Hong Kong retained its status as a leading global arbitration hub in 2023, recovering from setbacks caused by the pandemic. The resumption of cross-border trade, improved connections within the Greater Bay Area and beyond, and support from both local and central governments in its development as a leading Asia-Pacific centre for regional and international dispute resolution services, continue to favour better conditions for resolving domestic, regional and international disputes by arbitration in the city.
Hong Kong’s pro-arbitration reputation is supported by an arbitration-friendly judiciary and its status as an UNCITRAL Model Law jurisdiction, as well as a variety of legal and institutional developments.
This article examines three specific aspects and their impact on arbitration practice in Hong Kong, namely, outcome-related fee structures; the Court of Final Appeal’s elucidation of the approach to the interpretation of multi-tiered dispute resolution clauses; and broader access to interim measures in PRC courts.
The Arbitration (Outcome Related Fee Structures for Arbitration) Rules, also known as the ORFS Rules, took effect in December 2022. They enable lawyers and clients to agree on fee arrangements conditional on the outcome of arbitration.
This marks a significant departure from Hong Kong’s traditionally conservative funding in legal actions, as evidenced by the continued existence of the offences of champerty and maintenance for litigation.
The ORFS rules provide for three kinds of fee structures: conditional fee agreements; damages-based agreements; and hybrid damages-based agreements. Their functions and strengths have already been explored in an expert briefing article in Asia Business Law Journal’s May/June 2022 issue, and need no repetition.
However, of particular interest are additional conditions for a hybrid damage-based agreement, with part of the fees contingent on whether the client wins.
The ORFS Rules require a hybrid agreement to set out payments for scenarios where a client obtains a financial benefit, or no financial benefit is obtained. If the client loses, the client is only required to pay at most 50% of the irrecoverable costs, known as the capped amount, being the benchmark lawyer fees that would have been charged no matter whether an ORFS agreement has been made.
On the other hand, if the client wins but the fee payable arising from the damages-based portion of the agreement is less than the irrecoverable costs, the lawyer may instead elect to retain the capped amount, namely the amount of irrecoverable costs that would have been payable in the event the client lost.
The provisions for the ORFS, particularly hybrid damage-based agreements, are much welcomed additions. Not only do they make arbitration more accessible to local and international businesses of various sizes, but they also allow for flexible yet structured fee arrangements to be made. The option for electing between the capped amount and amount payable under the damages-based agreement payment if the client is successful enables lawyers to better recuperate the amount of fees they have incurred. Particularly for arbitration involving multiple and complex claims, it is quite possible that a party is only partially successful, resulting in an award that may be significantly lower than originally claimed.
By allowing lawyers to claim either the capped amount or that payable under a damages-based agreement payment, the ORFS regime on one hand allows lawyers to better balance the needs and preferences of their clients, and on the other hand the need to ensure they can be adequately remunerated for their work. This is, self-evidently, particularly important for complex arbitrations with multiple items of a claim.
Hong Kong’s arbitration-friendly approach also enjoys contributions from the courts. The highly anticipated judgment of the Court of Final Appeal in C v D (2023) – the first of its kind by a common law apex court – laid down the proper approach to interpretation and understanding of multi-tiered or cascading dispute resolution clauses in arbitration agreements.
The arbitration agreement in C v D provided that in the event the dispute “cannot be resolved amicably within 60 business days of the date of a party’s request in writing for such negotiation”, it shall be referred to arbitration. The tribunal considered that the parties fulfilled their negotiation requirements and proceeded to render an award in favour of the respondent. The appellant sought to set aside the award on the grounds that the tribunal lacked jurisdiction.
The issue before the Court of Final Appeal was: if an arbitration agreement contains a multi-tiered dispute resolution clause, whether an arbitral tribunal’s determination on the fulfilment of that precondition was subject to recourse of the court under article 34(2)(a)(iii) of the UNCITRAL Model Law.
The court unanimously dismissed the appeal on the basis that on a proper construction of the agreement, both parties intended any dispute as to fulfilment of the pre-arbitration conditions to be submitted to an arbitral tribunal for consideration. As such, the appellant could not rely on article 34(2)(a)(iii) to set aside the award.
Justice Roberto Ribeiro (with whom Chief Justice Andrew Cheung, Justice Joseph Fok and Justice Johnson Lam agreed) held that a court’s jurisdiction to review a pre-arbitration condition must be set out in clear language in the arbitration agreement before a court would conclude so. A pre-arbitration condition is presumptively non-jurisdictional, subject to interpretation of the agreement’s purpose and the parties’ intention.
