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Chief Justice Sundaresh Menon: Keynote address delivered at the SIAC Annual India Conference 2024
SIAC ANNUAL INDIA CONFERENCE 2024
KEYNOTE ADDRESS
“The Pursuit of Justice: Securing Trust in Arbitration”
Friday, 6 September 2024
The Honourable the Chief Justice Sundaresh Menon*
Supreme Court of Singapore
The Honourable Justice Devendra Kumar Upadhyaya, Chief Justice of the High Court of Bombay,
Fellow Judges from the Supreme Court of Singapore,
Mr Davinder Singh SC, Chairman of the Singapore International Arbitration Centre (“SIAC”) Board of Directors,
Mr Cyril Shroff, Member of the SIAC Board of Directors,
Mr Darius Khambata SA, Member of the SIAC Court of Arbitration,
Distinguished guests,
Ladies and gentlemen,
I. Introduction
1. Good afternoon. It is truly a delight to be back in Mumbai, and I am very grateful to Davinder, Gloria and the entire SIAC team for the tremendous work that has gone into organising this conference, and also for inviting me to deliver this keynote address.
2. The focus of my address this afternoon is on the critical issue of securing trust in arbitration. A leading treatise describes arbitration as “essentially a very simple method of resolving disputes” where “[d]isputants agree to submit their disputes to an individual whose judgment they are prepared to trust” [emphasis added].(1) While this description may accurately depict the historical origins of arbitration, my central thesis today is that trust can no longer be taken for granted as an inherent feature of arbitration; and indeed that there is a pressing need for all stakeholders in the arbitration community to collectively and proactively act in the endeavour to secure trust in arbitration.
3. I will divide my address into three main parts.
(a) I will first outline some key trends that I suggest should inform the way we think about arbitration today.
(b) Following that, I will delve into two pivotal areas that lie at the heart of our collective effort to secure trust in arbitration. The first is to promote access to justice, particularly by controlling costs, while the second is to ensure that the values of the legal profession are upheld.
II. Key Trends Affecting Arbitration
4. Arbitration was historically perceived as a private method of alternative dispute resolution, and has been referred to as a form of “private justice”. Accounts of early human civilisations are replete with references to practices resembling arbitration, and this is true also in India. It has been suggested that the origins of arbitration here can be traced to the system known as the “Panchayat”, where disputes of various kinds were resolved by a small group of wise, respected and trusted village elders.(3) And later, in the realm of commerce, mercantile communities established community organisations that implemented mechanisms to settle disputes among their members. This was regarded as a more cost-effective and expeditious alternative to the courts. For instance, here in Mumbai, the Bombay Shroffs’ Association resolved around 25 disputes each day in the early 20th century.(4)
5. However, this traditional view of arbitration – as a private, simple, informal, and alternative mode of dispute resolution – probably no longer holds true today. Let me outline four key developments.
A. Key developments in arbitration
6. The first is the transformation of arbitration from a relatively informal mode of dispute resolution to one that is governed by a substantial body of procedural rules. James Allsop, the former Chief Justice of the Federal Court of Australia and now my colleague on the Singapore International Commercial Court (or “SICC”), has characterised this as the problem of “industrialisation”, which leads to an increase in unnecessary process-driven costs. In other words, these costs are incurred by the parties not because these processes aid in dispute resolution, save perhaps in securing the occasional victory by attrition, but rather because they are perceived as necessary or have just become common practice.(5)
7. The next significant development is the professionalisation of arbitration.(6) This is marked by the growing presence of arbitrators and lawyers from diverse backgrounds who are entering the arbitration community often at a younger age.(7) While the diversity is commendable, it also results in a community where not all members share the same values and understandings about the practice of law generally, and hence also of arbitration. This can give rise to missed expectations and when the system cannot or will not respond to this, it can lead to a loss of confidence in the integrity of the process.
