Why More Options for Amicable Dispute Resolution in Singapore Matter

Posted in Insights March 5, 2015

A few months after the launch of the Singapore International Mediation Centre (“SIMC”) in November 2014 and amidst the interest shown by the media and the business community in the latest changes to the Singapore dispute resolution landscape, it is useful to “freeze the image” to look carefully at some of the assets of SIMC and what SIMC can offer to potential business users and to the legal community.

Before we underline the specificity of the model clause for Arb-Med-Arb, the so-called “Singapore clause”, and the originality of the Arb-Med-Arb Protocol designed by SIMC together with the Singapore International Arbitration Centre (“SIAC”) (the “Protocol”), this article will consider the practical advantages of having institutional mediation with SIMC (as opposed to ad hoc mediation) and the importance of involving the arbitrators and other stakeholders in alternative dispute resolution (“ADR”) within the new environment created in Singapore.

Ad hoc mediation or mediation at SIMC?

You may think that because business parties are perfectly capable of negotiating on their own or with the help of their counsel, they may be able to set-up a mediation, appoint their mediator outside the framework of predetermined rules and the control of an institution with less costs and at a shorter time.

You may be right, but you may also be wrong…

When parties have a dispute, it may be useful to refer to pre-established rules of the game. When parties are not able to talk to each other, it can be very problematic for them to decide to refer their case to mediation, agree on the choice of their mediator, the timeframe of the mediation or even the venue for the mediation. Why put the mediation at risk, and allow procedural matters to possibly reduce the chance of finding a solution to the dispute? SIMC can play the role of a neutral third party, look into the specificities of the case in order to find the most suitable mediator from its panel of eminent experienced mediators, get in touch with the mediator, liaise with the parties for the payment of the mediator’s fees, and refer to its rules to set the procedural parameters of the mediation, determine the venue and negotiate rates for the rental of rooms and catering.

Even if parties get along well and come to agreement on some issues, it may still be useful to have SIMC manage the case on behalf of the parties. The following are some examples.

Let us assume that one party is familiar with mediation, having used it several times in the past, but that the counterparty and its lawyers do not have that same familiarity. It may be helpful to rely on SIMC to explain to the other party the process of a mediation, highlight its advantages and help both parties with the drafting of a mediation agreement. The existence of procedural rules, even as flexible as SIMC’s are, offer guidelines that parties who are not familiar with mediation may find reassuring. The whole process is described transparently in the SIMC Mediation Rules and its Schedule of Fees. Hence parties know, from the commencement of the mediation, what they will encounter in the process of mediation, how the mediation will be conducted and, last but not least, what the costs of the mediation are.

Another example: in the course of mediation, the mediator may find out that he/she has a conflict of interests that he/ she should disclose. The mediation is interrupted. It may be very useful for the parties to receive assistance from SIMC to swiftly replace the mediator and liaise with both parties for the (re)calculation of fees, collection of deposits and rescheduling the mediation in order to keep it within tight timelines.

Instead of lawyers using their resources to ensure that procedural matters are on track, they could rely on SIMC, for which those matters constitute its core business. They can then focus on matters for which their clients have consulted them, where they can add value as mediation advocates: the preparation of statements of case, the search for constructive solutions and the preparation of the mediation session with their clients.

About the importance of ADR solutions in Singapore

Today, the business community wants to choose from multiple avenues to solve their disputes: apart from Court litigation, parties in a dispute would rely on arbitration and mediation as well as on other forms of ADR, such as early neutral evaluation, mini-trial or peer review.

Why such diversification? In a global economy with the crisis in Europe and the dull world economic outlook for 2015 as a backdrop, the business community is looking for legal solutions that would fit each of the circumstances it encounters and preserve their resources in time, manpower and costs. Why use litigation if there will be no recognition of a foreign decision? Why commence arbitration if the award will likely be set aside easily in the country of enforcement? Why not try to avoid lengthy legal proceedings with early dispute resolution mechanisms? Why not mediate to preserve a long-term business relationship?

