By Preeti Bhagnani (White & Case) and I-Ching Tseng (Minter Ellison)
The Singapore International Arbitration Centre (SIAC), one of the world’s leading arbitral centres, released draft revised arbitration rules (“Draft Rules”) for public comment in January 2016. The Draft Rules include new provisions on multi-contract disputes, consolidation and joinder and enhancements to the existing emergency arbitrator and expedited procedures.
Following the 2015 Queen Mary / White & Case International Arbitration Survey, in which respondents ranked cost and lack of speed among the worst characteristics of international arbitration, the Draft Rules include among other proposed changes, several amendments that aim to increase the efficiency of SIAC proceedings and reduce delay. This note discusses the more significant developments.
Multi-party and multi-contract disputes relating to a single transaction or project are increasingly common, particularly in the energy and construction industries. Often, they lead to parallel arbitrations resulting in increased costs, inefficiencies and the risk of inconsistent awards. In recent years, several leading arbitral institutions have introduced or enhanced rules providing for multi-contract disputes, the consolidation of arbitrations and joinder of third parties to enable a single tribunal to decide all the issues.
Consistent with this trend, the Draft Rules allow a claimant to commence a single arbitration concerning disputes arising out of multiple contracts, provided that (1) the parties to the contracts consent, or (2) the arbitration agreements are compatible and:
• the disputes arise out of the same legal relationship;
• the contracts containing the arbitration agreements consist of a principal contract and its ancillary contracts; or
• the disputes arise out of the same transaction or series of transactions (Draft Rule 4.1)
The Draft Rules also introduce a mechanism for the President of the SIAC Court of Arbitration (“President”) (prior to the full constitution of the tribunal), to, upon application by a party, consolidate two or more arbitrations into a single arbitration.
The President may, on application of a party, consolidate two or more pending arbitrations where: (1) all parties agree, (2) the claims in the arbitrations are made under the same arbitration agreement, or (3) more controversially, where the claims arise under different arbitration agreements, the arbitration agreements are compatible and the disputes arise out of:
• the same legal relationship, or
• contracts consisting of a principal contract and its ancillary contracts, or
• the same transaction or series of transactions.
By implication, consolidation may be possible even in cases where the parties to the different arbitrations are not identical.
The Draft Rules are consistent with the approach to consolidation under the Swiss Arbitration Rules and the HKIAC Arbitration Rules but go further in certain respects – unlike the Swiss Arbitration Rules and the HKIAC Arbitration Rules, they do not require the President to consult with the parties or any arbitrator confirmed at the time that the application for consolidation is made. They also cover a slightly broader range of relationships (e.g., the HKIAC Arbitration Rules provide for consolidation where the relief sought arises out of the same transaction or series of transactions but not where the disputes arise out of a principal and ancillary contracts or the same legal relationship).
Under the Draft Rules, once the tribunal has been fully constituted, any application for consolidation must be made to the tribunal (Draft Rule 8.2). By contrast, under the Swiss Arbitration Rules (Art. 4) the HKIAC Arbitration Rules (Art. 28) and the ICC Rules (Art. 10) the institutions deal with requests for consolidation.
The powers of consolidation available once a tribunal has been fully constituted are narrower. In an application to the tribunal (unless all parties agree to consolidation) consolidation is permitted only if the arbitrations are between the same parties, and the same tribunal has been appointed in the pending arbitrations, or no arbitrator has been appointed in the other arbitration(s) (Draft Rule 8.3).
These additional requirements are appropriate. Where an application for consolidation is granted, the arbitrations will be consolidated into the arbitration that commenced first (Draft Rule 8.4). If not for the additional requirements, where an arbitrator has already been appointed in the second arbitration pursuant to a party’s nomination, consolidation would effectively result in a revocation of the appointment. Further, if the parties to the second arbitration are different from the parties to the first arbitration, they will not have had any opportunity to select the arbitrators that will ultimately hear the dispute. The choices made in the Draft Rules reflect a fine balance between the twin and sometimes conflicting aims of procedural efficiency and party autonomy.
