9 August 2010 | By James Swift
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The Singapore government has made the most of its natural ’middleman’ location by elevating its arbitration credentials to the very top.
Singapore is small and lacks natural resources, but the country does have one feature to be thankful for - its location. Equidistant from China and India, Singapore was for centuries used as a neutral locale for people from both countries to meet and trade. Parties from India, Indonesia and the rest of Asia continue to make the most of the country’s handy location, especially now it has emerged as a major arbitration centre.
Arbitration in Singapore used to be confined primarily to marine law disputes because of the country’s port, which is among the five busiest in the world. The scope of work increased with the establishment of the Singapore International Arbitration Centre (SIAC) in 1991, but it has been in the past three to four years that the country has really come into its own.
“Around three or four years ago it was advised that there needed to be a real push for the SIAC and arbitration generally,” says Ben Giaretta, a litigation partner at Ashurst in Singapore. “Because of that policy decision a number of things have happened.”
Indeed, the Singapore government has done everything it can to encourage the country’s emergence as an arbitration hub to rival London, Geneva, Paris and Hong Kong, including offering tax incentives, adapting legislation and providing the most up-to-date facilities.
Best in the business
In January 2010 the country officially opened its state-of-the-art international dispute resolution complex, Maxwell Chambers. The design was based on the London Court of International Arbitration, although many lawyers believe it to be superior. Maxwell Chambers is a source of immense pride for the legal community in Singapore.
“I haven’t met a single person who didn’t say it was the best facility in the world,” says Clifford Chance Singapore partner Nish Shetty.
But the convenient location is not the only factor giving Singapore arbitration a boost. Many South East Asia economies are commodity rich, meaning there are a lot of oil and gas disputes, and the heavily regulated nature of some Asian economies necessitates the use of joint ventures to make acquisitions, and when these ventures go awry arbitrators are often brought in to settle disputes.
The country’s hands-off judiciary, which rarely challenges arbitration awards, also helps. As does the lengths the SIAC has gone to to ensure a truly international composition of its members.
“The SIAC used to be parochial,” says Ashurst’s Giaretta, “but they’ve put in charge some bright young things and persuaded [respected Australian arbitrator] Michael Pryles to come on as chairman.”
“Certainly between 2007 and now we’ve seen a big jump in arbitration,” says Norton Rose litigation partner KC Lye. “One of the parties will usually have an Asian, but not necessarily Singaporean, connection - around 37 per cent of cases administered by the SIAC have no Singaporean connection.
“Also, the sums at stake tend to be quite high. My experience is that sums are in the millions, and not infrequently over $100m [£63.87m]. The average claim has a value of between S$9m [£4.23m] and S$10m.”
But arbitration is just one facet of the Singapore government’s plans to market the country as a professional services centre. To this end Singapore has embarked upon a gradual process of liberalisation. Until around 18 months ago international firms were effectively limited to offshore work, but in early 2009 the government awarded six law firms with Qualified Foreign Law Practice (QFLP) licences, allowing them to practise domestic law (excluding litigation and a few other areas) with Singapore-qualified lawyers.
The six firms to receive the licences were Allen & Overy, Clifford Chance, Herbert Smith, Latham & Watkins, Norton Rose and White & Case. Fourteen other international firms were denied licences.
“The government’s had to be very clever on how to capitalise on what resources they’ve got,” says White & Case partner Barrye Wall. “They were thinking about how to best drive their economy and the legal sector’s something they thought would help - although obviously it’s not a big pillar of the economy.”
The reasoning behind the move was that it was felt multinational companies would be more comfortable using Singapore if the largest firms were there and that the country’s problem with attrition would be alleviated by having big-name firms to stop talent looking beyond Singapore for work.
Singapore has not just rolled out the red carpet for international firms. Prominent practices such as Ashurst were denied licences and the government retains the right to withdraw QFLP licences if firms fall short of the targets agreed upon when they applied.
Herbert Smith South East Asia managing partner Austin Sweeney describes how his firm has just submitted its first performance review.
“There are two main figures the government’s looking at,” relates Sweeney. “One’s the amount of overseas income work we’re doing in Singapore; the other’s a projection with regards to headcount. The rules are that the government’s entitled to withdraw licences if, after two years, a firm hasn’t reached 50 per cent of its target and if they’re out by more than 20 per cent after five years.”