The majority of judges also held that the distinction between jurisdiction and admissibility is helpful in construing a multi-tiered dispute resolution clause. In simplest terms, the distinction is one between a challenge to the tribunal (a question of jurisdiction) and a challenge to the claim (a question of admissibility).
The objection in question was only that the claim had been prematurely referred to arbitration, but not an objection refusing to give consent to the tribunal’s authority to decide and render an award on the matter. That said, given that such clauses are only presumptively non-jurisdictional, it is still open to parties to elevate a non-jurisdictional matter (like a multi-tiered dispute resolution method) into a jurisdictional one by express consent. This is embodied in section 3(2) of the Arbitration Ordinance, freeing parties to agree on how a dispute should be resolved, and a court should only interfere with the arbitration of a dispute as expressly provided for. Such an expansion of the scope of curial review was, however, observed to be “contrary to all normal commercial expectations”.
The judgment resoundingly maintained the distinction between jurisdictional and admissibility disputes, which finds firm roots in well-established approaches in ascertaining arbitrating parties’ intentions. It correctly highlights the importance of commercial certainty and the need for express indicia of intention before courts would consider intervening in arbitration disputes. More importantly, the judgment also elucidates what commercial parties may normally expect from Hong Kong courts: They are willing to assist in arbitration procedures and only make a limited intervention in arbitration disputes.
All in all, the judgment contributes to and solidifies Hong Kong’s reputation as a leading global arbitration hub, where commercial parties may conduct business and resolve disputes with reliable certainty, rooted in the very agreements they entered in the first place.
This year has also seen broader access to interim measures in PRC courts, which dates back to 2019, when the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region was entered into (interim measures arrangement). 2023 has seen increased use of asset preservation orders, and conduct preservation orders and evidence preservation orders for parties conducting arbitration in Hong Kong.
Recently, in May 2023, the Asian-African Legal Consultative Organisation (AALCO) Hong Kong Regional Arbitration Centre signed memoranda of understanding with 15 different organisations, including the Hong Kong Institute of Arbitrators. This signifies further and greater co-operation and integration of the city’s arbitration regime with the rest of the world.
As an institution approved by Hong Kong’s Department of Justice to be a qualified institution under the interim measures arrangement, parties using the AALCO arbitration can apply directly to PRC courts for interim measures.
Considering the development of stronger economic ties between Asia-Pacific and African economies, the AALCO may be expected to serve as a convenient platform for the resolution of commercial disputes between Asian and African entities, including commercial and investment disputes arising from the Belt and Road Initiative.
Hong Kong’s arbitration landscape has much to look forward to as a result of these legal and institutional developments.
With continuing government support for further use of arbitration and development of commercial ties with up-and-coming economies from different corners of the globe, the special administrative region is well-poised to serve as a progressive, reliable and user-friendly dispute resolution centre for domestic and international commercial parties of various industries.
India has taken several steps to promote arbitration as an alternative dispute resolution mechanism, and facilitate a more efficient and secure arbitration process since enacting the Arbitration and Conciliation Act (Arbitration Act) in 1996, with significant amendments in 2015 and 2019.
The judiciary has also played a key role in advancing this goal through its decisions. Yet while the judiciary has mostly furthered the cause, there have been setbacks where occasional contrary decisions have provoked amendments to the Arbitration Act.
This article focuses on three recent judicial pronouncements in India: a Supreme Court judgment on the stamping of arbitration agreements; a Supreme Court judgment on the limited scope of enquiry by courts at the stage of appointing an arbitrator; and a Delhi High Court judgment on third-party funding in arbitrations.
STAMP DUTY AGREEMENT
The Supreme Court’s recent decision in NN Global Mercantile v lndo Unique Flame & Anr held that an agreement, including an arbitration agreement, in which stamp duty had not been paid in terms of the Indian Stamp Act, 1899, was not capable of being acted on by courts in the appointment of arbitrators.
Courts are now required to ascertain that appropriate stamp duty has been paid on the underlying instrument prior to acting on the arbitration agreement. The Supreme Court reasoned that an agreement that is unenforceable due to the operation of substantive law – in this case, the Indian Stamp Act – would not be a valid contract under the Indian Contract Act, 1872.
