Amendments to the Singapore International Arbitration Act and India’s Arbitration and Conciliation Act, Demonstrate the Countries’ Commitment to Arbitration as Mechanism for Dispute Resolution

By Veronica Leokadia Dunlop, Brooklyn Law School

In the final months of 2020, Singapore and India each passed key amendments to their respective arbitration acts. In doing so, the countries reinforced their individual commitment to arbitration and taken together this is a testament to the increasing popularity and endorsement of arbitration internationally.

Singapore

New disputes filed with the Singapore International Arbitration Centre hit a record high in 2020. In fact, since Covid-19 was classified as a pandemic in March of 2020, there has been an increase in cross-border disputes around the world. Of course, there are many desirable arbitral seats vying to host these disputes. In an effort to ensure that Singapore remains an attractive venue for international arbitration, the Singapore Parliament approved amendments to the Singapore International Arbitration Act (“the Singapore Act”) on October 5, 2020.

Two key amendments were approved, and two remain proposals. The approved amendments are aimed at facilitating the appointment of arbitrators in multiparty disputes (“the Appointment Amendment”) and at enforcing confidentiality obligations among the parties to an arbitration (“the Confidentiality Amendment”).

(i) The Appointment Amendment

The Singapore Act already provided a default mechanism for the appointment of arbitrators in two-party disputes. The Appointment Amendment extended this procedure to multiparty disputes, and to prevent deadlocks and unnecessary delays. Essentially, all claimants must jointly appoint one arbitrator, and all respondents must jointly appoint another arbitrator within a specified timeframe. Thereafter, the two party-appointed arbitrators appoint a third, presiding arbitrator. If any of the appointments cannot be agreed upon within the allotted time, any party may request that the President of the Court of Arbitration of the Singapore International Arbitration Centre (“SIAC”) appoint the remaining arbitrators. In practice, sophisticated parties usually provide for the procedure to appoint arbitrators in their arbitration agreement, however, the Appointment Amendment will still serve as an important backstop to ensure equity and efficiency in numerous disputes.

(ii) The Confidentiality Amendment

The Confidentiality Amendment defines the power of arbitral tribunals to enforce confidentiality obligations between the parties. Singapore law already recognizes an implied duty of confidentiality in arbitration, such that neither party to the arbitration may disclose details of the dispute to third parties. Of course, there are also express confidentiality obligations included in institutional arbitration rules, and the parties’ contracts often also provide for these. As such, the Confidentiality Amendment does not create or codify any additional confidentiality duties. Instead, the Confidentiality Amendment strengthens the parties’ ability to enforce existing obligations, both implied and express, by empowering the arbitral tribunal to make orders to enforce existing confidentiality obligations.

Moreover, in a Singapore-seated arbitration, tribunal orders regarding confidentiality obligations are now enforceable as if they were court orders, provided that the High Court grants leave. Further, if the arbitral tribunal has not yet been constituted, the High Court can issue interim orders to protect confidentiality obligations that bind the parties.

(iii) Proposed Amendments

One of the proposed amendments would enable the parties to appeal to the High Court on a question of law arising from the arbitral award. This represents a wide divergence from the provisions of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), which to date, has been adopted by 33 nations. Under the Model Law, international arbitral awards can only be set aside or rendered unenforceable on limited, strict grounds, such as where the arbitration agreement is invalid, but not on a point of law. Thus, as a Model Law country, Singapore currently does not allow the appeal of arbitral awards.

The second proposed amendment would enable the parties to agree to waive or limit the grounds for annulment of an arbitral award. This also diverges from the provisions of the Model Law. While Article 34(2) of the Model Law provides for six instances in which an award may be set aside, the second proposed amendment would allow the parties to waive some of those grounds, such as the incapacity of a party, or when the award exceeded the scope of the arbitration agreement. However, the second proposal would not allow the parties to waive the annulment grounds provided by Art 34(2)(b) of the Model Law, which states that an award may be set aside if the subject-matter of the dispute was not capable of settlement by arbitration under the applicable law, or if the award would conflict with the public policy of the enforcing country.