The new consolidation procedures will apply to arbitrations where the arbitration agreement is entered into on or after the date on which the 2016 Arbitration Rules come into force.
The current SIAC Arbitration Rules (“2013 Rules”) give the tribunal the power to join a third party in the arbitration provided that the third party is a party to the arbitration agreement in question and provides written consent to be joined.
The Draft Rules enable both the President (prior to the appointment of any arbitrator) and the tribunal to order joinder of a third party even if that party is not a party to the arbitration agreement, as long as all the parties to the arbitration and the third party consent in writing to the joinder (Draft Rule 7.1). Additionally, where the third party is a party to the arbitration agreement, the President (prior to the appointment of any arbitrator) can join the third party even without the third party’s consent.
Time limit to submit draft award
The 2013 Rules require the tribunal to submit its draft award to the SIAC Registrar within 45 days after declaring the proceedings closed (Rule 28.2) (unless the Registrar extends time or the parties agree otherwise) but do not require the tribunal to declare the proceedings closed within a certain period.
The Draft Rules require the tribunal to declare the proceedings closed no later than 30 days after the last hearing or filing of the last submission by the parties if it is satisfied that the parties have no further relevant and material evidence to produce or submission to make (Draft Rule 30.1). This effectively imposes a 75-day time limit on the tribunal to render its draft award.
The time limit is ambitious and marks the latest in recent efforts by arbitral institutions to limit the time taken for tribunals to issue award. For example, the ICC requires tribunals to submit draft awards within three months of the last substantive hearing or the last written submissions (2 months in the case of a sole arbitrator) and recently announced that it may reduce arbitrators’ fees where there is unjustified delay). At the same time, prominent arbitrators have pushed back on the trend towards time limits, arguing that a “general time limit is arbitrary” and warning that “institutions must take care that artificial deadlines don’t result in poorly thought out awards.”
The SIAC Registrar would need to consider these factors in exercising its discretion to grant extensions of time.
While the 2013 Rules already provided for expedited procedures, the Draft Rules go one step further in providing that the parties (to the arbitral proceeding) agree that cases under the expedited procedure shall be referred to a sole arbitrator, unless the President determines otherwise, and this is the case even where the arbitration agreement(s) provides for more than one arbitrator (Draft Rule 6.2(b)).
In contrast to the 2013 Rules which provides that the tribunal shall hold a hearing “unless the parties agree that the dispute shall be decided on the basis of documentary evidence only,” to further expedite the proceedings, the Draft Rules provide the tribunal with the discretion to decide if the dispute shall be decided on the basis of documentary evidence only (Draft Rule 6.2(c)).
The Draft Rules have enhanced the provisions relating to emergency arbitral proceedings as follows:
• They provide the Registrar with the power to increase the amount of the emergency arbitrator’s fees and expenses to be requested from the party making the application. If the fees and expenses are not paid within the time limit fixed by the Registrar, the application will be considered as withdrawn (Draft Rules, Schedule 1(1)).
• The Draft Rules clarify that the preliminary orders that may be made by the emergency arbitrator includes orders that may be made pending any hearing, telephone conference or written submissions by the parties (Draft Rules, Schedule 1(7)); and
• The Draft Rules require that the emergency arbitrator’s order or award be made within fourteen business days from the date of the Emergency Arbitrator’s appointment unless the Registrar extends the time (Draft Rules, Schedule 1(8)).
Consistent with the recent focus on efficiency of arbitral proceedings by major arbitration institutions, the changes to the Draft Rules exert substantial efforts in this respect.
Whether the changes to the Rules will have the desired effect on the efficiency and costs of arbitral proceedings remains to be seen.
Regardless of changes to the Rules, the challenges and pressures remain on the arbitrators to address the balance between the need for efficiency and the need to afford the parties reasonable opportunities to be heard.