This decision raises concerns within the arbitration community as regards its potential misuse and impact, including widespread fear that it would be used to delay appointments of the tribunal by courts. Another concern is that it would breed challenges by parties to awards on the grounds that the underlying agreement was not stamped, or insufficiently stamped.
Red flags were raised for foreign investors, who are usually unaware of the substantive laws in India, often leaving it to the Indian counterparty to ensure the agreement is enforceable. The fact that the agreement is not stamped becomes the Achilles’ heel weakness in commencing arbitration proceedings until this irregularity is corrected. Pertinently, not only does post facto stamping require payment of penalties, but can also be a lengthy and cumbersome process.
While the judgment did not make any observations regarding its impact on ongoing arbitrations, the Indian judiciary has been quick to recognise and counter some impediments to which it may lead.
Most recently, in Arg Outlier Media Private v HT Media, before Delhi High Court on 4 July, the award debtor sought the setting aside of an award on the grounds that in view of the NN Global judgment, the agreement being insufficiently or improperly stamped could not have been acted on by the arbitrator.
The high court rejected the plea to set aside the award on these grounds. It held that where the underlying agreement, including the arbitration agreement, was not properly stamped it should not have been admitted in evidence. However, once it had been so admitted, the resultant award could not be faulted on these grounds.
This decision alleviates concern as regards the increase in challenges of practical impacts of the NN Global judgment. While this is certainly a step in the right direction, there is still some way to go, since the high court’s decision does not touch on potential delays to the appointment of arbitrators that will be caused by the judgment.
One can also see improvement as the Supreme Court has agreed to hear a curative petition in another decision by it, which involves the question of enforceability of an insufficiently stamped arbitration agreement.
Until there is clarity, the parties should exercise diligence to ensure their agreements are stamped as per the Indian Stamp Act to be considered enforceable and avoid potential delays should disputes arise.
Earlier this year, in April, the Supreme Court dealt with the pre-referral jurisdiction of courts under the Arbitration Act in NTPC Limited v SPML Infra, emphasising the limited scope of their inquiry while appointing an arbitrator.
The issue in this case concerned objection by a counterparty to the appointment of the arbitral tribunal on the ground that no disputes existed between the parties. The counterparty relied on a settlement agreement that stated all obligations of the counterparty stood satisfactorily discharged.
The question before the Supreme Court was whether existence of the dispute in this context should be determined by the referral court appointing the arbitrator, or left for consideration by the tribunal.
In the past, the court’s position had been that it must prima facie examine the credibility of allegations before referring parties to arbitration. As these precedents did not align with the idea of minimal judicial intervention in arbitrations seated in India, the legislature intervened through an amendment to the Arbitration Act in 2015. This limited the court’s power to appoint an arbitrator by examining whether an arbitration agreement existed between the parties “nothing more, nothing less” (Duro Felguera v Gangavaram Port, 2017).
The NTPC judgment echoed the legislative intent of minimal judicial intervention. It further clarified that courts are required to carry out two limited inquiries.
The primary inquiry is the existence and validity of an arbitration agreement. This requires examination by the courts as to who the parties to the agreement are, and whether those are the parties before it.
The secondary inquiry is limited to examining whether the dispute is arbitrable. The court also clarified the secondary inquiry to be a prima facie scrutiny of the facts that lead to a conclusion that there is “not even a vestige of doubt that the claim is non-arbitrable”.
The rule formulated by the Supreme Court is clear. If a prima facie review on the objection of non-arbitrability is found to be inconclusive, the dispute is to be referred to arbitration. Clearly, this secondary inquiry is limited to protecting parties from being forced to arbitrate when the matter is demonstrably non-arbitrable, aiming to cut out the dead wood.
This decision reinforces the principle that the arbitral tribunal is the preferred authority to decide all questions of non-arbitrability. It will translate to a more efficient and speedier appointment of the arbitral tribunal by courts, as parties will think twice before raising objections at the appointment stage with a view to delaying arbitration.
Delhi High Court’s recent decision in Tomorrow Sales Agency v SBS Holdings, in May this year, offers clarity on the legal validity of third-party funding of arbitrations, which is not a legislatively recognised principle to date. However, courts have implicitly recognised this practice in judgments.
The high court was dealing with the question of whether an award holder can enforce an arbitral award against a claimant and its third-party funder. The claimant failed to satisfy the award. Subsequently, the award holder demanded payment of the awarded sum from the third-party funding the claimant’s arbitration, which was refused.