This second amendment was proposed due to a recent uptick in challenges to arbitral awards based on alleged breaches of due process. Indeed, tribunals have become fearful of denying the parties’ procedural demands to avoid such challenges.

India

With the seventh largest economy by GDP it makes sense that India is increasingly a party to international arbitrations, and promoting domestic arbitration to relieve its national courts. On November 4, 2020, the Indian Ministry of Law and Justice passed amendments to the Arbitration and Conciliation Act of 1996 (“The Indian Act”) in an effort to modernize the system and establish itself in the arbitration community.

The 2020 Amendments made two key changes to the framework governing Indian-seated arbitrations. The first such Amendment gives Indian Courts the power to grant an unconditional stay on enforcement of certain arbitral awards (“the Section 36 Amendment”) and the second removes the criteria for the accreditation of arbitrators introduced in 2019 (“the Qualification Amendment”).

(i) Section 36 Amendment

Section 36 of the Indian Act concerns the enforcement of arbitral awards in Indian-seated disputes and has undergone a series of updates since 2015. Pursuant to Section 36(2), after a party files a set-aside application it must make a separate application to the court seeking a stay of enforcement and Section 36(3) states that when granting a stay application the court may impose conditions it deems “fit,” thereby granting broad discretion to the court.

The Section 36 Amendment seeks to clarify the grant of an unconditional stay, but only in cases of fraud or corruption. Now, where a court is “satisfied that a prima facie case is made out” that “the arbitration agreement or contract which is the basis” of the award is “induced or effected by fraud or corruption,” then the court “shall stay the award unconditionally pending” resolution of any set-aside application.

This raises two questions. First, it is unclear what satisfies the “prima facie” test. Will the court require proof of fraud and corruption, or merely accept an allegation? The former may require lengthy arguments and evidence, while the latter may incentivize parties to assert baseless claims to derail enforcement. Second, the phrase “shall stay the award unconditionally” creates uncertainty around the degree of judicial discretion. It could be read as removing judicial discretion entirely, imposing a mandatory stay where a prima facie case of fraud or corruption is established. However, is could also be read as only removing the discretion of the courts to impose conditions it deems fit on a stay where a prima facie case of fraud or corruption is established.

Accordingly, it remains to be seen whether the Section 36 Amendment will streamline the set-aside process or creates more issues, which will require further clarification.

(ii) The Qualification Amendment

In 2019 a new set of requirements for the qualification of arbitrators in Indian-seated arbitrations was introduced to the Indian Act. These requirements are known as the Eight Schedule. Among other things, the Eight Schedule provided that a person could not qualify as an arbitrator unless he or she was an “advocate within the meaning of the Advocates Act, 1961[,] having ten years of practice experience as an advocate,” and that “the arbitrator shall be conversant with the Constitution of India.” Additionally, the Advocates Act imposes a nationality requirement; thus, the Eight Schedule made it unlikely for foreign lawyers to sit as arbitrators and in fact precluded lawyers not admitted in India from sitting as arbitrators in Indian-seated arbitrations. With this preclusive, nationalistic effect, it is no surprise that these requirements were widely criticized. The Qualification Amendment deletes the Eight Schedule in its entirety.

These two Amendments are the latest in a series of changes to the Indian Act since 2015 and have been met with mixed reviews. Removing the restrictive Eight Schedule requirements is certainly productive, but the uncertainty of the prima facie test in the Section 36 Amendment may cause delays in enforcing awards in Indian-seated arbitrations and indeed may be the subject of a new amendment in the years to come.

Despite any shortcoming, what is clear with all four of the amendments passed by Singapore and India is the countries’ commitment to enhancing their respective domestic and international arbitration framework, which in turn illustrates the ever increasing adoption and promotion of arbitration as a dispute resolution mechanism.