29 February, 2016
On 10 January 2016, the Singapore Academy of Law (SAL) published the results of its study on preferences for the choice of governing law and jurisdiction made by those involved in cross-border transactions "in Singapore and the region" (the Study). The Study reflects the views of around 500 commercial law practitioners and in-house counsel who have involvement in cross-border transactions. The Study results can be accessed here.
The Study responses suggest growth in:
(i) the internationalisation of transactions in the region
(ii) the importance of Singapore law and
(iii) Singapore as a preferred choice of forum for the resolution of disputes.
The value in the Study in signalling the strength of Singapore as an international centre of dispute resolution is of course influenced by the demographics of the Study population. With this in mind, the most noteworthy points are:
- 48% said that their preferred choice of governing law in cross-border transactions was English law. Singapore law was second at 25%, with New York at 7% and Hong Kong at 3%. Amongst the Study population, Singapore law was widely accepted as a valid choice for the governing law of cross-border agreements in the region.
- 52% said that their preferred venue for dispute resolution amongst study participants was Singapore, with Hong Kong second at 22%. The UK was only preferred by 7% of respondents. The top three reasons cited in the Study for choosing Singapore as a venue were proximity, efficiency, and neutrality (the first indicating a study population based in or near Singapore).
- 71% of respondents indicated that arbitration was the favoured method of dispute resolution, compared to 24% for litigation and 5% for mediation. Mediation's low score is perhaps surprising and the outcome may reflect the way the Study question was framed, given that mediation is often attempted within the framework of litigation or arbitration and should not be selected as a sole method of dispute resolution on the basis that it may not reach a determinative outcome.
Enforceability of decisions was cited as a key priority. Given the importance of enforceability in choosing litigation or arbitration, the introduction of the hybrid AMA Protocol in Singapore (see pages 6 and 10) may prove popular since the combined process can result in a consent award enforceable under the New York Convention.
All industry sectors represented by the Study showed a strong preference for arbitration. Consistent with our own experience, the highest scores were shown in the Construction and Oil & Gas sectors, at 84% and 82% respectively. The highest score for litigation was the Banking and Finance sector at 30%.
The general trend suggested by results of the Study matches our own experience both in Singapore and across our network that international arbitration is the most popular dispute resolution mechanism for cross-border transactions. This was also reflected in the 2015 Queen Mary University of London International Arbitration Survey published in October 2015 where survey respondents were predominantly from Europe and Asia (see here for more details).
Whilst the potential limitations of the Study are noted, undoubtedly Singapore continues to increase in popularity as a venue for dispute resolution and Singapore law may begin to challenge the established use of English law as the preferred choice of governing law in cross-border transactions in the region. These points and more will be scrutinised at the Global Pound Conference (GPC) Series, where Herbert Smith Freehills is taking a leading role (see page 14 for more details).
For further information, please contact:
Alastair Henderson, Partner, Herbert Smith Freehills
alastair.henderson@hsf.com
