31 January, 2017
While toasting the New Year over a glass or two of champagne, it may have gone unnoticed to many of us that the strike of midnight also marked a more momentous event: the coming into force of two new sets of arbitration rules. On 1 January 2017, the Stockholm Chamber of Commerce (“SCC”) Arbitration Rules 2017 (the “SCC Rules “)[1] and the Singapore International Arbitration Centre (“SIAC”) Investment Arbitration Rules 2017 (the “SIAC IA Rules”)[2] both came into force, potentially marking a new chapter in the institutional administration of investor-State arbitration proceedings. Please see here for a quick-reference table comparing the key provisions of these and other major international investment arbitration rules.
Needless to say, 2016 saw some notable events, not least in this once esoteric, now infamous field of law. A hasty renegotiation of the EU-Canada Comprehensive Economic and Trade Agreement (“CETA”) and, with the election of Donald Trump as President of the United States, the likely demise of both the Trans-Atlantic Trade and Investment Partnership (“TTIP”) and the Trans-Pacific Partnership (“TPP”), all resulted, at least in part, from the public outcry in response to perceived inefficiencies, secretiveness and bias in the current investor-State dispute system. It is not yet clear whether the latter two trade and investment agreements can be revived, or whether the former will act as a stimulus (and perhaps a template) for a global investment court. However, in the interim, the private sector has once again stepped into the breach to provide its own potential solution to apparent State intransigence.
Common Themes, Different Approaches
Both the SCC Rules and the SIAC IA Rules were developed, following public consultation, to address some of the more compelling criticisms of existing investor-State arbitration mechanisms. In particular, they both attempt to deal with spiraling costs, frivolous claims, impartiality and public interest interventions, by drawing on best-practice from bodies such as the Permanent Court of Arbitration (“PCA”), the International Centre for Settlement of Investment Disputes (“ICSID”) and the United Nations Commission on International Trade Law (“UNCITRAL”).
However, there are notable differences in the way each institution has approached these issues. First and foremost, SIAC has decided to adopt a totally separate set of rules for these kinds of disputes, whereas the SCC has simply included an appendix to its general commercial arbitration rules with provisions specific to investment disputes. Whether this difference will matter in practice remains to be seen. However, a second and more important distinction is that the SIAC IA Rules apply whenever the parties have agreed to their application (whether that is in a treaty, statute, contract or any other instrument) and will not be subject to objective criteria such as the requirement for an “investor” or “investment”, as is the case with ICSID proceedings.[3] This is likely to enhance the popularity of the SIAC IA Rules, especially in an environment where bilateral and multilateral investment treaties are falling out of favour and investors may accordingly demand assurances through other legal instruments. In contrast, the specific investment arbitration provisions of the SCC Rules only apply where there is a treaty providing for arbitration of disputes between an investor and a State.[4]
Appointment and Dismissal of Arbitrators
The SCC Rules and the SIAC IA Rules both include a requirement that arbitrators are independent and impartial, as well as a provision under which sole or presiding arbitrators should not have the same nationality as either of the parties, unless otherwise agreed between the parties.[5] Both sets of rules also anticipate the problem of non-participation by the respondent and include default provisions where one party fails to appoint its arbitrator and the institution has to step-in.
The SCC Rules do not set out a specific timeframe for such appointments, but the default provisions under the SIAC IA Rules apply if a party fails to make a nomination within 35 days.[6] This is in-line with the 30 day window provided for under the equivalent UNCITRAL and PCA Rules,[7] but is a substantially shorter timeframe than provided for in the ISCID Rules, which allow 90 days.[8]
The grounds for challenging an arbitrator are similar in both sets of rules; namely, where there are justifiable doubts as to the arbitrator’s impartiality or independence or if the arbitrator does not possess any requisite qualification on which the parties have agreed.[9] Unlike the ICSID Rules, any challenge is determined by the institution rather than the tribunal itself, which potentially (and specifically, in the case of the SIAC IA Rules) allows the proceedings to continue while a challenge is being considered, thus reducing the risk of challenges being brought as a delay tactic.[10] This is further supplemented in both sets of rules by a strict limit on the timing of any such challenges. In contrast to ICSID’s requirement that a challenge must be brought “promptly and, in any event, before the proceedings are declared closed“, the SIAC IA Rules provide a 28-day window from the time of appointment (or the ground for a challenge becoming known) and the SCC Rules provide a stringent 15-day window.[11] Given that many ICSID proceedings have been beset by late (and often repeated) challenges, this is undoubtedly a positive development.