8. The next key trend is that arbitration can no longer reasonably be regarded as an alternative mode of dispute resolution. This is especially true of cross-border disputes, where the surveys and statistics consistently indicate an overwhelming preference by commercial parties for arbitration over litigation or mediation.(8)
9. But even beyond cross-border commercial disputes, arbitration is increasingly becoming a mandatory mode of dispute resolution that affects the lives of many ordinary citizens. A growing trend has emerged of employees, consumers and small businesses being subject to “mandatory arbitration” clauses.(9) One prominent example that made the news just a couple of weeks ago is the Disney litigation in Florida’s Ninth Judicial Circuit.(10) The plaintiff had filed a wrongful death lawsuit against Walt Disney Parks and Resorts, after the tragic death of his wife following a meal at a restaurant located in one of Disney’s resorts. Disney sought to stay the proceedings in favour of arbitration on the basis that the plaintiff had agreed to arbitrate all his disputes against Disney. How? Well, among other things, he had once signed up for a one-month free trial of the Disney+ streaming service. And by agreeing to its standard terms and conditions, those things we all routinely accept without reading, Disney claimed that the plaintiff had consented to resolving all future disputes with Disney through arbitration, even those that were unrelated to the streaming service. Disney eventually withdrew its application following a public backlash. But this case is not an isolated one and the experience of the United States (“US”) is particularly illuminating. Consider the following statistics:
(a) Of the Fortune 100 companies in the US in 2018, 81 of them – including Amazon, Walmart and eBay – used arbitration agreements in connection with their consumer transactions.(11)
(b) And it is reckoned that as of this year, more than 80% of private sector, non-union workers in the US are subject to arbitration clauses. This effectively means that these workers have severely curtailed access to the courts to protect or secure their employment rights, and this figure is striking when one considers that the equivalent statistic in 2018, just 6 years ago, was 56.2%, and in 1992, just 2%.(12)
10. So what is driving this? Should we discern a rosy picture that validates arbitration’s popularity? Perhaps not. I suggest that these trends are to be seen in the context of a series of decisions of the Supreme Court of the United States (“US Supreme Court”), which have upheld the legality of mandatory arbitration clauses, as well as class action waivers that require arbitration to be pursued on an individual basis.(13) And class action waivers are particularly detrimental for what we refer to as “negative value” claims, where the cost of pursuing an action individually outweighs its potential returns, often by the order of multiples.(14)
11. I do not, and do not need to, comment on the correctness of the relevant US Supreme Court decisions. But I respectfully suggest that it is a deeply disturbing development, when, in light of the prevailing jurisprudence, mandatory arbitration clauses are deployed by businesses and employers to denude and effectively deny their customers and employees their right and ability to access legal remedies and seek recourse. I suggest that all of us who care deeply about arbitration as a vital mode of dispute resolution should view with grave concern that arbitration – which began and was intended to be a quick, simple and effective means of private dispute resolution – is instead becoming a tool to block access to justice and the vindication of rights. And as we shall see shortly, this is already featuring as a consideration in case law.
12. This brings me to the fourth and final trend which is the decline of trust in public institutions.(15) It has been observed that the default tendency of individuals today is to distrust something until they see evidence that it is trustworthy; distrust is coming to be considered as “society’s default emotion”.(16) Strictly speaking, this is a global trend which has far-reaching implications beyond the law and beyond arbitration. But as I said at the inaugural Supreme Court of India Day Lecture last year, this is arguably the most critical challenge that our courts face, because the legitimacy of the judiciary rests upon a broad acceptance that courts can be depended upon to dispense justice. And if that trust erodes, so too will trust in the justice system as a whole and in the rule of law.
13. And what I have said in the context of courts should apply equally to arbitration, because we are partners in the enterprise of the law, united in the mission of administering justice and supporting the rule of law.
B. The need to secure trust in arbitration
14. I began this address by referring to the traditional view of arbitration as a private, simple, informal, and alternative mode of dispute resolution, which the parties willingly resorted to in order to resolve their disputes. Trust could be said to be an inherent part of that process. But in the light of the evolving arbitration landscape that I have outlined, coupled with society’s predisposition towards distrust at the moment, trust cannot be maintained simply by maintaining the status quo, and we should collectively explore ways in which arbitration can establish or regain trust among its stakeholders.
15. Before I turn to some ideas, let me make two further points in support of the need for us to undertake this task.
16. The first is that compared to the courts, arbitration has certain longstanding features, which largely as a matter of design, might appear to undermine trust. These include first, the general confidentiality of arbitrations and the corresponding lack of transparency and public scrutiny; second, the use of party-appointed arbitrators who might be perceived as being partial to the interests of their appointers; and third, the very limited recourse to the courts for error-correction.(17) Let me emphasise that I am not criticising these points. Arbitration was designed with these features for good reasons. My point is that these features, added to the prevailing issues, can exacerbate the problem of trust. As I said at the SIAC’s Virtual Congress some years ago, because it has chosen to pursue other objectives, arbitration does not fully align with these key values and purposes of the general framework of the rule of law and so, it rests on an attenuated model of the rule of law.(18)
17. And the second point is that there have been recent high-profile cases which have prompted some reflection on the need for us to work at securing trust in arbitration.(19) Many of you would be familiar with the case of Nigeria v Process and Industrial Developments Ltd (or “P&ID”).(20) There, the London Commercial Court set aside certain arbitration awards made against Nigeria, to the tune of US$11 billion, on the basis that these had been obtained by fraud and in a manner contrary to public policy. Mr Justice Robin Knowles found that there were serious procedural irregularities surrounding the awards, including the provision of false witness evidence by the claimant, the ongoing bribery of a Nigerian official during the arbitration so as to suppress relevant information, and the claimant’s improper retention of privileged documents received during the arbitration. Justice Knowles concluded that Nigeria had suffered substantial injustice from the irregularities and that the tribunal would have taken a different approach to the claimant’s witness evidence if all these matters had been known.