The award holder sought interim relief in terms of an order of security of the awarded amount, disclosure of assets and holdings, and an order restraining the alienation of assets from the award debtor and the third-party funder.
This relief was granted by a single judge of the high court. But on appeal, the division bench of the high court overturned the order, rejecting the request for interim relief against the funder on the grounds that it could not be treated as an award-debtor against which the award could be enforced.
The high court emphasised the purpose of third-party funding – namely, to ensure access to justice – and observed that while regulation was required to be formulated for transparency and disclosure in respect of funding in arbitration, it would be counterproductive if the law would allow for “mulcting third-party funders with a liability that they have not agreed to bear”.
This judgment is a step towards further legitimising third-party funding, particularly by protecting them from being made parties to enforcement action.
Hopefully, the legislature will pay heed to the observations of the court and develop formal regulations for third-party funding in India, which until now was undertaken with trepidation and unease.
The arbitration landscape in India is developing at a fast pace. Generally, it is safe to say that the judiciary is consistently rendering judgments that are commercially sound and arbitration-friendly. The legislature is also taking steps to amend unforeseen pitfalls in the existing legal framework.
On 14 June, the government constituted a 15-member expert panel to recommend reforms to the Arbitration Act. This panel will be submitting its report in the coming months.
Hopefully, this consultative process including renowned figures from the arbitration fraternity will result in changes to obvious pain points in the present system, making India a more arbitration-friendly jurisdiction for users both within and outside the country.
Japan is not frequently selected as a place of arbitration, mainly because it is assumed that Japanese is the language used in arbitration procedure, which is disadvantageous to non-Japanese attorneys and parties. It’s also widely believed that few arbitrators are proficient in English, and only Japanese lawyers are allowed to represent clients.
However, these misconceptions have been addressed through the overall globalisation that has taken place across Japan.
Regarding the language used, 41% of international arbitration cases used English before the Japan Commercial Arbitration Association (JCAA), the leading international arbitral institution, between 2018 and 2022, indicating that English is one of the major languages used.
A growing number of Japanese arbitrators can also work in English, with 38% of arbitrators appointed to international JCAA cases of non-Japanese nationality from 2018 to 2022, and from 12 countries. Following amendments to the law, non-Japanese lawyers are also recognised as representatives at international arbitration cases.
Clearly, demerits assumed to impact Japan as a place of arbitration have now been removed.
ARBITRATION ACT AMENDMENT
The Arbitration Act in Japan (AAJ) was enacted in 2003 in accordance with the stipulations of the Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL).
However, the AAJ was not amended to reflect Model Law amendments in 2006. That finally happened this year, in April, with the AAJ amended to align with the latest version of the Model Law.
Specifically, the 2023 amendment has established types and requirements for the enforcement of interim measures, which are orders issued by arbitration tribunals to preserve rights and evidence.
This enforcement can be broadly classified into measures necessary to avoid the risk of significant damage or distress to disputed property or rights and/or measures to restore them, and measures prohibiting the disposal of property, obstruction of proceedings, destruction of evidence and other acts.
The party obtaining enforcement of interim measures may then petition the court for an order permitting execution of it, and the petition will be approved unless the court finds grounds for refusal.
Also, prior to the 2023 amendment, when a claimant filed a petition with the court for an execution order, if the arbitral award was written in any language other than Japanese, it was required to submit to the courts a written translation into Japanese of the arbitral award. As arbitral awards tend to be quite long, this translation requirement imposed an administrative burden on the parties involved.
But with the 2023 amendment, in certain cases it will be possible to petition for an execution order of the arbitral award without submitting a Japanese translation.
Additionally, if the place of arbitration is Japan, concurrent jurisdiction will be recognised for Tokyo District Court and Osaka District Court, both of which have judges with specialised knowledge of arbitration cases.
The 2023 amendment is to come into effect no later than one year from the date of promulgation, which was 28 April 2023. At the very latest, operations from May 2024 will be conducted on the basis of the AAJ amendment.
JAPAN ARBITRATION BENEFITS
In addition to the 2023 amendment, there are other unique benefits to selecting Japan as a place of arbitration. First of all, Japan is a nation based on Civil Law. It is therefore easy to appoint a Civil Law arbitrator in Japan.
Considering that since 2010 there have been no cases in which a JCAA arbitration decision was rejected by a non-Japanese court – and there has never been a case of an arbitration tribunal decision reversed by the Supreme Court – it is clear that not only the Japanese courts, but also the non-Japanese courts, respect the decisions of arbitration tribunals and such decisions are stable.
