Key Takeaways

• The SIAC Model Clause contains a general choice-of-law clause for the main commercial contract. In view of recent case law, apart from the general choice-of-law clause which governs the main contract, it may be prudent for commercial parties to insert a clause specifying their choice of law for the arbitration clause contained in a main contract, preferably within the arbitration clause itself. This is particularly so if the law governing the main contract is different from the law of the seat.
• The SIAC Model Clause now provides an optional clause for parties who select Singapore as the seat of the arbitration to specifically choose the Singapore International Commercial Court (SICC) as the supervisory court of the arbitration. International parties may wish to choose SICC as the supervisory court of the arbitration because of the following reasons/factors: (a) diverse and highly respected judges on the SICC (including international judges drawn from both civil law and common law traditions); (b) the judges have arbitration practice experience; (c) if one of the parties to the commercial contract is a Singapore party, but the non-Singapore party to the contract has some reservations about choosing the Singapore High Court (excluding the SICC) as the supervisory court of the arbitration; (d) the internationalised procedure for SICC proceedings; (e) speed of judgment; and (f) better recovery of legal costs.

Introduction

The Singapore International Arbitration Centre (SIAC) recently revised its model arbitration clause on 12 January 2023 (SIAC Model Clause), which states as follows:

“In drawing up international contracts, we recommend that parties include the following arbitration clause:

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (SIAC) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (SIAC Rules) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The seat of the arbitration shall be [Singapore].

The Tribunal shall consist of _________________ arbitrator(s).

The language of the arbitration shall be ________________.

[In respect of any court proceedings in Singapore commenced under the International Arbitration Act 1994 in relation to the arbitration, the parties agree (a) to commence such proceedings before the Singapore International Commercial Court (the SICC); and (b) in any event, that such proceedings shall be heard and adjudicated by the SICC.]

APPLICABLE LAW

Parties should also include an applicable law clause. The following is recommended:

This contract is governed by the laws of _________________.”

There are 2 features worth noting about the SIAC Model Clause, namely:

1. It provides a general choice-of-law clause for the main commercial contract instead of a specific choice-of-law clause for the arbitration agreement.
2. It provides an option of choosing Singapore International Commercial Court (SICC) as the supervisory court of the arbitration.

(1) The importance of specifying the law governing the arbitration agreement in view of recent case law developments

The SIAC Model Clause contains a general choice-of-law clause for the main commercial contract, instead of a specific choice-of-law clause for the arbitration agreement. It states: “This contract is governed by the laws of _________________.” This provision is not new and has been in the previous iteration of the SIAC Model Clause. However, is the general choice-of-law clause contained in the SIAC Model Clause adequate to expressly select the law governing the arbitration agreement? Or would more specific language be required? This is the issue to be explored in this commentary.

At the outset, it should be noted that the law governing the arbitration agreement is of critical importance because it governs issues such as these: (a) Is the arbitration agreement valid? (b) How should the arbitration clause be interpreted to determine whether the dispute at hand falls within the scope of the clause? (c) Who are the parties to the arbitration clause?

What commercial parties may not realise is that the law governing the arbitration clause is distinct from the law governing the main contract containing both the commercial terms and the arbitration clause, and these two laws may or may not be the same. This is because the arbitration clause is commonly treated as a distinct agreement which is separate from the commercial terms in the main contract due to the doctrine of separability, albeit not for all purposes. The doctrine of separability serves to give effect to the parties’ expectation that their arbitration clause remains effective even if the main contract is alleged or found to be invalid (as embodied in Art 16 of the UNCITRAL Model Law). For that same reason, even though an arbitration clause is contained within a main contract together with the other commercial terms, it is often referred to as the “arbitration agreement”.

What commercial parties may also find surprising is this: When an arbitration agreement is in the form of a clause in the main contract, one might expect that a generally worded choice-of-law clause contained in the main contract would be taken to apply to the arbitration clause such that the chosen law governs both the main contract and the arbitration agreement. However, that is not necessarily the case, at least under Singapore law (recently confirmed by the Singapore Court of Appeal in Anupam Mittal v Westbridge Ventures [2023] SGCA 1 (Anupam)), as well as under English law. For a case note on Anupam, please click here.