18. I highlight the P&ID case not to suggest that there is a problem of widespread corruption in arbitration. Indeed, that would, in my view, be the wrong conclusion to draw from that case. My point is a narrower one but no less important, in that it took the courts to unravel fraud that seemed to have permeated the entire arbitral process and this, surely, begs the question why. This ought to prompt some reflection on the longstanding features of arbitration that I earlier mentioned. For instance, is there value in having greater openness and transparency in the conduct of proceedings and the publication of awards?
19. I am not suggesting that this would necessarily have resulted in a different outcome in P&ID. But cases like P&ID ought to prompt introspection on whether we should re-examine certain features or practices in arbitration and to consider whether there is a need to secure better accountability in order to maintain public confidence.
20. I do not propose to delve any further into these subjects which have sparked much debate. Let me instead turn to two areas that ought to unite the entire arbitration community and which may then provide the foundation for further systemic change.
III. Promoting Access to Justice
21. I begin with access to justice. This is a systemic challenge that arbitration faces and it goes directly to the issue of trust – the parties must have a realistic opportunity to commence or defend a claim, and a fair shot at presenting their case, regardless of their financial resources or legal sophistication. While there are various facets to access to justice, one major and obvious difficulty in arbitration is the issue of costs.(21) This includes not just the party costs – which can run into the tens of millions for larger arbitrations(22) - but also the costs of the arbitration, such as the tribunal’s fees and expenses, which although a much smaller component, nonetheless represent an additional level of expense that the parties would not otherwise have to contend with. Costs have consistently been perceived in user surveys to be arbitration’s “worst feature”.(23) Just last week, the Singapore International Dispute Resolution Academy published its latest survey report which found that only 30% of respondents were satisfied with the cost of arbitration.(24)
22. I return to a point I made earlier and observe that we are beginning to see the concern regarding the prohibitive cost of arbitration play out in the jurisprudence relating to the enforcement of arbitration agreements in at least some settings. I mention two examples.
(a) In Uber Technologies Inc v Heller,(25) the Supreme Court of Canada, by an 8 to 1 majority, held that an arbitration clause in a standard form services agreement signed between the plaintiff driver and the defendant company was unconscionable and hence unenforceable. The clause in that case stipulated that any dispute had to be resolved by way of arbitration in the Netherlands in accordance with the rules of the International Chamber of Commerce (or “ICC”). The court found that there was an “inequality of bargaining power” between the parties, and the arbitration clause was “improvident” because the cost of commencing the claim alone amounted to US$14,500, and this was almost the equivalent to the plaintiff’s annual income.
(b) More recently, the Polish Supreme Court annulled a decision of the Warsaw Court of Appeals that enforced an arbitration agreement between the parties. Relying on provisions in the European Convention of Human Rights and the Charter of Fundamental Rights of the European Union, the Supreme Court held that a party’s “objective financial inability” to bear arbitration costs can render the arbitration clause unenforceable.(26)
23. It remains to be seen whether these issues will be decided similarly in Singapore, India and other centres of arbitration.(27) That said, what these cases show is that there is real concern over the cost of arbitration, which needs to be addressed so that we can secure trust and the presumptive enforceability of arbitration agreements. And we can think of how to address this concern in three broad areas.
A. Substantive and procedural rules on costs
24. To begin with, institutions could consider introducing substantive and procedural rules on costs that would provide a common framework for arbitrators to assess costs. I am referring here to party costs, which represent the largest proportion of the costs of international arbitration.(28)
25. It is well established that reasonableness is, in theory, the touchstone for cost recovery in arbitration. But it has been observed that in practice, tribunals typically exercise restraint in reducing or rejecting costs as being disproportionate or unreasonable.(29) The assessment of costs in arbitration is said to be a “far less forensic exercise” than in litigation.(30)
26. To address this, it might be helpful for the rules of arbitral institutions to expressly state that only reasonable and proportionate costs will be recoverable, and to provide a list of factors that should be considered in the tribunal’s assessment. This would not only provide concrete guidance for tribunals but might also promote broad consistency in the approach to fixing the quantum of recoverable costs.
27. This is precisely the approach we have taken in the SICC, which could serve as a useful point of reference. Order 22 rule 3(1) of our SICC Rules sets out the default position that a successful party is entitled to costs, and the quantum of any costs award will generally reflect the costs incurred by the successful party, subject to the principles of proportionality and reasonableness. Order 22 rule 3(2) then goes on to provide a non-exhaustive set of factors that the court may consider in assessing proportionality and reasonableness, and these include the complexity of the case, the conduct of the parties and the value of the claim.