From a geographic perspective of being located at a mid-point between each of the US, Europe and Asia, Japan provides good access for arbitrators, attorneys, parties and witnesses. It’s therefore a convenient location for selection as a third-party jurisdiction. Tokyo and Osaka, which are the likely places for arbitration to be held in Japan, also have the best public safety environments in the world.
In addition, the number of lawyers in Japan is quite low on a per capita basis. This underlines the high level of difficulty of the training and bar examination systems. This difficulty of becoming an attorney is because there is no difference between barristers and solicitors, and all attorneys are trained to be barristers. As such, the quality of lawyers involved in arbitration proceedings is maintained at a high level.
THE COST OF ARBITRATION
A schedule of fees paid to JCAA arbitrators
Amount in claim/
Number of arbitrators
JPY20 million (USD136,000)
JPY million JPY4 million
Source: JCAA website (https://www.jcaa.or.jp/arbitration/costs.html)
COST OF ARBITRATION
Let’s also take a look at the length of time and cost of arbitration procedures. The graphic at the top of this page listing fees paid to JCAA arbitrators shows that the amounts are clearly lower than those of arbitrators in other countries.
The time that is required for arbitration proceedings in Japan also tends to be short. The average time required from the initiation to the conclusion of proceedings from 2013 to 2022 at the JCAA was 12.9 months.
It is clear there are significant merits to selecting Japan as a place of arbitration. In principle, the expedited procedure is on a document-only basis, with reasonable effort made to render an arbitral award within three to six months.
Furthermore, when a Japanese national or Civil Law arbitrator is appointed, proceedings are conducted at an early stage to identify issues, and evidence and document disclosure proceedings are not undertaken, so that the overall proceedings can be made as compact as possible.
Since document production, in which both parties require mutual disclosure of certain documents, or specific categories of documents, is highly costly and time-consuming. The idea of limiting document production is often suggested when it saves arbitration costs and time.
It is clear there are significant merits to selecting Japan as a place of arbitration.
As outlined, Japan is an increasingly attractive place of arbitration. But the country is still only selected for a limited number of cases. This is why discussion of international arbitration is accelerating, with consideration underway on developing a new international hub.
In the future, the authors believe that in addition to being a location for arbitration proceedings involving Japanese nationals, Japan will eventually become a third-party jurisdiction for international arbitration cases. The authors hope this article contributes to that effort.
3F East Tower Otemachi First
Square 1-5-1, Otemachi, Chiyoda-ku
Tokyo 100-0004, Japan
Tel： +81 3 6270 3500
Recent jurisprudential developments have certainly added to the Philippines’ rich arbitration practice. They have been premised on essential legal and policy principles that ensure the integrity, efficacy and rationality of the arbitral process.
Arbitration continues to be a robust and dynamic practice area in the Philippines as the legislature and courts continue to maintain a decidedly pro-arbitration stance. This is readily seen in the country’s prevailing arbitration law and procedural rules, all of which are consistent with the keystone principles developed and practised globally.
Overall, this jurisdiction’s statutory and policy framework, complemented by jurisprudence and fostered by a rebounding and growing economy, has made the Philippines a competitive regional hub for arbitration and alternative dispute resolution.
AUTONOMY REMAINS PARAMOUNT
In Colmenares v Duterte (2022), the Supreme Court of the Philippines upheld the choice of law and forum clauses stipulated in the arbitration agreements covering certain loan agreements entered by the Philippine government with the Export-Import Bank of China.
Such clauses provided that the loan agreements, and the parties’ respective contractual rights and obligations, would be governed by and construed in accordance with the laws of China; also that any dispute arising from the loan agreements would be resolved in arbitrations administered by the China International Economic and Trade Arbitration Commission or the Hong Kong International Arbitration Centre, and under their respective rules.
Special interest groups assailed the clauses for being heavily skewed against the Philippines and, thus, violative of constitutional policy on the state’s pursuit of independent foreign policy. This policy requires that, in its relations with other states, the Philippines must be guided by national sovereignty and national interest, among other considerations.
In resolving this issue, the Supreme Court upheld clauses on the fundamental arbitration principle of party autonomy. The apex court recognised that arbitration of disputes around commercial contracts was a “purely private system of adjudication facilitated by private citizens, which has been consistently recognised as valid, binding and enforceable” such that arbitration agreements should be liberally construed, and the interpretation that would render them effective should be adopted.
