REUTERS | Edgar Su

SIAC to launch Investment Arbitration Rules

On 1 February 2016, the Singapore International Arbitration Centre (SIAC) announced the upcoming launch of a set of arbitration rules designed specifically for investor-state disputes, and published a first draft for consultation. Produced by a panel of eminent experts, the draft Investment Arbitration Rules 2016 (draft Rules) aim to offer an alternative to the procedural rules most commonly incorporated in international investment agreements (IAAs), such as the International Centre for Settlement of Investment Disputes (ICSID) Rules and the United Nations Commission on International Trade Law (UNCITRAL) Rules.

This could be a clever move from an institution that has rapidly become a global leader in commercial arbitration. The growing network of IAAs, in Asia and beyond, provides ample opportunity for SIAC to find its way into the investment arbitration world.

The key to making SIAC’s entry a lasting success will nevertheless depend on the extent to which the Rules address some of the frustrations of users of the existing investment arbitration system. Crucially, this means ensuring that the Rules are balanced, while improving the speed and efficiency of proceedings. In addition, concerns of a lack of transparency and regard for the public interest, which have already fuelled the EU’s proposal for an Investment Court, should be addressed.

Delivering on speed and efficiency

Too often, investment arbitrations fail to deliver on the promise of arbitration due to protracted proceedings and exorbitant price-tags. ICSID proceedings, in particular, have acquired a reputation for inordinate delays, with the majority of arbitrations concluded in 2015 lasting on average 39 months from the date of the tribunal’s constitution. SIAC proposes several incremental reforms to promote speed and efficiency.

First, the draft Rules incorporate a number of tight timelines originating from the SIAC Arbitration Rules 2013 and the draft SIAC Arbitration Rules 2016. For example, SIAC will proceed to make default appointments of sole arbitrators and co-arbitrators after only 28 days (draft Rules 6.2 and 7.2). Similarly, a tribunal is required to declare the proceedings closed within 30 days of the last hearing or submission, whichever is later, and to submit a draft award to the SIAC Registrar within the following 45 days (draft Rules 29.1 and 29.2). These time limits could go a long way in addressing delays, which are frequently incurred during the constitution of the tribunal and the rendering of awards. However, the use of a list-procedure (draft Rule 8) might make it difficult for the institution to secure default appointments as expeditiously as it typically does under the SIAC Arbitration Rules, which simply require the SIAC President to make default appointments “as soon as practicable”.

Second, parties would have the opportunity to apply for dismissal of a claim at a very early stage in the proceedings (draft Rule 25.1). This provision echoes ICSID Rule 41(5), which allows for an early dismissal of claims “manifestly without legal merit”, yet expands on it by making the mechanism available where claims are “manifestly outside the jurisdiction of the Tribunal” or “manifestly inadmissible”.

Third, if the parties have expressly agreed thereto, the draft Rules allow applications for interim relief before the constitution of the tribunal through the application of SIAC’s emergency arbitrator procedure (draft Rule 26.4 and Schedule 1). No other rules commonly used in investment arbitration, apart from the Stockholm Chamber of Commerce (SCC) Rules, give this option. However, requiring an express “opt-in” to the procedure may reduce its potential significantly, as it is doubtful that respondent states would agree to a procedure that is most likely to be directed against them.

Finally, the incorporation of SIAC’s advantageous schedule of fees in the draft Rules may result in significantly lower costs for the parties (draft Rule 31.1).

Push towards transparency

The drafters also appear to have appreciated the widespread concerns relating to the level of transparency and regard for the public interest in investment arbitration. This is evidenced by the inclusion of a draft Rule allowing written submissions by third parties with a “sufficient interest” in the proceedings and the ability to bring a different perspective on the dispute (draft Rule 28).

Inspired by equivalent provisions in the ICSID Rules (Rule 37) and the UNCITRAL Rules on Transparency (Article 4), this provision arguably goes further than the former two, by only requiring the non-disputing party to show a “sufficient” rather than “significant” interest in the proceedings. No other set of rules apart from those mentioned above give the option of third party participation in arbitral proceedings. SIAC will furthermore publish limited information on proceedings (such as the identities of the parties, and whether proceedings are ongoing), unless both parties object (draft Rules 37(1) and 37(2)).

This notwithstanding, the draft Rules preserve SIAC’s confidentiality provision, 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 (draft Rule 36). The compatibility of this tried-and-trusted provision with the more innovative rule on third party participation is uncertain. For example, if proceedings are (almost) entirely confidential, it is unclear how third parties will be able to determine whether and when to participate. The limited information published by SIAC to which the public, by default, would have access is unlikely to be sufficient. In addition, the draft Rules are discernibly less far-reaching than the UNCITRAL Rules on Transparency since tribunals’ decisions may only be published, and hearings may only be open to the public, with the consent of all parties (draft Rules 37(3) and 20.4).

Conclusion

With the one-month consultation period on the draft Rules now concluded, the ball is in SIAC’s court to finesse what is certainly a promising draft. In its current form, the draft is likely to result in more expedient and cost-effective proceedings. However, its confidentiality provision may prove ill-suited to modern investment arbitration. The arbitration community will have to stay tuned for the rules’ official launch at SIAC’s silver jubilee on 27 May 2016 to determine whether the SIAC Investment Arbitration Rules 2016 will be a credible competitor to more established investment arbitration rules.

Three Crowns LLP Vladimir Bertrand Katherine Jonckheere

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