28. We also seek to address the issue of costs through our procedural rules.
(a) For instance, shortly after the commencement of proceedings and even before the first Case Management Conference which the judge having carriage of the matter will conduct, the parties are required to estimate the costs that they have incurred to date, as well as their overall costs in the event that the matter proceeds to a trial or hearing on the merits.(31) In the course of the proceedings, the SICC may also require parties to provide cost estimates or budgets. These indications are important and helpful because they allow the court to consider making the necessary directions or orders to manage and, if necessary, streamline, the dispute. They also help to put the opposing party on notice of their potential costs liability should they be unsuccessful, and they serve as useful reference points when the court ultimately has to decide the quantum of recoverable costs.
(b) In addition, the SICC may require the parties to provide a costs schedule with their closing submissions, using a sample that is provided in the Rules.(32) This ensures that there is sufficient particularisation of costs so that the court can conduct a proper review, and the other party has the opportunity to challenge the reasonableness of the costs claimed.(33)
29. Let me be clear that I have referred to the experience of the SICC not to suggest that these are model rules and procedures that should be directly imported into all arbitrations, but with the more modest aim that they could provide some inspiration for arbitral institutions in any endeavour to address the challenge of spiralling party costs.
B. Ensuring the efficient conduct of proceedings
30. This brings me to my next point, which is that both institutions and tribunals share an interest in ensuring that proceedings are conducted efficiently so as to control costs, and I go so far as to suggest that tribunals in particular have a responsibility to ensure this. Let me give a shoutout here to Session 1 which will look more closely at potential practical steps to this end.
31. One suggestion I have previously made is that institutions should consider developing alternative models of arbitration with simpler procedural regimes, particularly for smaller-value or less complex disputes.(34) I therefore commend SIAC for introducing the Streamlined Procedure in the upcoming 7th Edition of the SIAC Rules. Under this procedure, prior to the constitution of the tribunal, a party may apply for the arbitration to be conducted in accordance with the Streamlined Procedure if: (a) the parties have agreed to its application; (b) the amount in dispute does not exceed S$1,000,000; or (c) the circumstances of the case warrant the application of the procedure.(35) Some key features of the Streamlined Procedure include that: the final award will generally be issued within 3 months from the date of the constitution of the tribunal; the arbitration will be decided based on written submissions and documentary evidence only; and no party is entitled to request document production or file any witness evidence.(36)
32. The Streamlined Procedure is an excellent move and a step very much in the right direction, and moving forward, I would encourage SIAC to continue to explore ways to enhance and strengthen it. For instance, is there value in having the procedure apply by default for low-value disputes, so as to reduce the burden of a party having to file a formal application that might then be contested? Would it also be worth incorporating mediation as part of the Streamlined Procedure? These are interesting issues that I am sure will be carefully considered. It is worth noting that just two months ago, we too introduced the Express Track scheme in the General Division of our High Court, with the objective of facilitating the more expeditious and efficient resolution of certain civil matters that can be resolved within four days of trial.(37)
33. Apart from the possibility of effecting change through procedural rules, tribunals have a special role to play in ensuring the efficient conduct of the proceedings. I return here to the problem of “industrialisation”.(38) Here, there is value in recalling again the origins of arbitration as a quick and effective mode of dispute resolution, and in this light to consider how the most appropriate procedures for each particular arbitration might be designed by thoughtful case management. In other words, we should promote what I have referred to as the value of contextuality which means developing and applying the right case management processes for the context of the case at hand.(39) One innovative idea is the Town Elder Rules proposed by one of the most highly respected arbitrators, and now my colleague on the SICC Bench, Mr David Rivkin.(40) David suggests that tribunals should essentially start the first procedural conference with a blank slate, and develop a decision tree listing issues to be determined and the sequence in which these issues will be decided, with the most critical issues being determined first. The procedure for each step is then determined, with some steps not requiring certain procedures such as oral hearings or document production. David’s proposal reflects the sort of paradigm shift that will be needed if we are to effectively address the problem of industrialisation and move decisively towards promoting contextuality.
C. Generative AI
34. This brings me to my third and final point on how we might control costs, which is by harnessing the tremendous potential of generative artificial intelligence (or “AI”) to make arbitration more efficient and cost-effective.
35. We can think of the utility of generative AI on two levels.
36. The first use of generative AI is one that many of you would already be familiar with. Generative AI can be used to support and enhance the work of lawyers in the performance of traditional legal tasks, such as legal research, and drafting and preparing summaries. And the data suggests that most legal professionals have already started to integrate generative AI into aspects of their legal work or expect to do so imminently.(41) What we must ensure is that lawyers are equipped with the necessary knowledge and skills to use AI effectively. To this end, in Singapore, our Academy of Law is partnering with Microsoft to launch an online foundational course on generative AI for all lawyers, as well as a prompt engineering guide that will elucidate strategies for obtaining better results from large language models.
