Opening Address by Mr K Shanmugam, Minister for Home Affairs and Minister for Law, for SIAC India Summit 2019 Day Two: International Commercial Arbitration

31 AUG 2019

31 Aug 2019 Posted in Speeches

Your Excellency, Minister Ravi Shankar Prasad, Union Minister for Law and Justice, Minister of Communications and Minister of Electronics and Information Technology

Mr Lim Thuan Kuan, High Commissioner of Singapore

My colleague, Edwin Tong, Senior Minister of State for Health and Law

Honourable Justices Rohinton Nariman and Indu Malhotra, Honourable Judges of the Supreme Court

Mr Davinder Singh, S.C., Chairman of the SIAC Board of Directors,

and Mr Gary Born, President of the SIAC Court of Arbitration,

Ladies and gentlemen,

Good morning. Good to see so many people on a Saturday morning. I will touch briefly on the growth of the Indian/Asian economy, the role arbitration plays and the complementary role that Singapore and SIAC play in the arbitration context – for India and for Asia. India has for some years been the fastest growing large economy. It seems counterintuitive to say that in context of the headlines this morning, but I ignore quarter on quarter growths, as they don’t tell the story of the economy.
The secular trend for India, with the right environment, is very strong growth upwards. If you look at the significant growth in the last five years, India went from a USD 2 trillion economy to a USD 3 trillion economy. The momentum is very substantial.
And the growth of the Indian economy has been in tandem with growth of the broader Asian economy. 19 years ago in 2000, Asia accounted for just under one-third of global GDP in PPP terms. Now it is on track to cover 50 percent by 2040. Investment activity will continue to grow. ADB estimates that developing economies in Asia will need to invest about USD 26 trillion in the next 10-11 years, or just under USD 2 trillion a year, USD 1.7 trillion a year.
India has the capacity, in fact has the need, to absorb a good part of that investment, both in infrastructure and also in other areas. The significant growth of the Indian economy has also meant that Indian companies have been expanding outwards. In Asia, in terms of Asian locations, many Indian companies find Singapore suitable. It is relatively near - three to five hours. There is cultural familiarity, connectivity from Singapore to the rest of Asia, so they use it as a regional base for a variety of business functions – regional headquarters, raising of capital, joint ventures, including on the tech side.
As of end 2017, we had nearly 8,000 Indian companies registered in Singapore and doing substantial business out of Singapore. That backdrop brings me to my second point, which is the role that arbitration plays in the context of this Asian economic growth. The huge capital flows and investments can only take place with effective dispute resolution mechanisms. Some will end up in the Courts, but in cross-border transactions, many parties, for reasons that all of you will know, choose arbitration. And that is applicable across the world, including US, Europe, as much as Asia, Latin America and Africa.
So with the growth of Asia, and the growth of investments in Asia, arbitrations will be even more important. They will play a critical role, and in fact, they will facilitate the investments – that is my belief. That brings me to my third point: the role that Singapore plays as a business center and an arbitration center in Asia. Big economies - if you take the four largest economies in Asia: India, China, Japan, South Korea, with well-developed legal professions - their business disputes will mostly be resolved within what I would call the home jurisdictions. So, investments into India, whether FDI or local investment, will often primarily be handled in India.
But there will be a number of cases – a minority but nevertheless a number of cases – where the parties will want the dispute to be handled outside of the investor country and the investee country, particularly in the context of FDI. And that is true for all of the four major economies I mentioned. And so when parties in Asia look in those situations for a jurisdiction outside of the “home country”, Singapore has become the choice for ADR in that context. The reasons are well known. Singapore is open, easily accessed by foreign lawyers – including Indian lawyers - they can represent their clients in any Singapore-seated arbitration, so it’s a completely open regime – and even some court proceedings in the Singapore International Commercial Court (SICC).
Often, parties and lawyers can also choose to have Singapore counsel to assist them, and foreign lawyers, international law firms, 130 or so foreign international law practices in Singapore, also provide assistance including top investment arbitration practices. So in this context, the media asked me yesterday: many Indian cases go for arbitration in Singapore, is that a zero sum game, is India losing out? The short answer is no, it’s a misreading of the statistics of SIAC to draw that conclusion. In fact, a different conclusion ought to be drawn.
When SIAC publishes its figures and says “Arbitrations from India”, the vast majority will involve one Indian party and one non-Indian party. Those arbitrations would most unlikely to have been done in India, the only question is will they be done in London, Hong Kong, Singapore or Paris. So it’s in that context that this change outside of India has taken place. These figures will also include, say when an Indian company headquartered in Singapore, regional headquarters in Singapore, invests in Indonesia for example. Neither side will want the arbitration to be in India or Indonesia, and Singapore becomes a choice.
It is the same for arbitrations that take place in Singapore that come from North Asia. For several years, arbitrations from greater China – under the SIAC’s statistics, greater China includes mainland China, Hong Kong and Taiwan – were the number one source of cases for SIAC. Recently the United States was number one, I think the last year or the year before. So year on year, the numbers change, but this is the context. And we see ourselves, Singapore, playing therefore a significant complementary role for these huge trade and investment flows. So, most of the work stays in the home country. What cannot be done in the home country is done in Singapore, London, Paris, New York.
Singapore in that context – has emerged as the clear choice in Asia, one of the top three in the world. We do it by, first of all, strong Government support, and I am saying it because if you were to think in terms of Singapore as a centre, you need to know what the philosophy of the Government is. Strong Government support, a clear focus on arbitrations through a legal framework. When we started thinking about this about 10 years ago, the approach we took was: the laws will change to make it state of the art, the best in the world, by copying the experiences of the others. The rules changed how arbitrations were conducted, the SIAC panel was completely revamped to include the best arbitrators in the world to be on the panel, the rules were changed to allow foreign lawyers to practise in Singapore for arbitrations. And, the courts became very supportive of arbitration, and therefore interventions were kept to what were internationally recognised as grounds of intervention.