Summary Procedure and Emergency Arbitrators
Drawing on recent developments in multilateral trade and investment agreements such as CETA, both sets of rules provide for early dismissal of claims where they are deemed to be frivolous or unmeritorious. The SIAC IA Rules allow for a claim to be struck out where it is (i) manifestly without merit, (ii) manifestly outside the jurisdiction of the tribunal, or (iii) manifestly inadmissible.[12] This clearly draws upon the ICSID Rules and corresponding case law.[13] In contrast, the equivalent provisions in the SCC Rules (which also apply to commercial arbitrations) provide a broader right to apply for a summary determination, citing by way of example circumstances where (i) an allegation material to the outcome of the case is manifestly unsustainable, (ii) even if the alleged facts by one party are assumed to be true, no award could be rendered in favour of that party under the applicable law, or (iii) any issue material to the outcome of the case is suitable for determination by way of summary procedure.[14]
Uniquely among rules applicable to investment arbitration, both the SIAC IA Rules and the SCC Rules provide for an emergency arbitrator to be appointed prior to the constitution of the tribunal.[15] This is in stark contrast to the approach taken by the International Chamber of Commerce (“ICC”) in its latest arbitration rules, which specifically exclude the ability of the parties to apply for an emergency arbitrator in cases involving treaties.[16] Allowing for the appointment of an emergency arbitrator might arguably cut across the mandatory cooling-off period common among investment treaties. Some States might seek to exclude these provisions in any agreements referring to either the SCC Rules or the SIAC IA Rules.[17]
Third Party Interventions
In response to the widespread criticism that investment tribunals are clandestine, unaccountable and pay little heed to important public policy issues, both SIAC and the SCC have adopted provisions permitting amicus curiae interventions in certain limited circumstances. These largely adopt the drafting used in the most recent versions of the ICSID and UNCITRAL Rules,[18] as well as several recent trade and investment agreements.
While the wording varies slightly between the SIAC IA Rules and the SCC Rules, they both provide a prima facie right for non-disputing parties to a treaty to provide written submissions on the correct interpretation of that treaty, provided that these are relevant to the dispute.[19] In addition, both sets of rules permit third parties (whether a party to the treaty or not) to apply to the tribunal for permission to make written submissions, provided that they have a “significant interest” in the outcome of the proceedings and assist the tribunal in the determination of a relevant factual or legal issue by bringing a perspective, particular knowledge or insight that is different from that of the parties.[20] Interestingly, unlike the ICSID and UNCITRAL Rules, both the SIAC IA Rules and SCC Rules also expressly enable the tribunal to seek input from third parties ex proprio motu, provided that the parties have been consulted.[21]
Third Party Funding
One issue that has not expressly been dealt with in any of the rules typically applied to investment arbitrations is the treatment of third party funding. The SIAC IA Rules therefore break the mould in this respect, by providing for the tribunal (i) to order disclosure of third party funding arrangements, including the identity of the funder, its interest in the outcome of proceedings and/or whether the funder has committed to undertake adverse costs liability, and (ii) to take into account any third party funding arrangements when apportioning the costs of the arbitration. It is noteworthy that the original draft of the rules that was circulated for public consultation in February 2016 also included a provision under which the tribunal could make a costs award against a third party funder, if appropriate.[22] Given that this proposal was not adopted in the final draft, it seems that parties to proceedings under the SIAC IA Rules will instead have to rely on the cumulative effect of provisions for funding arrangements to be disclosed and for security for costs to be ordered.
No equivalent provision is found in the SCC Rules, but they do grant the tribunal the power to order interim measures (including security for costs, in exceptional circumstances) and a broad discretion to consider “any other relevant circumstances” when making a costs award.[23]
Transparency and Confidentiality
One significant criticism of investment arbitration that is not addressed in either the SIAC IA Rules or the SCC Rules is the issue of transparency. This is perhaps understandable, given these institutions’ primarily commercial focus and the stakeholders that they generally represent. In stark contrast to the recently adopted UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration 2014, which provide for transparency save in exceptional circumstances (i.e. commercially sensitive information or national security interests), both sets of rules treat confidentiality as the default option.
This raises some interesting practical questions, especially in relation to third party interventions. First, it is unclear how interested parties would become aware of the proceedings in the first place if all details are kept confidential. Second, it seems unrealistic to expect non-governmental organisations or other civil society groups to participate in proceedings without consultation with their members and/or the public in general. This would be very difficult unless confidentiality was waived in relation to the key factual and legal issues in dispute between the parties. Clearly this tension between transparency and confidentiality was considered during the consultation phase, since the original proposal from SIAC anticipated the publication of the identity of the parties and their legal counsel.[24] Instead, the final rules permit disclosure only of the nationalities of the parties, as well as the identities of the tribunal members and the treaty or other legal instrument under which the arbitration has been commenced.[25]
Investment Wars: A New Dawn?