37. But the second use of generative AI I have in mind is one that may prove more transformative, and that is by thinking of how we might harness generative AI to address the challenges of “industrialisation” and “complexification” in new and creative ways. Complexification is a term I have used to refer to the ever-increasing technical and evidential complexity of disputes that threaten to exceed the ability of adjudicators to even comprehend much less master the material placed before them.(42) For example, could arbitrators use generative AI, at or around the commencement of proceedings, to assist them in synthesising the vast quantities of information that are becoming commonplace in international disputes today and identifying the key issues to be determined? I suggest institutions like the SIAC could help take the lead in undertaking studies to explore how far we may be able to go in getting the most value from what is undoubtedly a ground-breaking development.
IV. Upholding the Values of the Legal Profession
38. Let me turn to the second area that we ought to focus on and that is to ensure that arbitration upholds the values of the legal profession.
39. Recent cases have raised some concerns in the arbitration community. I mentioned P&ID earlier. In another recent decision of the London Commercial Court in Contax Partners,(43) an order entering judgment in the terms of a purported arbitral award was set aside, after the court found that both the award and the arbitration agreement were fabrications. Mr Justice Butcher observed that there were serious questions as to who was responsible for the fabrications and the way in which the enforcement application was presented to the court.
40. Against that backdrop, I will suggest two areas that we should examine to ensure that arbitration upholds the most basic and common values of the legal profession.
A. Promoting a consistent understanding of ethical values and principles
41. The first area concerns the lack of a consistent understanding of ethical values and principles across arbitration. This is not a new issue. More than a decade ago, Lord Peter Goldsmith KC said that “ethics in international arbitration has generated much debate but relatively few answers”.(44)
42. Take, for example, the preparation of witnesses. A recent ICC report found that in arbitration, “there is limited guidance on the steps which may be taken by party counsel to ‘prepare’ a witness, and there are no applicable general standards”.(45) To illustrate using an example provided by Professor Catherine Rogers, a German lawyer might regard pre-testimonial communications as deserving of criminal sanctions, while an American lawyer may instead be ethically compelled to prepare a witness so as to avoid committing a breach of the duty of competence.(46) And there are other areas where we find an absence of common ethical standards, such as in the production of documents and in communications with the tribunal.
43. On previous occasions, I have advocated for uniform or at least broad-based codes of conduct for arbitrators and counsel.(47) There were several reasons I advanced to justify this. First, there is a need for some sort of a broad consensus on what is ethically acceptable conduct so that we might make a real effort at trying to flatten the inconsistency in standards. Second, the lack of clear rules may lead to opportunistic challenges to set aside awards. And third, the differences in ethical standards applicable to counsel can create an uneven playing field if the lawyers are playing to different rules.
44. But the more fundamental point is this: how can it be that judges and lawyers are subject to codes of conduct or professional conduct rules in their own jurisdictions, whereas we are hesitant to even have “guidelines” in the case of arbitration? This directly impacts the issue of trust, and it may be noted that in a 2018 survey, 73% of respondents indicated that arbitral rules should address the conduct of parties and their counsel.(48)
45. We should therefore take steps towards producing such codes of conduct or sets of principles. Perhaps what we should strive for is not complete uniformity or harmonisation but codes which could broadly be divided into two parts:
(a) First, a set of core values and principles consistent with the values of the legal profession that are or should be universally accepted. For instance, no one should question such things as the duty not to mislead the tribunal and the duty not to present evidence that counsel knows to be false.
(b) Second, for “grey areas” such as the production of documents and witness preparation, there could be an open and comprehensive discussion on the various ethical standards. Each arbitral institution may then decide its own default position, perhaps in line with the prevailing approach in the jurisdiction that the institution is from. And in line with party autonomy, parties would be permitted to agree to an alternative standard.
46. This need not be an overly ambitious proposal. Indeed, earlier this year, UNCITRAL released codes of conduct for arbitrators and judges in the context of international investment disputes, and this could serve as a point of reference for the work ahead.(49)
B. Sanctions against errant arbitrators and counsel
47. But beyond promoting a more or less consistent understanding of ethical standards, thought should also be given to the manner in which such standards can, if the need arises, be enforced. The reality is that the existing legal avenues for holding errant arbitrators and practitioners to account are not as well-developed as the frameworks that apply in domestic court systems, and this is compounded by the confidentiality that prevails in arbitration. A practitioner based in Singapore, Dr Andreas Respondek, provides a disquieting anecdote of a case he was involved in where two arbitrators, having received their fees, simply disappeared and could not be contacted. Despite this flagrant breach of their professional and ethical obligations, the arbitral institution maintained that its hands were bound and it could not take disciplinary measures due to the confidentiality of the proceedings.(50)
48. I make two points.
49. The first is that arbitral institutions and professional bodies should not shy away from taking the lead in addressing breaches of ethical standards. The more robustly and firmly we say that we will not stand for it, the better we affirm arbitration’s integrity. Placing reliance on the courts would plainly not suffice, because judicial remedies are directed primarily at awards and it is likely that only egregious misconduct will warrant these being set aside. It also does not address the problem of the errant arbitration or practitioner. In addition, I suggest that the parties to an arbitration should be permitted to lodge a complaint to the institution in respect of any conduct of concern on the part of the tribunal or counsel, regardless of whether they seek to set aside the award, and so too should the tribunal.
