is no surprise.

 

a.         The Asian Development Bank calculated that Asia accounted for nearly two-thirds of global growth last year.

 

b.         As Asian economies grow, we will see, first, the rising presence of foreign companies meeting the needs of a wealthier, more sophisticated domestic market.

 

c.         Second, local companies going global.

 

d.         Growing cross-border commercial activity means growing cross-border disputes and growing demand for arbitration.

 

e.         This is not even accounting for future projected growth.

 

                       i.             India – growth will be facilitated by the economic policy foundations laid by the Modi government.

 

                     ii.             China – new opportunities will arise from the Belt and Road Initiative.

 

                    iii.             ASEAN – as the region integrates, the ASEAN Economic Community will generate even more growth.

 

6.         All these augur well for the need for dispute resolution. The facts and figures indicate that the sun is shining brightly on arbitration. There are signs of summer. But the question is what part of summer? Is it at the beginning – with arbitration on the ascent? Or is it at the end of summer – with the decline around the corner, and the advent of winter?

 

Winter Coming?

 

7.         The facts I cited present opportunities, but also generate stress on the market.

 

a.         First, there is an issue of basic supply and demand. There are only so many high-quality arbitrators in the world, and it takes longer to train a top-notch arbitrator than it does to grow a company. I am sure those present here will not disagree!

 

b.         This results in the same arbitrators being appointed for multiple cases. We should not be surprised therefore to hear increasing concerns about arbitration as a mode of dispute resolution, in terms of rising costs and increasing delays.

 

8.         One natural response to this has been the increase in the supply of arbitration services:

 

a.         A rise in the number of Asian jurisdictions developing dispute resolution services and innovations to address the demand;

 

b.         A growth in the number of arbitral institutions; and

 

c.         Top arbitral institutions like the Permanent Court of Arbitration (PCA) and the International Court of Arbitration of the International Chamber of Commerce (ICC) expanding their global presence.

 

9.         However, a trend that should be of concern to arbitrators is the rise of competing dispute resolution models.

 

a.         Litigation is fighting back. The wide enforceability afforded arbitral awards by the New York Convention has long been a bulwark of arbitration’s popularity. However, there are now new instruments for international enforcement of court judgments, an important one being the Hague Choice of Court Convention. Signatories include the EU, US, Mexico and Singapore. It has gathered pace in recent years. The EU, Mexico and Singapore have ratified it. Last month, China signed the Convention as well.

 

b.         On the mediation front, there are now discussions about an equivalent to the New York Convention, i.e. a multilateral agreement on the enforcement of settlement agreements arising from mediation or conciliation.

 

10.      Now consider, on top of this, other global trends.

 

a.         As Mr Gary Born mentioned in this afternoon’s session, there is growing resistance to arbitration in the area of investor-state arbitration. Some states have voiced opposition to arbitration; in some cases citing factors that were the very reasons why arbitration came into being in the first place – confidentiality; the lack of the right of appeal; and a sense, rightly or wrongly, that awards against states have been disproportionate or unjustifiable.

 

                       i.             It is against this backdrop that the EU is now discussing a multilateral court system.

 

b.         This presents further competition to arbitration, which has dominated cross-border dispute resolution since 1958.

 

c.         Then there is technology.

 

                       i.             Technology is changing the legal sector. Clients demand value and speed, and are increasingly capable of parcelling work out to machines which can meet their needs.

 

                     ii.             Technology will increasingly augment the arbitrators’ and counsels’ work.

 

·                Courts are increasingly moving into e-filing and technology courts that provide convenience for parties and counsel. There will be pressure for arbitrators to do the same.

·                Artificial intelligence or AI is making ever-increasing inroads into discovery, case analysis and research. Clients will no longer be willing to be billed by the hour for such work to be done manually, if software solutions can turn up the same results in a matter of minutes, if not seconds.

·                In the US, there is a software known as Lex Machina. It predicts the outcome probabilities of cases, using data aggregated from past cases. This could impact expensive pre-arbitration advisory opinions.

·                In the US, there is also Premonition Analytics. It mines data to inform users which lawyers win before which judges. This basically means that clients can run a search for your win-loss record.