It is a matter of speculation whether the simultaneous release of the new SIAC and the SCC rulesherald the start of an arms race to corner the market for investment arbitration.
The SCC certainly has a first-mover’s advantage, already positioned in second place behind ICSID in terms of the volume of investor-State arbitrations previously administered.[26] It also benefits from being one of the existing options set out in the Energy Charter Treaty (“ECT”), which has recently provided a ready source of new investment arbitrations. However, Singapore is quickly emerging as a dominant force in international commercial arbitration and the launch of the Singapore International Commercial Court demonstrates a growing appetite for high-value, high-profile disputes to be heard within the jurisdiction. The recent case of Sanum v. Laos[27] further demonstrates the Singapore courts’ willingness and ability to deal with complex issues of public international law when acting as a supervisory court in international investment arbitration proceedings. While Stockholm emerged as a neutral venue for the resolution of East-West trade disputes during the Cold War and subsequently built on this reputation to expand into investment arbitration, Singapore is well-situated for the new wave of investments from China and other Asia-Pacific economic heavyweights into Africa and the Indian subcontinent.
There remains the more esoteric question of whether the proliferation of different rules is a positive development, providing greater choice and competition among institutions, or a negative development, exacerbating the fragmentation of international law. Time will tell whether States (who are ultimately likely to have the biggest say in whether such rules are adopted) have any appetite for yet more rules to add to the “menu” of options typically included in international investment treaties. But in the absence of a consensus among States as to the merits or characteristics of a global investment court, it is reassuring to see that some steps are being taken to allay the more credible and pertinent public concerns surrounding investment arbitration.
[1] Available at http://www.sccinstitute.com/media/168084/arbitration-rules_eng_17_final.pdf
[2] Available at http://www.siac.org.sg/images/stories/articles/rules/IA/SIAC%20
Investment%20Arbitration%20Rules%20-%20Final.pdf
[3] SIAC IA Rules, Recital iii and Rules 1.1 & 1.2; ICSID Convention 1966, Article 25(1)
[4] SCC Rules, Appendix III Article 1(1)
[5] SIAC IA Rules, Rules 10.1 and 5.7; SCC Rules, Articles 18 and 17(6)
[6] SIAC IA Rules, Rule 7.2; SCC Rules 2017
[7] UNCITRAL Arbitration Rules 2013, Article 9.2; PCA Arbitration Rules 2012, Article 9.2
[8] ICSID Rules 2006, Rule 4
[9] SIAC IA Rules, Rule 11.1; SCC Rules, Article 19(1)
[10] ICSID Rules 2006, Rules 9(4) and 9(6); SIAC IA Rules, Rules 12.4 and 13.1; SCC Rules, Article 19(5)
[11] ICSID Rules 2006, Rule 9(1); SIAC IA Rules, Rule 12.1; SCC Rules, Article 19(3)
[12] SIAC IA Rules, Rule 26.1
[13] ICSID Rules 2006, Rule 41(6); e.g. Trans-Global Petroleum Inc. v. Jordan, ICSID ARB/07/25
[14] SCC Rules, Article 39
[15] SIAC IA Rules, Rule 27.4 and Schedule 1; SCC Rules, Appendix II
[16] ICC Rules 2012, Article 29(5); ICC Arbitration Commission Report on Arbitration Involving States and State Entities under the ICC Rules of Arbitration (01 Oct 2015), Paragraphs 51 and 52
[17] The SIAC IA Rules require specific consent to the emergency arbitrator provisions, whereas under the SCC Rules the parties are deemed to have agreed to the emergency arbitrator provisions unless otherwise indicated
[18] ICSID Rules 2006, Rule 37(3); UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration 2014, Articles 4 and 5.1
[19] SIAC IA Rules, Rule 29.1; SCC Rules, Appendix III Article 4
[20] SIAC IA Rules, Rules 29.2 and 29.3; SCC Rules, Appendix III Article 3
[21] SIAC IA Rules, Rule 29.2; SCC Rules, Appendix III Article 3(4)
[22] Public Consultation on Draft SIAC Investment Arbitration Rules (01 Feb 2016), Draft Rule 34
[23] SCC Rules, Articles 37, 38 and 50
[24] Public Consultation on Draft SIAC Investment Arbitration Rules (01 Feb 2016), Draft Rule 37.2
[25] SIAC IA Rules, Rule 38.2
[26] See http://www.sccinstitute.com/dispute-resolution/investment-disputes/
[27] Sanum Investments Ltd v Government of the Lao People’s Democratic Republic [2016] SGCA 57
For further information, please contact:
Richard Allen, Baker & McKenzie
richard.allen@bakermckenzie.com
