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2 August, 2016
The Singapore International Arbitration Centre (the SIAC) has introduced a summary procedure to the 6th Edition of the SIAC arbitration rules (the SIAC Rules 2016). This is the first of its kind among the major international commercial arbitration institutions. Ronnie King and Sinyee Ong discuss the implications of this new summary procedure.
Introduction
In our recent briefing, we summarised the new provisions introduced by the SIAC Rules 2016. Among these changes was Rule 29, a potentially very significant new procedure that reinforces tribunals' discretion to hear applications for early dismissal of claims and defences (akin to summary judgment and strike-out in common law court actions) (Rule 29).
Background
Summary disposal has long been a feature of common law court procedure including in Singapore. Typically such procedures allow summary judgment to be entered into situations where: (a) there is no serious issue to be tried; or (b) there is no compelling reason for a full hearing.
By contrast with national litigation, international commercial arbitral institutions have not to date expressly provided an equivalent summary procedure. The generally accepted explanation for the absence of such procedures is the need to demonstrate due process in the conduct of the arbitration in order to engage enforcement rights, especially internationally.
It would be an over-simplification, however, to say that arbitration has invariably involved full oral hearing, on the merits of a case. Arbitration clauses providing for document-only arbitrations are well known. Moreover, certain trade bodies administer "closed door" arbitrations where disputes at to quality, for example, are resolved by an arbitrator from the trade, with no participation from legal representatives.
Summary disposal has a number of advantages for parties advancing claims to which there is no legitimate defence. Costs saving and speed are two obvious benefits.
The absence of a summary judgment procedure in the rules of the major arbitral institutions has contributed to the banking community's preference for national court litigation. It has also contributed to the use in loan documents of asymmetrical arbitration provisions under which the lender (but not the borrower) is given the option to commence litigation or arbitration, thereby enabling banks to commence litigation against borrowers in circumstances where summary judgment appears to be appropriate. Such asymmetrical clauses are controversial and their effectiveness has been questioned by adverse court decisions in France and other jurisdictions.
Keen to avoid costly and lengthy litigation proceedings for monetary claims which may often be indefensible, the financial services sector has been a major user of court litigation (and summary disposals). In this regard, the International Swaps and Derivatives Association (ISDA) has confirmed that, despite its publication of an arbitration guide containing model arbitration clauses, the financial services sector has been slow to opt for arbitration because of the perceived delays and cost concerns due to the lack of summary disposal provisions in major arbitration rules.
Rule 29
Rule 29 provides for summary disposal where claims and defences are: (a) manifestly without legal merit; or (b) manifestly outside the jurisdiction of the tribunal. These grounds mirror existing grounds under national Court procedures.
Procedure under Rule 29
An application for early dismissal of a claim or defence must state in detail the facts and legal basis supporting the
application. The application is made to the Tribunal and copied to the opposing party (Rule 29.2).
The Tribunal has discretion as to whether to consider the application. If it decides to do so, it must give the parties the opportunity to be heard on the application (Rule 29.3). While the Tribunal is empowered to decline to hear the application, we would expect the Tribunal to hear it unless the timing of the application threatened to disrupt the orderly conduct of the proceedings; for example, by being made in the immediate run up to the oral hearing.
The Tribunal is required to rule on an application within 60 days of the date of filing of the application unless in exceptional circumstances the Registrar extends the time limit.
It is to be expected that, in practice, applications will be made promptly. An earlier draft of Rule 29 provided a 30 day time limit in which to make applications. Although this limit has been removed, given that the benefit of a summary procedure is lost if not utilised quickly, we expect applications will be made promptly.
Properly used, this Rule opens the possibility of obtaining an Award within three months or so of commencement of arbitration, a time frame that compares favourably with similar procedures in national court litigation.
Tribunals proceeding under Rule 29 are obliged to give parties an opportunity to be heard. The International Centre for Settlement of Investment Disputes (ICSID) arbitration rules (Article 41(5)) provide for summary disposals in investor-state disputes. Although the ICSID arbitration rules do not expressly set out the process for parties to be heard, ICSID tribunals have typically received both written and oral submissions from parties before making a determination.
Moreover, arbitrators conducting SIAC arbitrations are familiar with the high level of scrutiny SIAC exercises over the arbitration process.
Rule 32.3 provides for draft Awards to be reviewed by the Registrar, who has power to suggest modifications to the form of Awards and to draw attention to points of substance. This "sense check", and the large body of precedents from national court practice concerning exercise of powers to order summary disposal, give good grounds for confidence that Rule 29 will be applied in a fair and predictable manner.
Banks in particular, and other corporates who value summary procedures as a major benefit in national court litigation, may find Rule 29 of particular interest. In transnational contracting and lending, cross-border enforcement is often required.
Depending on the location of the contracting parties, arbitration is increasingly the preferred option due to the application of the New York Convention on enforcement of foreign arbitral awards, to which 156 states are party. The introduction of an express provision for summary procedures is a valuable development. Through the introduction of such procedures, SIAC has made itself considerably more attractive to parties who value the potential for summary procedures.
Comment
Arbitration seeks to be efficient and cost- effective. Commentators have highlighted the absence of express summary disposal procedures as a major drawback to arbitration practice and contribution to unnecessary costs. SIAC has now taken steps to address this.
We commend SIAC for being the first commercial arbitration institution to introduce a summary procedure. Rule 29 will allow tribunals to expedite arbitration proceedings without unnecessary delays and costs, as well as serve as a deterrent to frivolous claims. Summary procedures are also on the cards in the Stockholm Chamber of Commerce, whose Rules due to come into force on 1 January 2017, make provision for summary disposal. Other arbitral institutions may follow suit.
For further information, please contact:
Ronnie King , Partner, Ashurst
ronnie.king@ashurst.com