Singapore has prepared the ground to diversify its offerings to the international business community in response to its needs. In the past years, Singapore has built up a reputation for the outstanding quality of the arbitration services through SIAC. To accelerate the pace of diversification, Singapore launched in November 2014 and January 2015, SIMC together with the Singapore International Mediation Institute (“SIMI”), a centre to enforce high standards of mediation, ensure the professionalism of mediators in Singapore and promote mediation, and the Singapore International Commercial Court (“SICC”). Consistent with its choice to support the developments of the dispute resolution landscape, Singapore will enact a Mediation Bill this year. It has already put in place tax exemptions and a work pass exemption  for non-resident mediators who mediate in Singapore, as it already provides for arbitrators.

Why should arbitrators get involved in the mediation process?

Should arbitrators be worried by the attraction other ADR services have for business stakeholders? Should they welcome this new era? In short, what role can they play in the new international ADR scene?

Arbitrators cannot pretend that the increasing trend for business to prefer other ADR modes does not exist, or that it is not their concern: for the simple reason that if parties in a dispute cannot find the institution/services that respond to their needs or if they do not receive the right advice in the place where they do business, they will be diverted to other fora which offer those services and where those services are promoted. The entire legal community in that particular place will likely suffer as a whole from this loss.

The steady growth of the trade and investment flows in Asia will result in a new request for dispute resolution solutions in the region. The creation of the ASEAN Economic Community is a huge vector for the further enlargement of business activity: the progressive disappearance of trade barriers and the opening of more frontiers will trigger new flows into the Asian economy. Where business is flourishing, stakeholders statistically may encounter more problems with their business partners. They will need a neutral place to receive legal advice, legal services of all kinds and not the least to resolve their differences. If they find suitable services for their different needs in Singapore, they will not have to pick and choose legal services from different locations. The business community will elect Singapore if it is aware of the options which are offered and if the lawyers are ready to respond adequately to their needs.

At this stage, what needs to be done is to convince the business stakeholders of the attractiveness of Singapore as a dispute resolution hub through the promotion of the complete suite of dispute resolution services that are now on offer.

The capacity to promote those new services to the international business community naturally lies with the different centres mentioned above, but first and foremost with the lawyers and the arbitrators based here in Singapore. Arbitrators and lawyers are in prime position to assist the business community with cross-border disputes and guide their choices. They are also the ones who can highlight the diversity of services offered in Singapore to international clients and explain to them the advantages of each service depending on their specific needs.

They have the choice to hear the business community’s voice and adapt their skills to the market needs. The lawyers and arbitrators who are also trained as mediators, will further be acquainted with the advantages of mediation and will be able to serve as mediation advocates as well as advise on other ADR solutions. They will gain the trust of their clients/parties, who will be confident in the fact that their needs will be met, their interests preserved and that lengthy proceedings are not commenced if those can be avoided. In the light of the likely growth of cross-border disputes, experience in ADR will be very valuable to allow lawyers to render complete advisory and support services to the business community.

The business stakeholders will choose to elect Singapore as their usual centre for dispute resolutions, if arbitrators and lawyers welcome the new trend in dispute resolution, and if they are ready to go the extra mile to promote the ADR services offered in Singapore. They will then gain from the virtuous circle instead of being embroiled in destructive competition.

Arb-Med-Arb procedure

Those who are familiar with ADR are probably aware of the concept of Arb-Med-Arb and appreciate the value and advantages such a procedure has. As the concept of Arb-Med-Arb may encompass different approaches to this combined mode of dispute resolutions, it is not redundant to provide a short explanation of what is intended by Arb-Med-Arb under the SIMC Mediation Rules and the Protocol.

Arb-Med-Arb is a proceeding where arbitration and mediation alternate and combine into a single procedure. The arbitral tribunal is constituted in the first phase of the Arb-Med-Arb procedure before the case is passed to SIMC for the mediation. The solution reached by the parties in mediation, the settlement agreement, can be converted into a consent award, which is recognised and enforceable as an arbitral award under the New York Convention in approximately 150 countries. If the parties cannot reach a settlement, either totally or partially, they will resume the arbitration proceedings with the arbitral tribunal. The SIMC Arb-Med-Arb service has the flexibility of a consent procedure, the balance of a concerted solution for all the parties involved, the finality and enforceability of an arbitral award, all of which achieved within a short period of time (the SIMC Mediation Rules provide for an 8-week timeline for the mediation to be completed as a default position).

To commence an Arb-Med-Arb procedure under the SIMC Mediation Rules and the Protocol, the parties have two main options:

  1. at the time of the conclusion of their contract, the parties may incorporate the Singapore Clause or a similar clause, which refers arbitration to SIAC and mediation to SIMC (Arb-Med-Arb Clause); or
  2. once the dispute has arisen and while the parties are arbitrating at SIAC, they decide to refer their case to mediation under the Protocol.

