Room for agreement: Selecting a venue for international infrastructure dispute resolution
An important decision to be made when planning for the resolution of disputes in international infrastructure projects is the venue. This article explores five key factors to consider when choosing this venue.
That infrastructure projects are inherently complex is beyond dispute. Their large ticket size usually means that multiple parties from different countries are involved, each making sizeable investments over an extended period into a facility outside their home jurisdiction. This high-value, cross-border and long-term nature of infrastructure projects inevitably carries with it political and financing risks, operational challenges, and differences in systems and practices attributed to the multiple stakeholders involved. Furthermore, delays, variations, defects, and performance-related issues are ubiquitous in infrastructure projects.
Therefore, even as parties seek to cooperate, they also need to plan for differences and disputes. In principle, agreeing in advance how future disputes will be resolved can strengthen trust and further cooperation. In practice, it is wise to do so because, once the parties are at daggers drawn, they are more likely to disagree on everything, including how and where to resolve their disputes. Having parties in continued locked horns will just cause further delays and losses to the project.
Don’t let the venue be another dispute
An important decision to be made when planning for the resolution of disputes in international infrastructure projects is the venue (and seat of arbitration, if arbitration is the chosen mode of dispute resolution). To a layperson, this may seem to be a simple decision. But in reality, having the parties agree on it, even before any discontent simmers, can be challenging. Parties can be from different jurisdictions and/or nationalities, prefer different methods to resolve their disputes, or have different perceptions about a specific venue or seat of arbitration – just to name a few factors.
Infrastructure Asia sought views from seven lawyers and in-house counsel in the infrastructure sector on the key factors they would consider when choosing, or recommending their clients in choosing, a venue for dispute resolution (or the seat of arbitration if arbitration is the chosen mode of dispute resolution).
[Note: “Venue” refers to the physical location for the resolution of international disputes. “Seat of arbitration”, which is specific to arbitration, determines the governing procedural law of the arbitration and the enforceability of the award.]
The following emerged as the key factors:
The ability to enforce a decision is key in dispute resolution proceedings. This is unanimously agreed by all three in-house counsel we reached out to, Li Zhiyong, In-House Counsel, Power China International Group, Maria Serrano Miralles de Imperial, In-House Counsel, International Pre-Litigation and Litigation Department within the construction business of Acciona and Hariprasad Ratnagopal, In-House Counsel, Meinhardt Group, and emphasised by Allen Choong, Partner, Allen & Gledhill LLP. This is even more important in international disputes, as parties need to have the confidence that a decision (be it a court judgement, arbitral award or mediation settlement) made in one country will be recognised and enforced elsewhere without requiring a re-litigation of the dispute.
For arbitration, the seat of arbitration chosen should be a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). An arbitral award rendered by an arbitral tribunal sitting in a country will be recognised and enforced in over 160 countries if the country is a signatory to the New York Convention.
For court litigation, the jurisdiction chosen should have international statutes and treaties that allow its court judgment to be recognised and enforced in the foreign country where the other party (and its assets) are located. As examples,
- Singapore court judgments may be enforced in the European Union by virtue of Singapore’s accession to HCCH1 Convention on Choice of Court Agreements.
- Singapore court judgments for the payment of money may be enforced via reciprocal enforcement legislation in the United Kingdom, Malaysia, Brunei, Hong Kong, New Zealand and certain states in India and Australia.
- The Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore signed a Memorandum of Guidance on Recognition and Enforcement of Money Judgements in Commercial Cases that provides guidance for parties seeking to enforce foreign money judgements in Singapore and the PRC.
- The Supreme Court of the Union of Myanmar and the Supreme Court of Singapore signed a Memorandum of Guidance as to Enforcement of Money Judgments to enhance clarity and promote mutual understanding of the laws and judicial processes concerning the enforcement of money judgments between the two courts.
International commercial settlement agreements resulting from mediation will be enforceable in countries that have ratified the Singapore Convention on Mediation, which will come into force on 12 September 2020. Enforcement is in accordance with the rules of procedure and conditions set out in the Convention.