The Supreme Court added that, for contracts involving foreign elements, the contracting parties’ choice of law is respected, pursuant to the principle of lex loci intentionis, or the law intended by the parties. Ultimately, the court found that the subject clauses were not offensive to Philippine law, morals or public policy, and the constitutional violation alleged by the special interest groups was speculative, given their failure to demonstrate that the governing law and dispute resolution mechanism stipulated in the loan agreements resulted in actual prejudice to the Philippines.
In Lone Congressional District of Benguet Province v Lepanto Consolidated Mining Company and Far Southeast Gold Resources (2022), the Supreme Court resolved the issue of whether a non-party to an arbitration agreement may intervene in arbitration proceedings or subsequent recognition or vacatur judicial proceedings for any resulting arbitral award.
In 1990, a mineral product sharing agreement was entered into by the Philippine government and certain mining companies to conduct mining operations in Benguet province. When the agreement was about to expire, the mining companies expressed their interest in renewing for another 25 years.
However, the Philippine government insisted that the renewal must first undergo a process under the Indigenous People’s Rights Act (IPRA), which had been enacted in the interim. The mining companies commenced arbitration assailing the new process. The arbitral tribunal rendered an award in favour of the mining companies; this was eventually vacated by a local trial court after a petition by the Philippine government.
While the case was before the Philippine Court of Appeals, the district of Benguet province, a local government unit, filed a motion for leave to intervene on the grounds that it represented constituents protected by the IPRA, who stood to be affected by the renewal of the mineral product-sharing agreement. Although the Court of Appeals reversed the ruling of the trial court, it denied the intervention of the district.
In resolving the issue of intervention, the Supreme Court held that Philippine arbitration law and procedural rules, particularly the Philippine Special Rules of Court on Alternative Dispute Resolution (special ADR rules), do not provide any mechanism for the intervention of non-parties to an arbitration agreement.
Specific provisions of the special ADR rules prevent the suppletory application of the rule on intervention applicable to ordinary court proceedings to arbitrations, or even to arbitration-related judicial proceedings.
The lack of a mechanism for intervention in arbitration proceedings is consistent with the objectives of Philippine arbitration law and rules – to respect party autonomy or the freedom of the parties to make their own arrangements in the resolution of disputes, as well as to achieve the speedy and efficient resolution of disputes and curb a litigious culture.
TRIBUNALS CO-EQUAL BODIES
ASEC Development and Construction Corp v Toyota Alabang (2022) is a case that involved one construction contract and arbitration agreement but two arbitral tribunals that rendered two conflicting arbitral awards in two separate construction arbitration proceedings.
The parties in this case entered a contract for the construction of a car dealership showroom. A dispute arose between the parties when the owner sought to deduct certain architectural works from the scope of the contractor, which entailed a reduction in the contract price, to which the contractor objected.
The contractor commenced arbitration before the Philippine Construction Industry Arbitration Commission (CIAC), which is the body vested with original and exclusive jurisdiction over construction arbitration disputes under Philippine law.
Arbitration ensued before the first arbitral tribunal, which rendered a final award in the contractor’s favour. Aggrieved, the owner sought judicial review before the Court of Appeals.
While this appeal was pending, the owner terminated the construction contract on the grounds of delay. This prompted the contractor to once again commence arbitration before the CIAC, this time on the principal issue of its entitlement to payment under its outstanding progress billings.
Eventually, the second arbitral tribunal ruled in favour of the owner. In doing so, the second arbitral tribunal essentially overturned the findings of the first arbitral tribunal as to the valuation of the works deducted by the owner. This prompted the contractor to elevate the matter to the Court of Appeals.
The appeals were consolidated by the Court of Appeals, which ultimately ruled in favour of the owner on the issue of deductive works.
On further appeal by the contractor, the Supreme Court set aside the final award rendered by the second arbitral tribunal insofar as it ruled on the issue of deductive works, which had already been settled by the first arbitral tribunal.
The Supreme Court explained that the two arbitral tribunals were co-equal bodies and neither of them could overturn, reverse or render another award of an issue previously settled by the other.
Thus, even if the findings of the first arbitral tribunal were pending appeal, such findings were already binding on the second arbitral tribunal. Otherwise, parties may be encouraged to incessantly file requests for arbitration until they are able to obtain an award in their favour.
Maynilad Water Services v National Water and Resources Board (2023) settled the rule on when to file a petition for the confirmation of a domestic arbitral award.
