26 April, 2016
Parliament has on 14 April 2016 passed the Choice of Court Agreements Bill (the “Bill”).
The Bill seeks to give effect to the Convention on Choice of Court Agreements concluded at the Hague on 30 June 2005 (the “Convention”). The Convention establishes an international legal regime for upholding exclusive choice of court agreements in international civil or commercial cases, and governs the recognition and enforcement of judgments amongst parties to the Convention.
Key Implications
The Convention entered into force on 1 October 2015. Under the Convention’s regime, parties will have greater assurance that:
- the court explicitly chosen by them under an exclusive choice of court agreement, and not some other court, will hear their dispute; and
- the courts of contracting states will enforce the judgement of the chosen court.
These fundamental principles underpinning the Convention promote greater certainty which will, in turn, enable parties to better manage the risks involved in transnational business and therefore create a legal environment more amenable to international trade and investment.
Importantly, the Bill will enhance the enforceability of Singapore judgments in other jurisdictions. This includes judgments rendered by the Singapore International Commercial Court (the “SICC”), which was established in January 2015 to hear international commercial disputes including those which have no substantial connection to Singapore.
Also, the ability to enforce Singapore judgments more widely will encourage parties to choose Singapore courts, including the SICC, in exclusive choice of court agreements. The Bill will therefore serve to unlock the potential of the SICC. In tandem with ratifying the Convention, the Singapore government is seeking to expand the scope of our reciprocal enforcement legislation, so that SICC judgments can be enforced by registration in more countries or territories.
The Convention is intended to be the litigation counterpart to The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). By having comparable enforcement regimes, this will level the playing field between litigation and arbitration, thereby enhancing parties’ choice. This is important because for various reasons, parties may prefer to litigate in courts. One major criticism of arbitration is the costs involved; also, difficulties arise in respect of joining an unwilling third party to an arbitration.
Important Features of the Bill
If the Singapore court is chosen pursuant to an exclusive choice of court agreement covered by the Convention, it would mean that the dispute must be heard only by the Singapore court. Also, the courts of other contracting states will be obliged to recognise and enforce the Singapore court judgment rendered in respect of the dispute. On the contrary, if the Singapore court is not the chosen court, the Singapore court must generally stay or dismiss the matter.
Generally, where a foreign judgment is valid and enforceable in the contracting state in which the judgment originated, it will be recognised and enforced in Singapore. Recognition and enforcement is subject to certain exceptions. Clause 14 of the Bill sets out the situations, such as fraud or public policy grounds, whereby the Singapore court must refuse recognition or enforcement of a foreign judgment. Clause 15 provides for discretionary grounds where the Singapore court has the discretion to refuse or enforce a foreign judgment.
Judgments in respect of interim protective measures cannot be enforced pursuant to the Convention. While clause 10(1) of the Bill excludes interim measures of protection from its ambit, clause 10(2) clarifies that the Bill is not meant to prevent a party from applying for, and the Singapore courts from granting, interim measures of protection such as mareva injunctions under Singapore law.
The Bill only applies to international civil or commercial matters. As such, it will not apply to matrimonial matters, bankruptcy, insolvency, employment or personal injury. We note that in respect of insolvency, this will be addressed separately by way of the Omnibus Insolvency Bill that will adopt the UNCITRAL Model Law on Cross- Border Insolvency.
The Convention will not supersede the Reciprocal Enforcement of Commonwealth Judgments Act and the Reciprocal Enforcement of Foreign Judgments Act entirely as there will be non-Convention situations (eg, non- exclusive jurisdiction clauses) and judgments on non-Convention matters (eg, lump sum maintenance orders), which may continue to fall within the existing statutory regimes.
Conclusion
Apart from Singapore, all of the countries in the European Union (except for Denmark), Mexico, Ukraine and the United States have signed on to the Convention. Other countries such as Australia, New Zealand, Canada and the Russian Federation are currently assessing the Convention. Hopefully the Convention will gain the necessary critical mass, especially from other Asian countries, in order to become a successful instrument.
We note that the experience with the New York Convention has shown that some jurisdictions have been more co-operative than others. There is a possibility that this may also arise in respect of the Convention.
The Convention is certainly something that parties and their legal advisers should bear in mind when weighing the pros and cons of non-exclusive jurisdiction clauses and exclusive jurisdiction clauses. While the use of a non- exclusive jurisdiction clause accords flexibility in choosing a jurisdiction as and when a need arises, there are uncertainties and litigation risks involved. The Court in Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] SGCA 16 held that the presence of a non-exclusive choice of jurisdiction clause will not, by the fact itself, constitute a strong indicator that the designated non-exclusive forum is the most appropriate forum where an international dispute ought to be adjudicated.
By enhancing its legislative architecture through the ratification of the Convention, Singapore will be able to parlay its success as a premier dispute resolution hub to even greater heights.