Neutrality and impartiality
Given that parties to a large international infrastructure contract are often of different nationalities, the neutrality of a dispute resolution venue – in terms of the parties’ nationality, residence or place of incorporation – is important to avoid real or perceived bias. Christopher Chuah, Partner and Head, Infrastructure, Construction & Engineering Practice, WongPartnership LLP, points out that though it is not always accurate to assume that the local party will be advantaged by its local status or that a foreign party will be disadvantaged on that basis, a neutral venue will provide a fair playing field or forum to promote effective resolution of dispute. Maria also shares her view, from an international developer’s perspective, about neutrality. The jurisdiction must be one with a solid tradition of rule of law, strong institutions, and a truly impartial justice system. She feels that this is especially important in the context of current geopolitical affairs, which can be subject to sudden changes.
To ensure that the dispute resolution process and its eventual outcome are fair and nationality-blind, parties usually select a third country with a well-respected legal system, low incidence of corruption and a strong reputation for good governance.
Efficiency and cost
The speed of the dispute resolution process is also paramount. As Allen points out, the adage “justice delayed is justice denied” continues to hold true. A good dispute resolution venue should have a judicial system and dispute resolution institutions that provides an efficient and cost-effective resolution process.
The costs involved in dispute resolution are not insignificant. In addition to counsel fees, parties must also pay the fees charged by the dispute resolution centres. Therefore, the more efficient a dispute is resolved, the lower the overall cost to resolve it is. However, as Hariprasad Ratnagopal, In-House Counsel, Meinhardt Group points out, cost efficiency should always be weighed against other factors such as enforceability, neutrality, expertise and quality of dispute resolution infrastructure.
Supportive judiciary and comprehensive legal framework
An efficient, competent and honest judiciary is a vital factor to the success of any international disputes hub, says Nish Shetty, Partner and Head, Litigation and Dispute Resolution (Asia-Pacific), Clifford Chance.
As far as international arbitration is concerned, parties want a judiciary that is pro-arbitration and familiar with international arbitration jurisprudence. They also expect the courts to uphold the arbitration agreement and support the arbitration process through a policy of minimum intervention.
Parties will also consider the underlying legislative framework when deciding on a seat of arbitration. Seats of arbitration with a comprehensive legal framework and supportive of alternative dispute resolution, including international arbitration, will be preferred. Many popular seats of arbitration have adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, have developed sophisticated arbitration jurisprudence, and provide access to the latest and most innovative rules and procedures.
Dispute resolution ecosystem and infrastructure
Resolving disputes involves more than just the parties and a judge. Parties should also think about how the broader ecosystem and infrastructure within the chosen venue can support them in managing and resolving their disputes, says Kelvin Aw, Director, CMS Holborn Asia and Partner, CMS Singapore.
Allen and Nish observe that the technical nature of infrastructure disputes often requires the expertise of a wide range of professionals. This includes (a) lawyers specialising in infrastructure disputes to represent the parties’ interests, (b) technical experts such as engineers, claims consultants and delay analysts to provide expert testimony, and (c) specialist judges and arbitrators with strong case management skills and who are experienced in dealing with issues arising from infrastructure projects. Having access to the required expertise within the venue’s ecosystem can save parties the cost and time of enlisting it from abroad.
In addition, the cross-border and large-scale nature of infrastructure projects means that disputes may involve voluminous documentation and witnesses from different countries. These witnesses may speak different languages and may not physically present at the hearing. A venue equipped with the necessary facilities and technologies, such as transcription, translation, document management services and good digital connectivity, will make the dispute resolution process more seamless. Efforts can then be concentrated on the resolution of the dispute, instead of administrative and logistical matters.
Singapore as a choice venue for dispute resolution
Considering the factors above, Singapore emerges as a choice venue for dispute resolution due to the following value propositions that it offers.
First, Singapore offers a full suite of dispute resolution options. This includes arbitration at the Singapore International Arbitration Centre (SIAC), mediation at the Singapore International Mediation Centre (SIMC) and litigation at the Singapore International Commercial Court (SICC). Arbitral awards, mediation settlements and court judgments of disputes resolved through these institutions are enforceable in foreign countries by virtue of Singapore being a signatory to the key international conventions (see Enforceability above). In addition, the various Singapore-based dispute resolution institutions also work together to provide a suite of integrated and innovative dispute resolution options, such as the Arb-Med-Arb2 protocol offered by SIAC and SIMC.
Second, having a trusted legal system and judiciary, Singapore offers a neutral venue for dispute resolution. World Justice Project Rule of Law Index 2020 ranks Singapore 12th worldwide and top in Asia3 in terms of rule of law. The Transparency International Corruption Perceptions Index (CPI) 2019 ranks Singapore the 4th least corrupt country in the world and the only Asian country ranked in the top 104. Foreign parties can therefore be confident that Singapore courts and judges will deliver a fair and nationality-blind outcome.
