Keynote speech by Minister for Law, Mr K Shanmugam, at the 26th LAWASIA Conference 2013

29 OCT 2013

29 Oct 2013 Posted in Speeches

International Dispute Resolution:
The Singapore Perspective in an Evolving Landscape

In the last 20 years, if you look at the global trade, that’s grown at an average of 5.5 per cent per annum.

Asia has been outperforming the global economy and attracting a higher share of international capital as well as trade
Since 2009, Foreign Direct Investment (FDI) inflows into Asia have grown by nearly 30 per cent, and now stand at about US$400 billion as of 2012. That accounted for 30 per cent of global FDI flows in 2012.

We expect a substantial increase in cross-border investments and trade into Asia; and intra trade between Asian economies.

From 2010 to 2020, the global GDP is expected to increase by approximately 73 per cent, to reach over US$100 trillion by 2020.
During that same time period, we expect that the Asian economies will more than triple, from US$10 trillion to US$34 trillion.
Of course China will contribute a substantial part of that, but a lot of people forget that the 10 countries of ASEAN have a combined population of 650 million and a GDP of US$2.2 trillion. That’s slightly larger than India’s economy.
If ASEAN was on its own, it would be the eighth or ninth largest economy in the world. And with the ASEAN 2015 vision, we expect a much greater integration by 2015 moving on to 2018 between the 10 countries, which is going to require a lot of infrastructure investments and the economies in this region are growing at something between four to five per cent on average, even during the tough times for the rest of the world.
So by 2020, you can expect the economies of ASEAN to be substantially bigger than where it is now. And Singapore services ASEAN in a way that, I think, no other city can.

All of these, obviously, calls for adequate dispute resolution mechanisms.

Against this backdrop, we expect that the legal services sector in Asia-Pacific will grow significantly^[1]. And the cities in Asia - Singapore, Hong Kong, other cities - are in a position to service large, growing economies such as India and China.
From Singapore, within seven hours, you reach pretty much all of China, as well as India, and of course, all of ASEAN. And if you combine the Australian economy, which increasingly is integrating with the ASEAN economy, you’re really looking at a very large footprint.
So the number and complexity of cross border disputes will increase.
And it’s important for the countries in the region to ensure that there are adequate dispute resolution mechanisms and frameworks in place to ensure efficient, cost effective and just resolution of such disputes.

Let me give you the context in Singapore.

In the last 10 years or so, Singapore has transformed itself into a key Asian base for leading global MNCs, businesses and a very cosmopolitan city that is attractive to international businesses from all over the world to site themselves here.

And, since law follows business, a number of top international law firms have sought to come here as well.

And over the last five years, despite challenging economic conditions throughout the world, Singapore’s legal sector has grown substantially.

From 2008 to 2012, legal services have grown by something like a quarter.
And from 2008 to 2011, the value of legal services exported from Singapore grew by 50 per cent.

We have in that context focused quite a bit on international arbitration. We have focused our energies on making Singapore a global legal and dispute resolution focal point and to break down boundaries and borders.

And that has resulted in significant growth in arbitration related services.

Singapore is now the third most preferred seat of arbitration in the world, behind London and Geneva.

The SIAC has become the 4th most preferred arbitral institution behind the ICC, LCIA and AAA/ICDR.

The total number of new cases handled by the SIAC increased from 99 cases in 2008 to 235 cases in 2012. This is significant and not just explained by economic situations.
The total sum of disputes arbitrated in SIAC in 2012 is also increasing – the sum total in 2012 was more than the totals in 2010 and 2011.
SIAC's caseload is predominantly international, with more than 80 per cent of the cases involving at least one international party.
Our local bar has benefitted from this growth. Around 75 per cent of international arbitrations involve at least one Singapore counsel.

