The Singapore International Commercial Court (SICC) has amended its rules to hear cross-border restructuring and insolvency matters, which took effect on 1 October, aiming to enhance the island country as an international debt restructuring hub.
The key changes made by the Singapore International Commercial Court (Amendment No. 2) Rules 2022 are an amendment to Order 21 of the Singapore International Commercial Court Rules 2021 (SICC Rules) and the addition of a new order 23A of the SICC Rules.
These changes introduce new processes in the SICC relating to corporate insolvency, restructuring or dissolution proceedings that are international and commercial in nature, and offer restructuring outcomes that would appeal to both debtors and creditors.
Patrick Ang, the managing partner of Singapore law firm Rajah & Tann, said the key challenges in dealing with cross-border insolvency and restructuring proceedings are dealing with diverse legal systems, different levels of development in the laws, and the lack of harmonisation among the various laws.
“The choice of jurisdiction to commence insolvency or restructuring is an issue and there may be disagreement between the debtor and creditors on the most appropriate forum,” said Ang. “In this region, in particular, the SICC offers a world-class, neutral, transparent and predictable forum. The new SICC rules expressly allow the court to hear cross-border insolvency and restructuring cases.”
The amended rules also allowed foreign counsel to work together with Singapore counsel to facilitate the process. The Legal Profession (Representation in Singapore International Commercial Court) (Amendment No. 2) Rules 2022 facilitate the participation of foreign lawyers in corporate insolvency, restructuring and dissolution proceedings before the SICC.
However, Ang noted, the SICC Rules require a foreign company to have a substantial connection with Singapore and a foreign element before the court. For example, connection by way of asset or business.
In terms of enforceability, Ang highlighted that an SICC judgment primarily depends on the laws of the state in which enforcement is sought.
“Parties should take note of the key jurisdictions that matter [for example, where there are assets to protect] and come up with a plan as soon as possible,” said Ang. “The fact that the jurisdictions have adopted the UNCITRAL Model Law, or whether the courts there have applied general law to assist and recognise a foreign judgment, will form some of the key considerations.”
With the ongoing domestic and global uncertainties and challenges, Ang anticipated to see more companies facing difficulties in the coming year.
“Increasing interest rates and growing inflationary pressures are likely to pose significant issues for many businesses,” said Ang. “Locally and in Southeast Asia, we expect to see medium-sized enterprises and highly leveraged businesses as relatively more vulnerable. In the recent past, we have also seen a number of crypto-related restructurings and insolvencies with regional businesses and presence taking place in Singapore.”
The general division of the Singapore High Court has seen an increase in corporate insolvency filings related to cryptocurrency markets. For example, Zipmex and Defi Payments of the Vauld Group recently filed for moratorium protection. Foreign representatives of the crypto hedge fund, Three Arrows Capital, filed for recognition in Singapore of liquidation proceedings commenced in the British Virgin Islands.
The new rules will make it possible for such proceedings that are commenced in the general division of the Singapore High Court to be transferred to the SICC, if the jurisdictional requirements are satisfied.
Previously in his opening remark during the SICC conference on 22 September, Edwin Tong, Minister for Culture, Community and Youth and Second Minister for Law of Singapore, said lawyers representing clients in certain insolvency cases before the SICC will be able to enter into conditional fee agreements (CFAs) with their clients – provided the insolvency proceeding has commenced in the SICC.
“Our framework in the Legal Profession Act and the Legal Profession (Conditional Fee Agreement) Regulations 2022, supports the use of CFAs in proceedings commenced in the SICC, while those proceedings remain in the SICC, and appeals arising from those proceedings,” said Tong.
“For insolvency proceedings in the SICC, this is a notable and positive evolution,” Tong added. “It will provide an additional funding option for debtors – on top of the existing avenues for third-party funding that is currently available. It also levels the playing field for Singapore lawyers vis-à-vis their foreign counterparts by allowing them to also offer CFAs.”