As confirmed by the Singapore Court of Appeal in Anupam, the Singapore courts apply the BCY 3-stage test (from BCY v BCZ [2017] 3 SLR 357 (BCY)) to determine the law governing the arbitration agreement:

• Stage 1: First, the court will determine whether parties have expressly chosen a law to govern the arbitration agreement.
• Stage 2: Second, in the absence of an express choice, whether parties have made an implied choice of law to apply to the arbitration agreement. A choice of law for the main contract is a strong indicator of the law governing the arbitration agreement unless there are clear indications to the contrary.
• Stage 3: Third, failing any of the above two stages, the court will ascertain the system of law with the closest and most real connection to the arbitration agreement. This law is usually the law of the seat of arbitration.

An important point to note is that under Singapore law, a general and express choice-of-law clause governing the main contract would not suffice as an express choice of law for the law governing the arbitration agreement under Stage 1 (recently confirmed by Anupam, also see BNA v BNB [2020] 1 SLR 456; and BCY). For example, in Anupam, the Court of Appeal found that the reference to Indian law in Clause 20.1 of the shareholders’ agreement does not constitute an express choice of law for the arbitration agreement. The relevant part of Clause 20.1 states: “This Agreement and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India”. The Court stated in rather strong terms that an express choice of law for an arbitration agreement “would only be found where there is explicit language stating so in no uncertain terms”. As will be explained below, this is the first time in Singapore that this has a practical consequence on the outcome of the case.

If there is no express choice of law governing the arbitration agreement, the analysis proceeds to Stage 2 of the BCY 3-stage test, and the inquiry there is whether parties have made an implied choice of law to apply to the arbitration agreement. At this stage, a choice of law for the main contract is a strong indicator of the law governing the arbitration agreement, even though the law of the seat is more closely connected to the arbitration agreement. However, that presumption can be rebutted in favour of the law of the seat.

The case of Anupam is significant because it is the first time a Singapore court has rebutted this presumption resulting in a practical effect on the outcome of the case. Hence, the Court in Anupam found that even though the law governing the main contract (Indian law) is a strong indicator that the same law also governs the arbitration agreement, there were sufficient indications to negate the implication that Indian law was intended to govern the arbitration agreement. This is because such an implication would frustrate the parties’ intention to arbitrate all their disputes, given that minority oppression disputes were non-arbitrable under Indian law (with the Court having decided that Indian law is relevant to the issue of arbitrability in the pre-award stage). Accordingly, the Court found that the law governing the arbitration agreement was the law of the chosen seat under Stage 3 of the BCY 3-stage test, ie, Singapore law, and that the fact that the dispute in that case was not arbitrable under Indian law was of no consequence. The rejection of Indian law in favour of the law of the seat illustrates the so-called “validation principle” which seeks to uphold the validity of the arbitration agreement on the basis that commercial parties are generally unlikely to have intended a choice of governing law for the contract to apply to an arbitration agreement if there is a serious risk that a choice of that law would “significantly undermine” that agreement.

The position under English law is similar. As a general rule, where the law applicable to the arbitration agreement is not specified, a choice of law to govern the main contract is construed as applying to an arbitration agreement contained as a clause in the main contract, even where the parties have chosen a different country as the seat. This general rule is an inference which may be negated by factors which imply that the arbitration agreement was intended to be governed by the law of the seat, and such factors include the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective (ie, the validation principle) (see Enka v Chubb [2020] UKSC 38 (UKSC)).

Conclusion on the general choice-of-law clause in the SIAC Model Clause

The significance of the analysis above is that even though the law governing the main contract would ordinarily be taken to govern the arbitration agreement contained within, that is not always the case, and there can be practical consequences. To further complicate matters, the approach stated above is part of the conflict of laws rules of Singapore (and England), but each country has its own conflict of laws rules which may not necessarily be the same. It is thus conceivable that another jurisdiction may prefer the law of the seat over the law of the main contract as the law governing the arbitration agreement, failing express and specific designation by the parties. This could be on the basis that the arbitration clause is to be treated as a separate agreement from the commercial terms of the contract and that the law of the seat (rather than the law of the main contract) is more closely connected to the arbitration clause. Importantly, the issue of the applicable law can arise not only at the seat court, but also at the courts of multiple places of enforcement of the arbitral award, which can potentially give rise to a variety of approaches to the issue.