This case involved separate domestic arbitrations stemming from concession agreements on the principal issues of whether the water concessionaires were public utilities whose profits were subject to a regulatory price cap, and were prohibited from treating corporate income taxes as business expenditures. In one of the arbitrations, the water concessionaire prevailed.
In seeking the confirmation of the award in its favour, the water concessionaire applied the reglementary period under rule 11.2 of the special ADR rules (i.e., at any time after the lapse of 30 days from receipt of a party of the award). The other party challenged this and argued that the period under section 23 of the Arbitration Law, (i.e., at any time within one month after the award is made) should be applied instead, being specific to domestic arbitrations in the Philippines.
The Supreme Court held that rule 11.2 of the special ADR rules effectively superseded section 23 of the Arbitration Law by express provision of the Alternative Dispute Resolution Act, the Philippines’ primary law on arbitration. Ultimately, however, the award in favour of the water concessionaire was vacated on the grounds of public policy.
The above-mentioned developments serve to highlight the Philippines’ unique and ripe position for the continuing development of a dynamic arbitration practice that is firmly grounded on fundamental principles and adeptly guided by judicious institutions.
Singapore has been ranked as the most preferred seat for arbitration worldwide, edging ahead of Hong Kong and tying with London, due to favoured qualities including a stable legal environment with world-class arbitral institutions and a top-notch judiciary upholding arbitration rule of law in accordance with the New York Convention and UNCITRAL Model Law on International Commercial Arbitration.
This article takes a closer look at select interesting arbitration jurisprudence from the Singapore courts so far this year.
RECOGNITION AND ENFORCEMENT
Singapore courts continue to adopt a robust approach in granting a mandatory stay of court proceedings in favour of arbitration under the International Arbitration Act, 1994. In Parastate Labs Inc v Wang Li and others (2023), the General Division of the High Court further found it appropriate to order a discretionary case management stay of court proceedings, pending the resolution of a related putative arbitration.
The general division, following the Court of Appeal decision in the seminal case of Tomolugen Holdings and another v Silica Investors and other appeals (2016), held that the stay was appropriate because claims in the putative arbitration were foundational to claims against all the defendants.
In two other cases, the general division addressed the distinction between claims falling within the scope of an arbitration agreement and non-arbitration claims made in the context of insolvency proceedings.
In Founder Group (Hong Kong) (in liquidation) v Singapore JHC (2023), the general division reaffirmed the Salford principle, i.e., where a claimant in a company’s winding-up proceedings asserts it is a creditor on the basis of a debt governed by an arbitration agreement, the insolvency court will ordinarily stay or dismiss the winding-up application if satisfied that, prima facie, a valid arbitration agreement capable of encompassing a challenge against the indebtedness exists. This is unless the company is acting in abuse of process.
In Gulf International Holding v Delta Offshore Energy (2023), the general division found the company’s denial of indebtedness was an abuse of process, as it previously admitted liability for the debt. However, the court opined that the Salford principle may not apply as strictly in a judicial management application, given that such applications “engage concerns of public interest which, in some instances, may justify giving precedence to the insolvency regime over arbitration”.
In the general division’s view, an insolvency court faced with a claim of indebtedness falling within an arbitration agreement should not find itself refraining from staying or dismissing a judicial management application only where the company is acting in abuse of process. Instead, the court should “make a more holistic assessment of the facts and consider, inter alia, the interests of the other stakeholders of the [company] and the wider public interest”.
JURISDICTION OF TRIBUNALS
In CYY v CYZ (2023), the general division once again distinguished matters that go towards a tribunal’s jurisdiction from matters that merely concern the admissibility of claims, when confronted with a challenge against a tribunal’s positive jurisdictional ruling. The applying party (respondent) contended that the tribunal lacked jurisdiction because the claimant was advancing claims for services rendered outside the ambit of a contractual clause stipulated in the parties’ charter agreement.
But the general division dismissed the challenge, holding that the applying party was conflating “a question of contractual interpretation concerning a substantive obligation of parties” with a question concerning the tribunal’s jurisdiction. The former was a matter of admissibility, whereas the latter, which typically would involve the interpretation of an arbitration clause, was a matter concerning jurisdiction.
