New 2016 SIAC Arbitration Rules address banking & finance industry needs

POSTED BY Timothy Lindsay
Cecil Hanafin
10 August 2016

posted in Arbitration | Dispute Resolution

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Introduction

The sixth iteration of the arbitration rules of the Singapore International Arbitration Centre (SIAC) came into force earlier this month.[1] As an institution SIAC has often been an innovator in reforming its arbitration rules to meet the needs of the international business community, and it has enhanced that reputation by being the first international commercial arbitration institution[2] to provide an express procedure for the early dismissal of claims and defences.[3] This addresses a key concern of the international banking and finance industry, which has commonly held out the lack of summary procedures as a reason for favouring domestic court litigation.

Increasing popularity of arbitration for banking and finance disputes

International arbitration is the now predominant means of resolving disputes arising out of international commerce.[4] However, and notwithstanding it is a key economic sector and increasingly globalised, historically international financial transactions have tended to be documented under agreements governed by English or New York law which contain jurisdiction clauses conferring jurisdiction on the English or New York courts.[5]

Over recent years that historical preference, which may in part be due to the “stickiness” of boilerplate documents in the banking and finance industry,[6] has slowly begun to turn in favour of international arbitration. Key reasons for this movement include inter alia the near-global enforceability of arbitral awards pursuant to the New York Convention enforcement regime,[7] the neutrality of arbitral tribunals and ability to choose a neutral seat (i.e. place) for the arbitral proceedings, privacy and confidentiality of the arbitral process, and the autonomy of parties and tribunals to put in place procedures appropriate to the circumstances of their particular dispute.

The increasing popularity of arbitrating cross-border banking and finance disputes is reflected by the International Swaps & Derivatives Association (ISDA) publishing in 2013 optional arbitration clauses for use with its Master Agreement and the Loan Market Association (LMA) doing likewise for certain of its documents, as well as the ICC commissioning a Task Force to publish a report on ‘Financial Institutions and Arbitration.[8]

Lack of summary judgment procedure in international arbitration?

Despite the increasing use of arbitration by the banking and finance community, some have remained concerned that international arbitration procedures are not entirely suitable for all banking and finance disputes. In particular, a common view among bankers and banking solicitors is that disputes in the banking and finance sector are often “one-shot money disputes,” i.e., disputes arising from simple transactions such as loans involving a mere payment obligation,[9] where there is in fact no genuine dispute such that summary judgment—which is typically unavailable in international arbitration proceedings—is the most appropriate procedure because it is more efficient. Whatever the merits of that view (even putting aside enforcement issues, summary judgment is only efficient when it is granted),[10] until now the rules of the leading international commercial arbitral institutions did not expressly provide for summary dismissal of claims or defences (although such procedures are likely available under a tribunal’s general powers[11]).

SIAC’s 2016 Rules introduce summary judgment procedures

Against this backdrop the sixth iteration of the SIAC Arbitration Rules came into force earlier this month, and with it new summary procedures.[12] As an institution SIAC has often been an innovator in reforming its arbitration rules to meet the needs of the international business community, and it has enhanced that reputation by being the first international commercial arbitration institution[13] to provide an express procedure for the early dismissal of claims and defences.

Under Article 29.1 of SIAC’s 2016 Rules, a party may apply to the Tribunal for the early dismissal of a claim or defence on the basis that: “(a) a claim or defence is manifestly without legal merit; or (b) a claim or defence is manifestly outside the jurisdiction of the Tribunal.” Importantly, SIAC has had the foresight to ensure this process itself is concluded expeditiously. Article 29.4 provides that if a tribunal allows an application for early dismissal to proceed, it shall issue its order or award within 60 days of the filing of the application.

SIAC refines other arbitral procedures, which will also be of interest to the banking and finance community

Whilst SIAC has left intact the backbone of its Rules, it has refined certain arbitral procedures to further promote efficient conduct, disposal of proceedings and to ensure relevant parties can be joined to the dispute. Key refinements for parties to note are:

  • Expedited Procedure: Complimentary to the new summary procedures available under the 2016 SIAC Rules, the 2016 Rules significantly widen the ability of parties to expedite proceedings. Whilst under the 2010 and 2013 editions expedition could only happen if all parties agreed, under the 2016 SIAC Rules arbitration can also be expedited if ordered by the SIAC President in “exceptional circumstances”. The 2016 SIAC Rules also permit a tribunal operating under the expedited procedure to decide the dispute based on documentary evidence alone, even if that is not agreed by the parties.
  • Emergency Arbitrator: SIAC was an innovator when in 2010 it provided for the appointment of an emergency arbitrator, who has the power to grant urgent interim relief prior to the constitution of the tribunal proper. In an effort to further expedite this process (which has been very popular – some 50+ cases have been referred), the 2016 SIAC Rules require the SIAC Registrar to appoint an Emergency Arbitrator within one day of receiving an application for emergency interim relief rather than one business day as under the 2013 edition of the SIAC Rules.
  • Consolidation: Following a similar development in the ICC Arbitration Rules 2012 (Article 10) and LCIA Arbitration Rules (Article 22.1 (ix), (x)), to assist reduce time and cost (and ensure consistency of outcomes in disputes between the same parties in relation to the same or similar issues) the 2016 SIAC Rules have introduced a new mechanism for the consolidation of two or more arbitrations into a single arbitration.
  • Multiple contracts: Again following a similar development in the ICC Arbitration Rules 2012 (Article 9), under the SIAC Rules parties can now bring within a single arbitration disputes which arise under more than one contract.
  • Joinder: Whilst under the 2013 SIAC Rules an existing party could seek to join a third party to ongoing proceedings, following the 2016 revision the SIAC Rules now allow a non-party itself to apply to join an existing SIAC arbitration.

Conclusion


By its 2016 Rules SIAC has made both innovative and more subtle changes to its arbitration procedures, which should all be welcomed by bankers and the commercial community more generally. These refinements by SIAC to its already forward-looking arbitration rules will undoubtedly aid parties and tribunals, even in the face of dilatory or so-called ‘guerrilla’ tactics and in more complex multi-party and multi-contract scenarios, to efficiently determine disputes.


[1] For a copy of the 2016 SIAC Reviews click here: http://www.siac.org.sg/our-rules/rules/siac-rules-2016. For an excellent disposition of the SIAC Arbitration Rules generally, see Mangan & Ors. A Guide to the SIAC Arbitration Rules (2014).

[2] In the investment treaty arbitration context, Rule 41(5) of the International Centre for the Settlement of Investment Disputes (ICSID) Arbitration Rules provides that an ICSID Tribunal may determine at a preliminary stage “an objection that a claim is manifestly without legal merit.”

[3] Arguably, arbitral tribunals already have such power: see Travis Coal Restructured Holdings LLC v Essar Global Fund Limited [2014] EWHC 2510, where an ICC tribunal seated in London granted a motion for summary judgment in favour of claimant seeking $210 million under a guarantee over promissory notes in favour of the claimant.

[4] Born, International Commercial Arbitration, 2nd Ed., p. 1 (2014)

[5] See e.g., Wright, The Handbook of International Loan Documentation, 2nd Ed., ¶¶ 12.003-12.006 (2014); Hanefeld, Arbitration in Banking and Finance, NYU Jnl. Law & Business, Vol. 9:917 (2013); Lindsay, International Arbitration of Private Equity Disputes, in Mervis (ed.), Private Fund Dispute Resolution, p. 51 (2014); ISDA Arbitration Guide (2013), ¶ 2.2, http://www.isda.org/publications/pdf/ISDA_Arbitration_Guide_Final_09.09.13.pdf

[6] Cross, Arbitration as a Means of Resolving Sovereign Debt Disputes, 17(3) American Review of International Arbitration 335, 337 (2006)

[7] “Which type of jurisdiction clause [arbitration/litigation] to use will therefore need consideration based on the location of the borrower and its assets”: Ibid, Wright, ¶ 12.006.

[8] The author is a member of the ISDA Arbitration Committee and the ICC Commission on Arbitration Task Force on Financial Institutions and Arbitration.

[9] Ibid, Hanefeld, p. 919.

[10] Whilst there is scant empirical analysis or academic treatment of the efficiency of summary judgment procedures, see Rave, Questioning the Efficiency of Summary Judgment, NYU Law Rev. Vol. 81:875 (2006).

[11] Ibid, note 3 above.

[12] http://www.siac.org.sg/our-rules/rules/siac-rules-2016

[13] In the investment treaty arbitration context, Rule 41(5) of the International Centre for the Settlement of Investment Disputes (ICSID) Arbitration Rules provides that an ICSID Tribunal may determine at a preliminary stage “an objection that a claim is manifestly without legal merit.”

POSTED BY Timothy Lindsay
Cecil Hanafin
10 August 2016

posted in ArbitrationDispute Resolution

VIEWED 4382 TIMES

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