50. We have seen some positive developments on this front. For instance, the Chartered Institute of Arbitrators has developed a system of disciplinary rules with sanctions for member misconduct, ranging from requiring re-training to expulsion. the tribunal.(51) The potency of these measures was demonstrated when a former member was expelled from the Institute and ordered to pay costs for failing to deliver an award for four years.(52)
51. Looking ahead, we may wish to explore the potential for greater synergies between the disciplinary framework for lawyers that apply in domestic court systems and the systems adopted by arbitral institutions and professional bodies. This could involve the sharing of information, and while this may require some departure from the general position that arbitral proceedings are confidential, this is something that might be worth pursuing to prevent recurrences of the unacceptable incidents that have come to light. And this will be especially important if the lawyer’s duties under his or her professional conduct rules extend to their conduct before an arbitral tribunal, as is the case in Singapore.(53)
V. Conclusion
53. Allow me to conclude. Like many of you, I consider myself to be a beneficiary of the massive growth of arbitration we have seen in the last few decades, and arbitration is now unquestionably a critical pillar of our global justice system. The largest portion of my time as a practitioner was spent in arbitration and as a judge I have dealt with arbitration regularly. It has been good to me. But as I have sought to explain, the arbitration landscape today has evolved dramatically from the time when many of us, who are senior figures today, were budding arbitration practitioners. Two of the most critical challenges facing arbitration today are the longstanding issues of costs and the lack of a consistent understanding of ethical standards and amidst all the developments affecting arbitration, these challenges have become even more acute. It is our responsibility to reflect on what we must do to ensure that this institution, which we all cherish, remains one that can be trusted and relied upon by society.
54. Thank you very much.
*I am deeply grateful to my law clerk, Chong Ee Hsiun, and my colleagues, Assistant Registrars Tan Ee Kuan, Wee Yen Jean and Bryan Ching for all their assistance in the research for and preparation of this address.
(1) Nigel Blackaby et al, Redfern and Hunter on International Arbitration (Oxford University Press, 6th Ed, 2015) (“Redfern and Hunter”) at para 1.04.
(2) Redfern and Hunter at para 1.15.
(3) Grace Xavier, “Evolution of Arbitration as A Legal Institutional And The Inherent Powers of the Court : Putrajaya Holdings Sdn. Bhd. v. Digital Green Sdn. Bhd.”, Asian Law Institute Working Paper Series No. 009 (February 2010) at p 2; Jelis Subhan, “Arbitration Conciliation and Mediation - Conflict between Formal and Informal Setups”, Social Science Research Network (3 September 2010).
(4) Medha Kudaisya, “India’s Merchant Communities”, Oxford Research Encyclopaedia of Asian History (April 2022).
(5) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “Arbitration’s Blade: International Arbitration and the Rule of Law”, Keynote Speech at the SIAC Virtual Congress 2020 (2 September 2020) (“SIAC Virtual Congress 2020 Speech”) at para 64.
(6) João Ilhão Moreira, “The ‘Professionalization’ of International Arbitrators: What Role for the Professional Arbitral Associations?”, Kluwer Arbitration Blog (4 August 2018).
(7) Alan Redfern, “The Changing World of International Arbitration” in Practising Virtue: Inside International Arbitration (David D. Caron et al, eds) (Oxford University Press, 2015) ch 2 at pp 45–51.
(8) See Singapore International Dispute Resolution Academy, “SIDRA International Dispute Resolution Survey: 2020 Final Report” (2020) at p viii (International commercial arbitration is the dispute resolution mechanism of choice used by 74% of respondents between 2016 and 2018.); Queen Mary University of London & White & Case LLP, “2021 International Arbitration Survey: Adapting arbitration to a changing world” (2021) at p 5 (90% of respondents expressed a preference for arbitration as their preferred method of resolving cross-border disputes.).
(9) Joe Valenti, “The Case Against Mandatory Consumer Arbitration Clauses”, Center for American Progress (2 August 2016); Katherine V.W. Stone and Alexander J.S. Colvin, “The arbitration epidemic”, Economic Policy Institute (7 December 2015).
(10) Tom Gerken, “Disney drops bid to stop allergy death lawsuit over Disney+ terms”, BBC News (21 August 2024).