A tribunal’s jurisdiction to decide issues arising from a purported termination of its mandate was also clarified in CNA v CNB and another and other matters (2023). The main respondent in an International Chamber of Commerce (ICC) arbitration sought to terminate the tribunal’s mandate by executing a later arbitration agreement between the parties, submitting the same dispute to another arbitral institution. The respondents claimed the manoeuvre was valid and binding on the claimant since it had previously granted the main respondent authority to contract on its behalf, and the ICC tribunal had therefore lost its mandate to determine any further issues. They applied to set aside two partial awards of the tribunal on grounds that it had acted without jurisdiction.
The Singapore International Commercial Court (SICC) dismissed the applications, holding that the tribunal was perfectly competent to determine for itself whether an event that materialised after a valid reference to arbitration properly deprived it of jurisdiction. The SICC further found, on de novo review, that the subsequent arbitration agreement was in breach of the main respondent’s fiduciary duty owed to the claimant.
DUE PROCESS CHALLENGES
The courts continue to exemplify vigilance in the scrupulous exercise of supervisory powers over Singapore-seated awards. In CWP v CWQ (2023), the general division, in dismissing an award setting-aside application alleging breaches of natural justice by the tribunal, found that the applicant was attempting an impermissible challenge of the tribunal’s findings.
In its judgment, the general division emphasised Singapore’s longstanding judicial policy that “the courts must be wary of attempts by an aggrieved party to mount what is, in effect, an appeal in disguise”.
The principle of minimal curial intervention was similarly demonstrated, once again in CYW v CYX (2023), where the SICC characterised an award setting-aside application as a “good example” of a misconceived case presented as involving a tribunal’s due process violation in its case management, despite that “almost inevitably” falling within the tribunal’s discretion.
The SICC further highlighted that even if a tribunal had breached a rule of natural justice, the court must additionally be satisfied that the breach caused actual or real prejudice to the aggrieved party before curial intervention is warranted.
The SICC found no denial of natural justice arising from the tribunal’s imposition of a circumscribed extended deadline for the applicant’s expert report and witness statements, on account of several past instances of the applicant’s failure to comply with procedural timelines.
In CFJ and another v CFL and another, and other matters (2023), allegations of apparent bias were made against a presiding arbitrator who, during the proceedings, accepted (without disclosure) an appointment to a panel of experts constituted by the judiciary of the national state of the claimants.
In dismissing the respondents’ application to remove the presiding arbitrator from the tribunal, the SICC applied the objective “fair-minded and informed observer” test and found no cause for the complaint.
The SICC urged that “an assertion of bias, whether apparent or actual, has to be carefully considered and made only where there is a compelling factual basis”.
Citing the UK decision of Halliburton Company v Chubb Bermuda Insurance (2020), it also held that arbitrators are required to disclose only appointments and matters “which would cause the [reasonable observer] to conclude that there was a real possibility of a lack of impartiality”.
CONFIDENTIALITY OF ARBITRATION
Two decisions are noteworthy. The first, The Republic of India v Deutsche Telekom (2023), raised the question of when confidentiality in arbitration is lost, such that parties can no longer enjoy legal privacy in award enforcement proceedings in court.
The Court of Appeal, in refusing an award debtor’s interlocutory application seeking sealing or redaction orders pending an appeal against the SICC’s enforcement of the final award, held that arbitration confidentiality had been lost due to: (1) availability in the public domain of the tribunal’s interim and final awards, the Swiss seat court’s prior decision relating to the arbitration, and case documents filed in enforcement proceedings in several jurisdictions; and (2) details of the arbitration having been published in the Global Arbitration Review and on social media of the award debtor’s lawyers.
The second case, CZT v CZU (2023), focused on the confidentiality of a tribunal’s records of deliberations. An award debtor applied to court seeking an ICC tribunal’s records of deliberations, following a 2-1 split in its decision on the merits where the minority member in his dissent cast strong aspersions on the impartiality of the majority members. The production order was sought in parallel with the award debtor’s application to set aside the award.
The SICC held that confidentiality of arbitrators’ deliberations exists as “an implied obligation in law”, and that confidentiality does not extend to “essential process issues” (such as where a co-arbitrator is alleged to have been excluded from deliberations).
However, the SICC was reluctant to recognise a categorical carve-out of all process issues from confidentiality, but instead preferred a more open-ended formulation of the exception to confidentiality, holding that “a case would fall within the exception if the facts and circumstances are such that the interests of justice in ordering the production of records of deliberations outweigh the policy reasons for protecting the confidentiality of deliberations”.
On the facts, the SICC declined to grant the production order, finding no compelling reasons to invoke the exception.