Even if we were to have a court decision that in the context of the existing rules, would not be seen by the arbitration community as supportive of arbitration, we have the capacity, as we did in the past, within three or four months, to change the law. So that entire corpus of jurisprudence as well as legal framework was completely supportive of arbitration. Everyone understood and knew the government’s policy articulated both in Parliament and outside was total support for arbitration.
Now, of course, the open regime for lawyers and all the things I have talked about, would be very different from say, the perspective of a large country like India or China, because if we said it is only Singapore lawyers, then the work would be in respect of foreign investments in Singapore. A dispute between an Indian company and an Indonesian company will not be handled in Singapore - they will go to a jurisdiction that allows Indian lawyers to turn up for those arbitrations.
Whereas for India, as I mentioned the point earlier, most of the work is in terms of foreign investments coming into the country. So, the context and your own needs are slightly different. Our needs are slightly different. We are a small internal economy. And we are outward focused, because we see ourselves as a platform for international arbitrations and work which has got nothing to do with Singapore. Your context, almost all the work would have something to do with India. So that’s the difference.
We also looked at the fiscal framework for arbitrators and various other factors. And I have made the same points with my Chinese counterparts, particularly when we were discussing BRI and where the arbitrations were conducted. Initially, they thought that the BRI work should be done in China. But now they understand that is not always possible. So it is really when it’s not going to be done in China, where else can it be done. And I think they have begun to understand that Singapore has a very strong value proposition. They are working with us now, to see how we can facilitate, help, complement.
Let me now briefly touch on a number of other points. In addition to arbitration, the dispute resolution landscape in Singapore, we provide a framework for international parties to use our court systems. The SICC, which I referred to earlier, was established in January of 2015, and it was really the first of its kind in Asia and broadly seeks to play the role that the London Commercial Court plays.
The underlying objective is to be a neutral venue for the resolution of international commercial disputes. And the framework is: parties may have nothing to do with Singapore, it may not even be Singapore law, but if they wanted to go for litigation as opposed to arbitration or primarily if they wanted the Chief Justice of Singapore to appoint a judge to deal with it, rather than each party choosing its own arbitrator, then the SICC provides a platform.
So again, my earlier example of an Indian company in Singapore investing in Indonesia, and if they said, “No, we don’t want arbitration, we want to go to court”, then the SICC provides a suitable venue. This is not going to work if we only had Singapore judges. So we went out and brought on board retired judges from around the world: US, Australia, UK, Asia, including India - highly experienced, respected judges. We were very happy that the recently retired Supreme Court Judge Justice Arjan Kumar Sikri, who retired in March, has been appointed to the SICC. And we look forward to more appointments.
Seven Indian legal practitioners are now registered with the SICC with rights of audience, so Indian lawyers can turn up in the SICC. The seventh one Mr Shrivastav, already appeared before an International Judge, Justice Patricia Bergin from Canada in a case that has been reported. So Indian counsel, Canadian judge, parties are international. The judgments from the SICC are enforceable in almost all major commercial jurisdictions based on treaties and bilateral agreements.
Let me now just touch on mediation. Parties can also choose to mediate or combine options administered by the SIAC and Singapore International Mediation Centre (SIMC), under the Arbitration-Mediation-Arbitration protocol. So we see mediation as strongly supportive of arbitration. The SIMC has an extensive panel of about 70 experienced international mediators, six of them, international mediators, are from India. We have just appointed 21 specialist mediators from India as well. Similar to international arbitration matters, lawyers from all over the world can come and represent parties in mediation as well.
We should also mention the Singapore Convention on Mediation, which opened for signing on the 7^th of August and 46 states have signed, including India among the first signatories, and I thank the Indian Ministry of Law and Justice for that. This Convention completes what we think is the missing link in the international dispute resolution enforcement framework. We already have the New York Convention for Arbitration, The Hague Convention on Choice of Court Agreements, the Singapore Convention on Mediation which allows mediation agreements to be enforceable - completes the suite. So, courts of contracting parties can enforce mediated settlement agreements.
The factors that have made SIAC the preeminent arbitral institute in Asia in the context that I mentioned are well known, and it is now the third most preferred arbitral seat in the world. From 2008 to 2018, in the 10 years, the caseload increased 4 times, and it overtook LCIA in 2016. SIAC has had a long and close relationship with Indian users, counsel and arbitrators, 26 arbitrators from India in its panel. I think Mr Singh used a cricket analogy in his own inimitable fashion - we co-opt the best, and we ask them to bat or bowl for us as necessary. So our approach has been systematic, to give assurance, and it is to work in a complementary way with the jurisdictions where the parties come from.
I first came to New Delhi in 2005 or 2006, together with my colleague Mr Edwin Tong, we were both in private practice together. The current Chief Justice who was then in private practice as well, Mr Menon, for an arbitration conference similar to this. I have come once after that, soon after I became Law Minister, when we decided to completely revamp the Arbitration sector.
I would say, based on my conversations with lawyers here, the decision makers, and the whole framework, SIAC and Singapore have come a long way in terms of our mutual relationship - that has seen us work much closer together. And I am very heartened to see that India has also made arbitration one of its key priorities. And that is good for all of us. Because when countries like India focus on arbitration, promote arbitration, give it even stronger legal framework, that sort of establishes the importance of arbitration, gives it greater systemic support, and it is good for the arbitration scene across the world, and everyone benefits. So we are very strongly supportive of the steps that have been taken. We think that it benefits everybody.
With that, let me thank all of you, and particularly the honorable Minister of Law and Justice and various other portfolios.
Thank you very much.

Last updated on 03 Sep 2019