(11) Imre Stephen Szalai, “The Prevalence of Consumer Arbitration Agreements by America’s Top Companies” (2019) 52 UC Davis L Rev Online 233 at 234 and 241.
(12) Jane Flanagan and Terri Gerstein, “’Sign on the Dotted Line’: How Coercive Employment Contracts Are Bringing Back the Lochner Era and What We Can Do About It” (2020) 54 University of San Franciso Law Review 441 at 447. Varying trends have been observed in other jurisdictions – see Employment Lawyers Association, “Arbitration and Employment Disputes”, An ELA report (November 2017) at paras 26–36.
(13) AT&T Mobility LLC v Conception, 563 U.S. 333 (2011); Am. Express Co. v Italian Colors Rest., 570 U.S. 228 (2013); Epic Systems Corp. v Lewis, 138 S. Ct. 1612 (2018).
(14) Alexandra Lahav, “Fundamental Principles for Class Action Governance” (2003) 37 Indiana Law Review 65 at 66.
(15) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “The Role of the Courts in Our Society – Safeguarding Society”, Opening Address at Conversations with the Community (21 September 2023) at para 35; Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “The Role of the Judiciary in a Changing World”, Address at the Supreme Court of India Day Lecture Series 1st Annual Lecture (4 February 2023) at para 24.
(16) Edelman, “The Trust 10”, Edelman Trust Barometer 2022 (2022).
(17) See, for example, the recent decision of the General Division of the High Court in Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (“Swire Shipping”). The court found that the award was “very difficult to read and understand”. It was written in a “convoluted and tortuous manner”, and required “the utmost willpower and concentration just to try to understand the Arbitrator’s reasoning”. However, the “lack of quality” in the award and its “manifest incoherence” was not a ground for setting it aside. This was a risk that both parties “took with open eyes” when they agreed to arbitrate their dispute (see Swire Shipping at [30] and [133]).
(18) SIAC Virtual Congress 2020 Speech at para 51.
(19) A recent example from Singapore is the decision of the Singapore International Commercial Court in DJO v DJP and others [2024] SGHC(I) 24 (“DJO v DJP”), where the court set aside an arbitral award on the basis that it was made in breach of natural justice. The court found that the tribunal had elected to use awards made in earlier arbitrations as a template for the present arbitration and to “massage” it into a state where it appeared to deal with the issues in the arbitration. In so doing, the tribunal had, among other things, placed weight on submissions made in the earlier arbitrations; applied the wrong lex arbitri to determine interest and costs; and failed to consider certain unique issues in the arbitration properly (see DJO v DJP at [51] and [55]–[77]). As at the date of this Keynote Address, this decision may yet be subject to appeal to the Court of Appeal.
(20) The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm).
(21) Raphael Ng’etich, “The Current Trend of Costs in Arbitration: Implications on Access to Justice and the Attractiveness of Arbitration” (2017) 5(2) Alternative Dispute Resolution 111 at 112.
(22) Phillip Landolt, “Controlling Costs in International Arbitration”, Bloomberg Law: Practical Guidance (October 2023).
(23) Queen Mary University of London & White & Case LLP, “2018 International Arbitration Survey: The Evolution of International Arbitration” (2018) (“2018 International Arbitration Survey”) at p 2; see also the similar results found in Queen Mary University of London & White & Case LLP, “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration” (2015).
(24) Singapore International Dispute Resolution Academy, “SIDRA International Dispute Resolution Survey: 2024 Final Report” (2024) at para 4.12.
(25) 2020 SCC 16 (CanLII), [2020] 2 SCR 118; See also Lochan v Binance Holdings Limited 2023 ONSC 6714 (CanLII).
(26) See Marcin Menkes, Alicja Zielińska-Eisen and Maria Paschou, “Can the Inability to Bear Arbitration Costs Render the Arbitration Clause Unenforceable? According to the Polish Supreme Court, It Can”, Kluwer Arbitration Blog (21 March 2024).
(27) See, for example, the remarks made by the court in Beltran, Julian Moreno and another v Terraform Labs Pte Ltd and others [2023] SGHC 340 at [180] and [181].
(28) Task Force on Decisions as to Costs, “Decisions on Costs in International Arbitration”, ICC Dispute Resolution Bulletin 2015, Issue 2 (2015) at p 3: party costs (including lawyers’ fees and expenses, expenses related to witness and expert evidence, and other costs incurred by the parties for the arbitration) make up, on average, 83% of the overall costs of the proceedings.
(29) Joseph R Profaizer, Igor V Timofeyev and Adam J Weiss, “Costs” in The Guide to Damages in International Arbitration (Global Arbitration Review, 5th Ed, 2022).
(30) Neil Newing, Ryan Cable & Johnny Shearman, “Costs in International Arbitration – Are Changes Needed”, Kluwer Arbitration Blog (1 January 2019).