The way we approached it was: take a very calibrated, progressive approach to reform the system to:

Keep pace with user needs and
Ensure a conducive environment for arbitration and dispute resolution activity to thrive. Primarily, the users come from India. Many Indians tell me this is their most preferred city. It’s almost an Indian city from their perspective. And an equal number of cases from what we call the Greater China: Hong Kong, China as well as Taiwan.

The success of our arbitration initiatives was built fundamentally on the trust premium in the Singapore brand and our ability to create a “Dispute Resolution Eco-System” where arbitration activity could thrive.

If you were to identify the key ingredients to our success, first and foremost, obviously, that we are a
1. Neutral third party venue – that’s been critical to our success. Asia is where the growth is and foreign investment is coming in substantial numbers. Investors as well as investees often prefer a neutral venue in Asia.
2. Second, a sound legal infrastructure – We adopted the UNCITRAL Model Law in 1994 with the enactment of our own International Arbitration Act, and there has been a continuous review and revisions to our International Arbitration Act and associated legislation - to ensure that we are on par with best international practices.
3. We have a supportive judiciary – a judiciary that recognises the value of arbitration and approaches it in the context of supporting it to the best international standards. And there is minimal intervention by the courts except in internationally accepted rubric. The Courts have also consistently supported the finality of awards from arbitrations. And where we saw one or two decisions that we felt were not consistent with that philosophy, in Singapore we were able to go in, amend the law in about four to five months and the legislative philosophy was clear and our courts applied that legislative philosophy.
4. We have an open environment – While I have said 75 per cent of arbitrations involve at least one local counsel, there is no legal requirement if the case has nothing to do with Singapore. So we have a completely open regime for international commercial arbitration. Commercial parties seeking to have their arbitration conducted in Singapore are free to appoint lawyers of any nationality from anywhere and use any governing law. Tax incentives have been introduced for arbitrators and arbitration work.
5. And of course, quality physical infrastructure and service support: Maxwell Chambers is probably one of the best in class and in terms of providing a framework for arbitration. But buildings, anyone can build. It’s really the software that goes to support that building. When it was set up, the Global Arbitration Review called the opening of Maxwell Chambers one of the “Best Developments” in the arbitration industry in the world. I won’t say purpose built because it’s a colonial building but purpose transformed I suppose.
6. And now, a developing critical mass of arbitral institutions, arbitrators and arbitration counsel - A community of arbitration practitioners has been built up. More than 10 of the Global Arbitration Review’s top 30 arbitration groups have offices in Singapore.
7. Stakeholder engagement – The Ministry of Law regularly reaches out to arbitration practitioners both in Singapore and internationally, and key stakeholders within the arbitration sector through dialogues and consultations to better understand the needs of the industry. And you will see every year, maximum once every two years, there are some changes made to keep pace, sometimes keep ahead of the necessary changes.

We will continue to focus on the arbitration space. Apart from the increasing caseload, the value of disputes has gone up and there is a rise in investment arbitration cases as well. We will continue to innovate and concentrate in this area.

At the same time, we’re now looking at what else can be done in Singapore to really make Singapore stand out as the premier destination for legal services and resolution of disputes in Asia, in fact, in the world. And we have identified that we need to put in a lot of focus on commercial mediation.

That is an area that my Ministry will be focusing on: to build up mediation capabilities – particularly to deal with international commercial disputes.

Mediation, as those of us who have practiced know, is an important complement to arbitration and litigation. We have a very strong Bar, a very strong litigation culture, having built the arbitration sector, we will now replicate that with the same intensity and focus on the mediation sector.
Mediation allows parties to arrive at a mix of legal and non-legal solutions and a mutually acceptable framework.

Mediation is well established in our domestic fields but we believe that the same factors that made Singapore such a successful arbitration venue, will help us focus and succeed in the mediation context as well.