Third, Singapore offers speed and cost efficiency for dispute resolution. The World Bank Doing Business Report 20205, which measures the efficiency of a judicial system in resolving a commercial dispute, ranks Singapore first globally in the contract enforcement variable. Based on the study, resolving a commercial dispute through the Singapore Courts takes just 164 days, the shortest time recorded worldwide. Costs are comparable to that of the major dispute resolution venues such as Hong Kong and New York, and are about half of that in London.
Fourth, Singapore has a judiciary and legal framework that is supportive of alternative dispute resolution. Singapore is pro-arbitration and has adopted a policy of minimal intervention in respect of arbitration proceedings. Both the UNCITRAL Model Law on International Commercial Arbitration and the New York Convention have the force of law in Singapore through Singapore’s International Arbitration Act. As for mediation, even before the Singapore Convention on Mediation was signed in August 2019 in Singapore to enable parties to easily enforce and invoke settlement agreements across borders, Singapore has already enacted the Singapore Mediation Act in 2017. This act provides a mechanism to record mediation settlement agreements as court judgements to enhance enforceability.
Fifth, Singapore offers a comprehensive dispute resolution ecosystem and world-class facilities. Singapore is home to top international and Singapore law firms with a strong pool of lawyers specialising in infrastructure. These include those accredited as specialists in Building and Construction Law under the Singapore Academy of Law’s Specialist Accreditation Scheme, such as Kelvin and Christopher (Senior Accredited Specialists) and Allen (Accredited Specialist). There is also a strong base of experts in the field of delays, quantification, engineering and assessment of financial losses, as well as specialist court judges and arbitrators, with background and familiarity with infrastructure disputes.
Singapore’s dispute resolution services also include tailored protocols and forward-looking services, such as the Singapore Infrastructure Dispute Management Protocol (SIDP), which help to manage project risk, and facilitate timely completion of infrastructure projects. Singapore also provides top-in-class hearing facilities at Maxwell Chambers, the world’s first integrated dispute resolution complex.
In an ideal world, cross-border infrastructure projects will proceed smoothly once the contract has been signed. However, it is important to plan for a situation in which a dispute will arise. Ultimately, parties to cross-border contracts want a forum which will provide a fair and efficient determination of their disputes by impartial decision-makers and produce an enforceable result. Singapore is often the preferred choice because it offers the required neutrality with a reputation for impartiality, integrity and a well-respected and efficient legal system.
1 HCCH: Hague Conference on Private International Law / Conference de La Haye de droit international privé
2 Arb-Med-Arb is a process where a dispute is first referred to arbitration before mediation is attempted. If the parties can settle their dispute through mediation, their mediated settlement may be recorded as a consent award, which is generally accepted as an arbitral award. If parties are unable to settle their dispute through mediation, they may continue with the arbitration proceedings.
3. Source: World Justice Project Rule of Law Index 2020
4. Source: Singapore maintains high score for Transparency International Corruption Perceptions Index 2019 [Corrupt Practices Investigation Bureau, 23 January 2020, link]
5. Source: Doing Business: Measuring Business Regulations [World Bank Group, link]. The number of days is counted from the moment the plaintiff decides to file the lawsuit in court until payment. This includes both the days when actions take place and the waiting periods in between.
This article was written by Jessica Bin, Lim Joo Hong and Seth Tan, and benefitted from the views of (in alphabetical order of surnames):
- Kelvin Aw, Director, CMS Holborn Asia / Partner, CMS Singapore (Senior Accredited Specialist, Singapore Academy of Law)
- Allen Choong, Partner, Allen & Gledhill (Accredited Specialist, Singapore Academy of Law)
- Christopher Chuah, Partner and Head, Infrastructure, Construction & Engineering Practice, WongPartnership (Senior Accredited Specialist, Singapore Academy of Law)
- Li Zhiyong, In-House Counsel, Power China International Group
- Maria Serrano Miralles de Imperial, In-House Counsel, International Pre-Litigation and Litigation Department within the construction business of Acciona
- Hariprasad Ratnagopal, In-House Counsel, Meinhardt Group
- Nish Shetty, Partner and Head, Litigation and Dispute Resolution (Asia-Pacific), Clifford Chance
- List of websites footnoted above