This article first appeared on Thomson Reuters Practical Law Arbitration Blog, here.
One day short of April Fool’s Day this year saw the Singapore International Arbitration Centre (SIAC) release its 2020 Annual Report (SIAC Report). Far from being a joke, the report presented some phenomenal figures that appear to cement deeper SIAC’s reputation as one of the leading international arbitration institutions, and Singapore’s reputation as a favoured arbitration hub.
Last year represented a milestone for SIAC, with developments including 1,080 new case filings in 2020, the launching of a representative office in New York and a new record of 545 US parties arbitrating their disputes at SIAC. The stand-out year may seem at odds with the wider global challenges, and tragedy, that is the COVID-19 pandemic. Were SIAC’s milestones reached independently of COVID-19, or did the pandemic contribute to it? To consider this, we need to look at the noticeable trends and gaps in SIAC’s 2020 Annual Report.
New Cases, Sectors, Contract Dates and COVID-19: What’s the Connection?
Of the 1,080 new case filings, the highest ever since SIAC commenced operations in 1991, a sizeable 734 of those filings (64%) are trade disputes. Compared with the 100 trade disputes filed in 2019, that means a hefty 639% surge of trade disputes filed with SIAC in the span of one year.
In contrast, corporate disputes slumped by 42.86% from 2019 (that is, from 140 to 80 in 2020). In the construction and engineering sector, the number of disputes filed with SIAC also dropped (from 76 filed in 2019 to 49 in 2020). However, maritime and commercial disputes soared: maritime disputes nearly doubled (from 39 disputes filed in 2019 to 72 in 2020), whereas commercial disputes increased (from 77 filed in 2019 to 91 in 2020). Finally, disputes tagged as “others” almost tripled (from 50 in 2019 to 123 in 2020). How can we explain these numbers?
Beyond providing figures, the SIAC Report does not specifically say to what it attributes the dramatic data. The SIAC Report also makes no mention of any impact the COVID-19 pandemic might have had to the rise and fall of disputes across the various sectors. But anyone following the global news over the last year might find it hard to not link the statistics, particularly the domination of trade disputes in the wake of the pandemic.
The link is noticeable (or perhaps inevitable), for example, when one considers the contract dates of the cases filed. According to the SIAC Report, “[d]isputes arising from contracts entered into during the period from 2018 to 2020 accounted for 75.2% of new case filings”. In other words, most of the new cases filed with SIAC in 2020 arose from contracts concluded in the immediate time period before the pandemic broke out. But for the pandemic then, what could explain the failures of these seemingly short-lived contracts?
News reports around the world appear united in the view that COVID-19 brought about the difficulties or impossibilities faced by business and traders in performing their contractual obligations in recent periods. Government restrictions in response to the pandemic including border closures, restrictions on in-person commercial activities, and nationwide lockdowns, directly impact global demand, global mobility, and therefore, the global supply chains.
So if COVID-19 does contribute to the 75.2% of new case filings with SIAC in 2020, what this also tells us is: to all of the parties to these contracts, arbitration is a preferred method of dispute resolution, and SIAC is a trusted and favoured arbitration institution for that purpose (over, and topping other leading institutions, such as the ICC (which recorded 964 new case filings in 2020) and the LCIA (which recorded 444 new case filings in 2020)).
Geographical Origin of Parties & Governing Laws
2020 also saw a significant increase in the number of foreign parties. 94% of the new cases filed were international in nature, involving parties from 60 jurisdictions. Of these, parties from India, US and China claimed the top three spots.
India remained a loyal user of SIAC and kept its spot in first place (with 690 users in 2020, compared to 485 in 2019). Parties from the US skyrocketed to 545 users in 2020 (a new record and jump of 738% from 65 users in 2019) and parties from China increased to 195 users in 2020, compared to 76 in 2019.
The SIAC Report is sufficiently discreet in that, although it provides information on the geographical origin of the parties, it does not indicate as between parties from which countries the disputes exist. It would therefore probably be too presumptuous to assume that most of the disputes are between US and Chinese parties. It might also be too simplistic to suppose that all the disputes involving US and Chinese parties are in the trade sector.
That said, a Financial Times news article stated that the leap in US and Chinese parties was explained by a trends expert as being “partly due to Singapore’s neutrality amid increasing tensions between Washington and Beijing”.
If so, this should be expected rather than coming as a surprise. Singapore has, after all, for some years carefully and deliberately positioned itself as a neutral ground for the region and global businesses. As described by SIAC’s Chairman: “Singapore is seen as a neutral venue for the holding of international commercial arbitration which is in a geographically convenient location and is supported by a physical, legal and political infrastructure that is sophisticated, skilled and of high integrity.”
Affirming yet even further that Singapore’s legal and political infrastructure is a trusted brand, the SIAC Report also states that the most applied governing laws were Singapore (76% an increase of 41% from 2019), followed by the United Kingdom (9%) and India (2%). This is interesting to note, as it potentially means that for many of the foreign users, Singapore law is the preferred governing law, possibly even for parties from India, US and China.
Emergency Arbitration, Expedited Procedure and Early Dismissal
SIAC is an institution that prides itself on keeping up to date with the needs of the business community. SIAC has therefore introduced amendments to its rules in order to facilitate an emergency arbitration (in 2010), an expedited arbitration procedure (in 2010), an early dismissal of claims (in 2016), and joinder and consolidations (in 2016). The SIAC Report shows that these features are not simply “nice-to-have”; they are welcomed and in growing demand by arbitration users.
In 2020, SIAC received 20 applications to appoint an emergency arbitrator (an increase from ten applications in 2019); 88 requests for expedited procedure (an increase from 61 requests in 2019); five early dismissal applications (down from eight applications in 2019); 248 applications for consolidation (an increase from 179 applications in 2019); and 36 applications for joinder (an increase from 29 applications in 2019).
SIAC’s 2020 performance is impressive but it may not be until the figures from 2021, 2022, 2023 and beyond are out before we can really gauge the long-term impact. If the SIAC can establish such robust growth as a pattern, not merely a result of a unique once-in-a-generation global crisis, then expect the dynamics of the international arbitration market to shift even more over the next decade.
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