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SIAC Investment Arbitration Rules: An OverviewFebruary 15, 2017
On 30 December 2016, the Singapore International Arbitration Centre (SIAC) announced its official release of the first edition of the Investment Arbitration Rules (IA Rules). These IA Rules came into effect on 1 January 2017. The introduction of a bespoke set of rules for international investment arbitration is the first of its kind by an international arbitration institution. These IA Rules can be applied by agreement in disputes involving a State, State‐controlled entity, or intergovernmental organisation, whether arising out of a contract, treaty, statute, or other instrument. We set out below a short overview of some of the highlights of these IA Rules and the implications for stakeholders in international investment arbitration.
Waiver of Immunity from Jurisdiction and Rights to Appeal
A key concern of any investor when choosing investment arbitration rules such as the IA Rules would be the likelihood of enforcement of final arbitral awards in the domestic courts of the host state. The IA Rules seek to address this concern as an agreement to the IA Rules constitutes a waiver of any right to immunity from jurisdiction in respect of proceedings related to the arbitration to which the parties might otherwise be entitled (Rule 1.3). In addition, the parties also irrevocably waive their rights to any form of appeal, review, or recourse to any State court or other judicial authority with respect to such award as long as such waiver may be validly made (Rule 30.11). These waivers go a long way to removing the obstacles to the enforcement of final arbitral awards made under the IA Rules in the host state.
Number of Arbitrators
Whilst the IA Rules give the parties freedom to choose the number of arbitrators, it is important to note that failing such agreement, the default position is three arbitrators (Rule 5.2 of the IA Rules). This follows the position adopted under Article 7 of the UNCITRAL Arbitration Rules (UNCITRAL Rules) (which are commonly used in international investment arbitrations).
Appointment of Arbitrators
If the parties fail to appoint the sole arbitrator or multiple arbitrators, the SIAC Court will make the appointment using the list-procedure as the default appointment mechanism. This default appointment mechanism exists in the UNCITRAL Rules and while there are similarities between the two mechanisms, there are also two key differences. In applying the list-procedure, the IA Rules (unlike the UNCITRAL Rules) go a step further by giving the parties the opportunity to provide their views on the qualifications of the arbitrators. The IA Rules relevantly state:
This facilitates participation by the parties in a key aspect of the arbitrator selection process. However, this approach also means that the process of constituting the arbitral tribunal could take longer under the IA Rules.
The second key difference in the list procedure between the IA Rules and the UNCITRAL Rules is that the IA Rules offer the parties a higher minimum number of candidates to choose as arbitrators. This is evident in Rule 8(b) of the IA Rules, which provides that the SIAC Court will propose at least five candidates to the parties. In contrast, the UNCITRAL Rules require at least three candidates to be offered as arbitrators (Article 8.2(a) of the UNCITRAL Rules).
Additional Powers of the Arbitral Tribunal
Among the many powers vested in the arbitral tribunal by the IA Rules, one notable highlight is the power to order the disclosure of third-party funding details such as the funding arrangement, the identity of the funder, details of the funder’s interest in the outcome of the proceedings, and whether the funder has committed to pay any adverse costs liability (Rule 24(l)). The IA Rules further provide that the arbitral tribunal may take into account any third-party funding arrangements in apportioning the costs of the arbitration (Rule 33.1). These provisions may be useful to successful respondent States in order to mitigate the risks arising from recovery of adverse cost orders against unsuccessful claimants that are funded by a third party.
Early Dismissal of Claims and Defences
Similar to the provision in the SIAC Rules 2016 (Rule 29), the IA Rules provide for the early dismissal of claims and defences (Rule 26). Under the IA Rules, a party can apply for such dismissal on the grounds that a claim or defence is:
- (i) manifestly without legal merit;
(ii) outside the jurisdiction of the arbitral tribunal; or
(iii) manifestly inadmissible.
The third ground is novel and is an expansion of the grounds provided for in the SIAC Rules 2016. At this time, it is not yet clear whether this provision for the early dismissal of claims and defence represents an efficient tool to wipe out unmeritorious claims or simply adds another procedural phase to arbitral proceedings. The answer is likely to depend on the facts of each case and the manner in which the procedure is applied by each arbitral tribunal.
The IA Rules give an arbitral tribunal discretion to permit a non-disputing party to make written submissions on a matter within the scope of the dispute (Rule 29). By introducing this provision, SIAC appears to have taken inspiration from the ICSID Rules and the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (UNCITRAL Transparency Rules) which contain similar provisions. This provision is relevant to investment disputes that have implications on matters of public interest (for example, where the case affects the ability of a state to regulate for public welfare).
The IA Rules provide that the arbitral tribunal is to exercise its discretion to allow written submissions by non-disputing parties after considering the views of the parties and the extent to which:
- (i) the non-disputing party’s written submissions assists the arbitral tribunal in the determination of a factual or legal issue related to the proceedings by bringing a perspective, particular knowledge, or insight that is different from the parties;
(ii) the non-disputing party’s written submissions addresses a matter within the scope of the dispute;
(iii) the non-disputing party has a sufficient interest in the arbitral proceedings; and
(iv) allowing such written submissions would violate the parties’ right to confidentiality.
With respect to the non-disputing party’s ‘interest’ in the arbitral proceedings, it is notable that this provision provides for a lower threshold than the ICSID Rules and the UNCITRAL Transparency Rules, which require a ‘significant interest.’
In addition, the IA Rules give a non-disputing contracting party the right to make written submissions to the arbitral tribunal on a question of treaty interpretation that is directly relevant to the dispute. This could be an attractive provision for States because it protects the interest of contracting parties in ensuring an accurate interpretation of the relevant legal instrument.
The IA Rules preserve the confidentiality provision under the SIAC Rules 2016, pursuant to which all matters relating to the proceedings and the award must be kept confidential unless the parties agree otherwise or one of the listed exceptions applies (Rule 37). Consistent with the confidentiality provision, the IA Rules limit the information that can be published by SIAC to the public by restricting it to:
- (i) the nationality of the parties;
(ii) the identity and nationality of the members of the arbitral tribunal;
(iii) the treaty, statute, or other instrument under which the arbitration has been commenced;
(iv) the date of commencement of the arbitration; and
(v) whether the proceedings are ongoing or have been terminated (Rule 38.2).
In this context, it is unclear whether the confidentiality provision under the IA Rules is compatible with allowing non-disputing third parties to make written submissions. For example, if only limited information is publishable in relation to a case, it raises the question of how non-disputing third parties would learn of the arbitration or the issues in dispute.
SIAC has provided investment arbitration users using the IA Rules with the option to expressly agree on the use of emergency arbitral relief prior to the constitution of the arbitral tribunal through an emergency arbitrator (Rule 27.4). However, the requirement of an express opt-in might reduce the utility of the provision, as it could deter respondent States from agreeing to such mechanism (especially if a significant adverse order is sought against the State).
The IA Rules have been the most recent innovation by SIAC in the investment arbitration space. They provide users of international investment arbitration with an institutional option for their disputes. In some circumstances, the IA Rules may also suit such users more than the other prevailing sets of rules.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Denis Brock, an O'Melveny partner licensed to practice law in Hong Kong (Solicitor-Advocate), England & Wales (Solicitor-Advocate), Ireland, Australia, New Zealand and New York, Kieran Humphrey, an O'Melveny Counsel licensed to practice law in Hong Kong, England & Wales, and New South Wales, Australia, and Aditya Kurian, an O’Melveny associate licensed to practice law in India, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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