(31) Order 9 r 4(2)(c) of the Singapore International Commercial Court Rules 2021 (“SICC Rules”) read with Form 16 in Appendix A of the SICC Rules.
(32) Para 54 of Appendix C to the SICC Rules.
(33) BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2022] SGHC(I) 17 at [63].
(34) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “’Arbitration and the Transnational System of Commercial Justice: Charting the Path Forward”, Keynote Address at the 25th Annual International Bar Association Arbitration Day (23 February 2024) at para 25.
(35) See Rule 13.1 of the Draft 7th Edition of the SIAC Rules.
(36) See Paras 11 and 13 of Schedule 2 to the Draft 7th Edition of the SIAC Rules.
(37) Supreme Court of Singapore, “Introduction of Express Track in the General Division of the High Court”, Announcement (27 June 2024), <https://www.judiciary.gov.sg/news-and-resources/news/news-details/introduction-of-express-track-in-the-general-division-of-the-high-court> (accessed 21 August 2024).
(38) See para 6 above.
(39) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “Constructing Collaboration: Remoulding the Resolution of Construction Disputes”, Speech delivered at the 9th Annual Conference of the International Academy of Construction Lawyers (14 April 2023) at paras 14–19.
(40) Alison Ross, “Rivkin unveils Town Elder rules”, Global Arbitration Review (13 December 2021).
(41) See Wolters Kluwer, “The Wolters Kluwer Future Ready Lawyer Report: Embracing innovation, adapting to change”, Wolters Kluwer Legal & Regulatory (2023): 73% of lawyers expected to integrate generative AI into their legal work in the next 12 months. See also Bryan Cave Leighton Paisner, “Annual Arbitration Survey 2023”, BCLP (9 November 2023) at pp 6 and 12: 28% of respondents had used ChatGPT in a professional context. 37% of respondents used AI for translation of documents, 30% for document review and production, 30% for text formatting and editing, and 23% for document analysis.
(42) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “The Complexification of Disputes in the Digital Age”, Goff Lecture 2021 (9 November 2021) at para 6.
(43) Contax Partners Inc BVI v Kuwait Finance House (KFH-Kuwait) & Ors [2024] EWHC 436 (Comm).
(44) Lord Goldsmith QC, “Ethics in International Arbitration”, Keynote Speech at the ICC UK Annual Arbitrators’ Forum (27 November 2013).
(45) Task Force ‘Maximising the Probative Value of Witness Evidence’, “The Accuracy of Fact Witness Memory in International Arbitration: Current Issues and Possible Solutions”, Report of the ICC Commission on Arbitration and ADR (21 September 2019) at para 5.35.
(46) Catherine Rogers, “Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration” (2002) 23 Michigan Journal of International Law 341 at 359–360.
(47) Sundaresh Menon, Chief Justice, Supreme Court of Singapore, “Some Cautionary Notes for an Age of Opportunity”, Keynote Address at the Chartered Institute of Arbitrators International Arbitration Conference, Penang (22 August 2013) at para 18.
(48) 2018 International Arbitration Survey at p 34.
(49) See UNCITRAL Code of Conduct for Arbitrators in International Investment Dispute Resolution and UNCITRAL Code of Conduct for Judges in International Investment Dispute Resolution.
(50) Andreas Respondek, “Five Proposals to Further Increase the Efficiency of International Arbitration Proceedings” (2014) 31(4) Journal of International Arbitration 507 at 509–510.
(51) See the Ciarb Disciplinary Rules – 2023. Misconduct is defined as conduct that, among other things, is or could prove to be injurious to the good name of the Institute, or is likely to bring the Institute into disrepute, which renders a person unfit to be a Member of the Institute; is a breach of professional or ethical conduct which shall include the Code of Professional and Ethical Conduct or other similar document published from time to time by the Institute; or falls below the standards expected of a reasonably competent Practitioner or a reasonably competent professional person acting in the field of private dispute resolution. Sanctions that may be meted out include restricting the wrongdoer’s privileges of membership, ordering that the wrongdoer undertake steps such as re-training or supervision, suspension and permanent expulsion from the Ciarb.
(52) Lord Hacking and Sophia Berry, “Ethics in Arbitration: Party and Arbitral Misconduct” in Defining Issues in International Arbitration: Celebrating 100 Years of the Chartered Institute of Arbitrators (Julio César Betancourt, ed) (Oxford Academic, 2016) ch 13 at para 13.29.
(53) See Rule 2(1) of the Legal Profession (Professional Conduct) Rules 2015, which defines “tribunal” as inclusive of any arbitral tribunal as defined in s 2(1) of the Arbitration Act (Cap. 10) or s 2(1) of the International Arbitration Act (Cap. 143A).
2024/09/10
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