Therefore, given the above (including the strict approach under Anupam), if parties want certainty on the issue of the law governing the arbitration agreement, it would be prudent for commercial parties to consider inserting a clause specifying their choice of law for the arbitration agreement, preferably within the arbitration agreement/clause itself, which is apart from the general choice-of-law clause which governs the main contract. This is particularly so if the law governing the main contract is different from the law of the seat. Moreover, the SIAC Arbitration Rules do not contain a clear default provision on what the law governing the arbitration agreement is, unlike Art 16.4 of the London Court of International Arbitration (LCIA) Arbitration Rules, which states: “Subject to Article 16.5 below, the law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.” (emphasis added) Lastly, it should be noted that the Hong Kong International Arbitration Centre’s model arbitration clause contains such a specific choice-of-law clause which states: "The law of this arbitration clause shall be ... (Hong Kong law). " (emphasis added)

(2) Option of choosing the Singapore International Commercial Court (SICC) as the supervisory court of the arbitration

By way of background, if parties have chosen Singapore as the seat of an international arbitration, the effect is: (a) parties have chosen Singapore law as the law governing the arbitral procedure (also known as the lex arbitri or curial law) (ie, International Arbitration Act 1994), and (b) the General Division of the High Court in Singapore shall be the supervisory court of the arbitration. Accordingly, the General Division of the High Court in Singapore, as the supervisory court, would determine matters such as whether the arbitral tribunal has jurisdiction, whether to grant any interim orders in aid of the arbitration proceedings, and whether the arbitral award should be set aside pursuant to International Arbitration Act 1994.

If parties choose Singapore as the seat, the SIAC Model Clause now provides an optional clause which parties can adopt to specifically submit to the jurisdiction of the SICC as the supervisory court of the arbitration (Optional Clause). The Optional Clause is in fact the SICC model jurisdiction clause for international arbitration matters launched by the SICC on 12 January 2023. The Optional Clause states:

“In respect of any court proceedings in Singapore commenced under the International Arbitration Act 1994 in relation to the arbitration, the parties agree (a) to commence such proceedings before the Singapore International Commercial Court (the SICC); and (b) in any event, that such proceedings shall be heard and adjudicated by the SICC.”

In other words, parties can, by way of inserting the Optional Clause, expressly choose the SICC to be the supervisory court of the arbitration. The SICC was established in 2015 as a division of the General Division of the Singapore High Court to hear international commercial disputes, including those governed by foreign law. In 2018, the Supreme Court of Judicature Act 1969 was amended to make it clear that the SICC also has the jurisdiction to hear the same kind of proceedings relating to international commercial arbitration that the Singapore High Court can hear, and which satisfies such conditions as the Rules of Court may prescribe (s 18D Supreme Court of Judicature Act 1969).

Is the Optional Clause necessary if parties want to choose SICC to be the supervisory court? By way of background, in general, the SICC has the jurisdiction to hear and try an action if:

1. the claim in the action is of an international and commercial nature;
2. the parties to the action have submitted to the SICC’s jurisdiction under a written jurisdiction agreement; and
3. the parties to the action do not seek any relief in the form of, or connected with, a prerogative order (including a mandatory order, a prohibiting order, a quashing order or an order for review of detention).

Moreover, the SICC may also hear cases which are transferred from the Singapore High Court.

The Optional Clause seeks to be a written jurisdiction agreement, and it avoids the need for the claim to satisfy the statutory requirements prescribed for being “international” or “commercial” in nature.