·                Another US start-up, Ravel Law, mines data to reveal insights about judges, lawyers, parties and subjects of cases. Whilst arbitration is confidential, one can well envisage that in the not too distant future, someone will start aggregating data about arbitrators, counsel and parties based on either publicly available information or using an Uber-like software to rank arbitration professionals based on clients’ direct feedback.

 

                    iii.             These are some of the challenges that face arbitration today.

 

Possible Responses

 

11.      So what can we do? Perhaps I can share a Singapore perspective.

 

12.      Singapore is a small country, with no natural resources. If nothing else, our situation has forced us to be very practical about things.

 

13.      What is our assessment of the broad parameters?

 

a.         The trend of globalisation will persist, notwithstanding the inward turn of some countries today. It has brought prosperity to millions, if not billions of people. The global trading regime is here to stay.

 

b.         At the same time, technology is developing at an accelerating pace, which will bring us to places we cannot yet even imagine. So you can do your best to prepare for them, but sometimes it is indeed like crystal ball-gazing. What is beneficial and what is disruptive? Who benefits and who is disrupted? We don’t quite know yet.

 

c.         Then there are the concerns of arbitration clients which I highlighted earlier.

 

14.      The conclusion is that dispute resolution – and arbitration in particular – remains critical to the growth of global commerce, but it must be responsive to demand and user requirements. In order for arbitration to not only survive but thrive, it must innovate to meet customer needs amidst changing trends.

 

15.      Hence in Singapore, we have in recent years made several changes to keep up with the evolving landscape:

 

a.         There are disputes where parties need emergency relief even before a Tribunal is formed. This used to be a bugbear in Singapore arbitrations, when parties’ activities in the interval before the appointment of the tribunal could adversely alter the situation in a way that would not be easily compensatable in damages, or would present the other side with an irreversible fait accompli. So SIAC introduced an emergency arbitrator mechanism and was the first arbitral institution in Asia to do so.

 

b.         In December last year, SIAC launched their investment arbitration rules, which seek to improve on existing frameworks.

 

c.         Most recently, we amended our legislation earlier this year to allow third-party funding for arbitration.

 

d.         For those less familiar with third-party funding, allow me to elaborate.

 

                       i.             Third-party funding is a situation when an entity unconnected to the dispute provides funds to a party to pursue a legal claim. This typically addresses a situation when a party has got a good claim on the merits, but has insufficient funds to pursue it.

 

                     ii.             The claimant uses the funds to cover its legal costs.

 

                    iii.             In return for funding, the funder receives a share of the amount(s) awarded to the claimant if the claimant is successful.

 

                    iv.             If the claim fails, the funder goes without reimbursement. Thus, the risk is assumed by the funder.

 

e.         We made this change in response to feedback that there was demand for such funding in international arbitration cases. We expect this to spur more international arbitration cases.

 

16.      Responding to change is not simply about fighting a rear-guard action. It is also an opportunity to innovate and move ahead. Arbitrators and arbitration counsel should be prepared for change, and ride on it. Arbitration is still popular, for good reason. But users have said, and you must respect, that it is no longer the only game in town.

 

a.         Being cognisant of this, we in Singapore consciously developed alternative products for dispute resolution. In this way, clients have a suite of things from which to choose, depending on what best fits their needs.

 

b.         Hence, in addition to arbitration, we have the Singapore International Commercial Court, which we established in 2015. This is a neutral and high-quality forum for cross-border commercial litigation, where jurisdiction is conferred purely by consent of the parties.

 

c.         Likewise, we set up the Singapore International Mediation Centre (SIMC). Mediation is slowly but surely growing in popularity as a mode of dispute resolution. To capitalise on the advantages of mediation, but provide cross-border enforcement, we introduced the Arb-Med-Arb procedure, which has been extremely well received by parties.

 

Conclusion

 

17.      In conclusion, the answer to the question of whether what lies ahead of arbitration is a long gradual decline into the frozen wastes of winter, or an ascent into a bright shining golden summer, is that it really depends on how the arbitration industry – the institutions, arbitrators and counsel – respond to the needs of parties and to the changes that will inevitably be wrought by technology, a changing world economy, and international considerations.

 

18.      The future, ladies and gentlemen, is in your hands.

 

19.      Thank you. 

Last updated on 13 Oct 2017