We have established a Working Group on International Commercial Mediation to make recommendations on what we need to do.
For example, when we wanted to succeed in the international arbitration sphere, we said that the SIAC’s board has to be international.
So we did something that is not easy to do in many countries, we had an Australian who is one of the key arbitration practitioners in the world, lead our board and it had a very international outlook with South Koreans, Indians, Chinese, on the board.
I see ourselves replicating that with the international commercial mediation sector, with a strong international board and changes in legislation that support it and a whole framework and ecosystem that will be supported by my Ministry.

We will create the right environment.

We are now closely working with the Singapore Mediation Centre and other industry stakeholders on enhancing our capabilities in this field.

We will look at establishing a new independently run mediation centre.

It will have an International Board with international mediation experts.
There will be an independent professional body to ensure the highest professional standards.

We will make sure that capabilities and product innovations will be forward looking and user oriented.

The necessary legislative framework and infrastructure will be put in to support mediation.

The second initiative that I would like to share with you today, which we have been thinking about is to set up a Singapore International Commercial Court (SICC).

This is another plan, which looks into the long term for the dispute resolution sector.

The framework for the SICC, the premise for the SICC is that the Singapore judiciary enjoys tremendous international reputation.

Our Supreme Court Bench comprises 15 Judges (including our Chief Justice and four Judges of Appeal) and another four Judicial Commissioners.
There is a strong common law tradition.
Judgments from the Singapore Court of Appeal have been frequently cited in the judgments of higher Courts of other jurisdictions.

Earlier I said to you, the rise in investments will inevitably lead to cross border disputes:

A rise in cross border commercial activity and the increasingly complexity of commercial transactions means more disputes of an international character.

While you have arbitration and you have mediation, I think litigation in an international court is a necessary product that I think people are going to need in Asia.

If you look around Asia, if the parties can agree they can go for arbitration, if they can agree to settle they can go for mediation, but sometimes they need the force of the court or they would like to go to court.

And there is really only one place in Asia that today can provide that neutrality and with the soundness and the reputation to provide good quality dispute resolution possibilities.

So we’re looking at how the coercive jurisdiction of a Court of law can be brought into a multi-jurisdictional dispute which is not amenable to arbitration.

There are models elsewhere. 90 per cent of the cases seen in the London commercial courts involve an international party.

The Dubai International Financial Centre (DIFC) Courts, started in 2006 to handle international commercial disputes, witnessed a 40 per cent rise in caseload in 2012.

So likewise, we believe there is a need in Asia for this.

We’re well placed to fill that space. I have set up a Committee chaired by Senior Minister of State for Law, former Senior Counsel Indranee Rajah and Justice of Appeal VK Rajah to look into establishing a Singapore International Commercial Court.

What the mechanics ought to be, what would be the jurisdictional issues, the enforceability issues, these are all important questions that need to be addressed. It will require a change in the Constitution, and also who should be the judges. Ideally we should have judges of international standing from different parts of the world. The Committee will look at it. But if the product can be set up properly, it can fill a huge lacuna that now exists in this region.

The Committee will also look at streamlined rules that will ensure that cases are dealt with in a timely fashion in accordance with the best international practices.

In terms of philosophy, the key objective of introducing the SICC is to help support the growth of the legal sector and create more opportunities for everyone. The key driver of course is that, these cases would in the first place not naturally have been litigated in Singapore.

We believe that Singapore’s existing institutional advantages and reputation as a centre for international arbitration, will allow the SICC to position itself as the premier forum for court based commercial dispute resolution both within and beyond Asia. And we believe that there is need for such a forum.

Singapore is a focal point in Asia for many international transactions, be it trade, investment or financial and other services. Our dispute resolution sector supports those services.

In doing so, we seek to serve the region, and expand the work that Asia is attracting, by the provision of a neutral venue for every kind of dispute resolution.

We will continue to map out clear strategies to place Singapore in the forefront of all aspects of business, including legal and dispute resolution services. We welcome your views, and your participation, in our journey.

I hope all of you have a good conference. Thank you.

Last updated on 29 Oct 2013