The Singapore Clause is the combination of an arbitration agreement with a mediation agreement, by which parties directly elect both SIAC and SIMC as independent centres to manage their disputes. The Protocol sets out the procedural rules of the Arb-Med-Arb procedure and provides for an economy of means to avoid any duplication of effort on the part of the parties, for example in filing requests for arbitration and mediation or making payments to both institutions.

What are the practical aspects of this procedure?

The claimant in the arbitral proceedings commences arbitration in the usual mode prescribed under the arbitration rules and sends a Notice of Arbitration to SIAC, mentioning the existence of an Arb-Med-Arb Clause, and the two Centres will take the lead in the management of the Arb-Med-Arb procedure.

After the payment of a combined case filing fee of SGD 3,000 (not including GST) for SIMC and SIAC, SIAC will deal with the commencement of the arbitration proceedings in accordance with the arbitration rules.

Parties will exchange their statements of case (limited at this stage to the Notice of Arbitration and the Respondent’s Response to the Notice of Arbitration) and supporting documents and SIAC will proceed with the constitution of the tribunal in accordance with the arbitration rules and/or parties’ arbitration agreement.

SIAC is responsible for collecting the deposits, both for SIAC and SIMC, pursuant to the arbitration rules and SIAC Schedule of Fees and SIMC Mediation Rules and Schedule of Fees. All the deposits are refundable once the arbitration and/or the mediation are/is completed and the actual costs of the arbitration and/or the mediation are calculated.

At this stage, unless otherwise agreed by the parties and the tribunal, the arbitration is suspended for 8 weeks (default period) and the case is sent to mediation. The parties do not have to contact SIMC and send a formal request to mediate or duplicate their documents: SIAC will liaise with SIMC and will transfer the case to SIMC.

Mediation will commence and SIMC will request any additional information required and also that the parties nominate their mediator within 10 days. SIMC will appoint the mediator if parties cannot reach an agreement on the nomination of the mediator.

If the mediation results in a full settlement of the dispute, the parties can request the arbitral tribunal to write a consent award on the agreed terms of the settlement agreement, or if the mediation has not resulted in a settlement (partially or totally), they can resume arbitration easily, as the tribunal is in place and the agenda of the procedure has been set during the preliminary meeting.

Conclusion

The golden age of international arbitration has not yet come to an end5 and for the reasons submitted above, the number of international disputes is not likely to fall. However, it is important for arbitrators and lawyers to hear the different criticisms that have been raised by the business community on arbitration in the past years and to address them.

What has changed today is the users’ ability to look for alternatives to arbitration and their willingness to do so.

To respond to this trend, professionalism among mediators has been rising, with the existence of certification schemes and the creation of independent institutions credentialing experienced mediators. New centres for international mediation have been created or have developed a new image, offering high-end services to the potential users of international arbitration.

Singapore has recently made available powerful tools for the use of the parties in cross-border disputes and this positions Singapore as a unique platform where business stakeholders can not only do business in the region but can receive the full spectrum of legal services from credible institutional providers.

Arbitrators who will adapt to the new market trends will certainly benefit from these extraordinary comparative advantages existing now in Singapore.

 

Francoise Lewalle

Director, Mediation Services

Singapore International Mediation Centre

Master of Law – Université de Liege – Belgium

Former Judge, Commercial Court of Brussels

 

First published in the Singapore Institute of Arbitrators (SIArb) Newsletter (March 2015, Issue No 13)

1 Thomas Stipanowich and J. Ryan Lamare: Living with ÁDR’: Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations (2013) – 19 Harvard Negotiation Law Review 1.
2 IMF Survey MAgazine 20 Jan 2015: World Economic Outlook Update – Global Growth Revised Down, Despite Cheaper Oil, Faster U.S. Growth – 20 January 2015
3 https://www.iras.gov.sg/irasHome/page04.aspx?id=16109
4 https:///beta.mom.gov.sg/en/passes-and-permits/work-pass-exempt-activities/eligible-activities
5 Attorney General Sundaresh Menon SC – Opening Plenary Session ICCA Congress 2012 – International Arbitration: The coming of a NewAge for Asia (and Elsewhere).