International parties may wish to choose SICC as the supervisory court of the arbitration because of the following reasons/factors:

1. Diverse and highly respected judges: SICC positions itself to be a neutral venue for international commercial litigation for parties with little or no connection to Singapore but who value a neutral jurisdiction with strong rule of law, experienced and highly respected judges and access to high quality legal and professional services for their dispute resolution. In addition to local judges, a diverse panel of eminent international judges sit as judges in the SICC. The international judges are drawn from both civil law and common law traditions, and include retired judges from other jurisdictions (such as England and Wales, Australia, China, India, and Japan). This diversity in legal traditions which the judges are familiar with is a plus because international arbitration procedure often involves accommodating parties from different legal traditions.
2. Judges with arbitration practice experience: Some of the international judges are practising arbitrators, who would be expected to be in touch with the practical reality on the ground of arbitration proceedings, and be updated with the current best practices of arbitration procedure. Further, some of the local judges have significant experience practising international arbitration as counsel and arbitrator before their appointment as judges, and continue to adjudicate on arbitration-related court proceedings. All this may give international parties a certain level of comfort that the rulings from the SICC on arbitration-related litigation would be informed by a wealth of arbitration practice experience of the judges.
3. Perception of neutrality: The SICC may be an attractive option if one of the parties to the commercial contract is a Singapore party, but the non-Singapore party to the contract has some reservations about choosing the Singapore High Court (excluding the SICC) as the supervisory court of the arbitration. Afterall, one of the benefits of arbitration is that the adjudication of the dispute is not conducted by any of the parties’ national courts. The non-Singapore party may be more comfortable with the SICC adjudicating on arbitration-related litigation because a diverse panel of eminent international judges sits as judges in the SICC. Even though all appeals from the SICC will be heard by the Court of Appeal of Singapore (usually a panel of 3 judges), the Chief Justice may designate local judges as well as international judges to hear appeals from the SICC.
4. Internationalised procedure: The SICC has its own set of rules which are distinct from the set of rules of court which govern local procedural matters dealt with by the Singapore High Court. The SICC is not bound to apply any rule of evidence under Singapore law in such cases and to such extent as the SICC Rules may provide. The SICC may, in such cases as the SICC Rules may prescribe, order that any question of foreign law be determined on the basis of submissions instead of proof. The internationalised procedural rules would fit the international character of international commercial arbitration well.
5. Speed of judgment: The SICC has also received positive reviews for the quality and speed of its judgments. Most judgments were delivered within three months or less of the date of the last hearing.
6. Better recovery of legal costs: A successful party in SICC proceedings is entitled to costs from the unsuccessful party, and the quantum of any costs award will generally reflect the costs incurred by the party entitled to costs, subject to the principles of proportionality and reasonableness: O 22 r 3 SICC Rules. Indeed, the successful party would typically provide a breakdown of the costs in terms of the number of hours claimed, the hourly rates charged, and some explanation as to what work those hours were incurred for (see Senda International Capital Ltd v Kiri Industries Ltd [2022] SGCA(I) 10). The recovery of costs on this approach would generally be higher than the approach applied in proceedings in the General Division of the Singapore High Court (excluding the SICC), which does not generally refer to the actual costs incurred by the successful party, but to the applicable costs guidelines which prescribe a pre-quantified range for each category of proceedings. For example, the guidelines prescribe a daily tariff of SGD$13,000 to SGD$40,000 for arbitration-related proceedings.

Conclusion on the option of choosing the SICC as the supervisory court of the arbitration

The SIAC Model Clause now provides an optional clause for parties who select Singapore as the seat of the arbitration to specifically choose the Singapore International Commercial Court (SICC) (instead of the Singapore High Court) as the supervisory court of the arbitration. International parties may wish to choose SICC as the supervisory court of the arbitration because of the following reasons/factors: (a) diverse and highly respected judges on the SICC (including international judges drawn from both civil law and common law traditions); (b) the judges have arbitration practice experience; (c) if one of the parties to the commercial contract is a Singapore party, but the non-Singapore party to the contract has some reservations about choosing the Singapore High Court (excluding the SICC) as the supervisory court of the arbitration; (d) the internationalised procedure for SICC proceedings; (e) speed of judgment; and (f) better recovery of legal costs. Indeed, the SIAC recommends, in its footnotes to the SIAC Model Clause, the inclusion of the Optional Clause when the SIAC Model Clause is adopted for international commercial arbitration. With this recommendation from SIAC, and the attractiveness of selecting the SICC as stated above, it is expected that international parties would increasingly select the SICC as the supervisory court if Singapore is the chosen seat of the arbitration.