Redefining lead: Singapore and London as the globally preferred seats of arbitrationBy Irene Mira
Comparison. /kəmˈparɪs(ə)n/. According to Google’s English dictionary by Oxford Languages, comparison means a consideration or estimate of the similarities or dissimilarities between two things or people.
Comparison is what we inevitably do almost daily. Even more so in business and legal industries where competition is tight and thriving.
Although this article begins with the word ‘comparison’, the message is not to compare Singapore and London in the context of international arbitration. Rather, the article aims to provide insights into how the two countries successfully leverage their economic activities and subsequently link international business and dispute resolution (particularly arbitration) into a working ecosystem.
What bridges businesses with arbitration? What does “seat of arbitration” entail? Keep these questions in mind as you read this article. Let us delve a bit further and consider these points: a) Businesses and arbitration do not always operate in silos; b) Businesses and arbitration give legitimacy to each other in different ways.
Business transactions always carry risks of disputes. This is precisely where arbitration comes in. To illustrate further, imagine Company A which operates in Malaysia enters into a sale and purchase agreement (“SPA”) with Company B which operates in England. The SPA has dispute resolution clauses which record the consent of both Companies to resolve any dispute that may arise out of the SPA by way of arbitration seated in Singapore.
Here, both Companies benefit from having an agreement which contains an arbitration clause. This is because they will be able to pursue their claims in an appropriate legal forum with rules and procedures.
Eventually, the winning party will be able to recover all or some of their losses through a legally binding decision issued by a panel of third-party neutral(s) and enforceable by law before the Singapore Courts, hence the crucial role of the seat of arbitration.
This illustration provides more insights into the initial two questions: a) While businesses and arbitration belong to two different industries and have their trends and markets, one cannot function without the other. As such, there are many opportunities where the two will work in intertwine; b) Arbitration is not just a mere dispute resolution mechanism. It has its legal framework which is internationally implemented in practice.
Arbitration is also a business as it promotes and supports the flow of international investment. When a country has a legal framework of arbitration, it signals that it is open for business and capable of providing security to economic actors by way of a confidential and neutral dispute resolution process that is void of their home country jurisdictions and is a legally enforceable decision.
Singapore and London as business hubs and preferred seats of arbitration
Historically, London has always been at the forefront of the world’s most preferred seats of arbitration. If we consider just the last five (5) years, since 2018 the leading and authoritative Queen Mary University of London Survey on International Arbitration (“Survey”) consistently shows London ranked first in the top five most preferred seats of arbitration.
The other four popular seats are usually Paris, Singapore, Hong Kong, and Geneva. This is not surprising as London enjoys the United Kingdom’s influence in international trade and investment as well as centuries of legal scholarship which spreads to and is adopted in many countries’ legal systems including that of Singapore. However, in 2021, Singapore for the first time was ranked equally with London and top of the 2021 Survey as one of the most preferred seats of arbitration. It was the only jurisdiction in Asia Pacific to get the top spot.
So, what may explain such a catapult for Singapore?
Generally, Singapore’s success in international arbitration is attributed to a combination of support from the Government, sophisticated Judiciary and arbitration law, and the country’s strategic placement as an economic powerhouse. While the first two factors are vital, Singapore’s economic directives are much applauded for and yet not too often discussed in the context of legitimising international arbitration.
Almost 40% of the global Foreign Direct Investments (FDI) inflows were into Asia in 2021. It bears mention that in 2022, foreign direct investment inflows (“FDI”) in developing Asia account for more than half of the global FDI, and ASEAN Member States and India have pivotal roles as major recipients of FDI. As a free market economy, Singapore is a business-friendly hub with a transparent tax regime and a friendly regulatory environment.
The country now houses the global headquarters of multinational corporations and is a fertile ground for startups. All these by no means are achievable without Singapore’s commitment as a global business hub but also as an international dispute resolution hub. International businesses in Singapore may rest assured that the country continuously secures innovation, economic growth, and access to the rule of law in equal measures.
Whilst the United Kingdom attempts to manage recession risks to speed up its economic recovery post the COVID-19 pandemic, the country’s arbitration landscape does not seem to bear the brunt of the economic crisis. In September 2023, the United Kingdom Law Commission published recommendations for the reforms of the Arbitration Act 1996 to ensure the United Kingdom remains a leader in international arbitration and that London stays as a leading international seat of arbitration.
Aware of Singapore’s reputation as an equally preferred seat of arbitration, the move demonstrated the country’s intention to have an up-to-date and dynamic arbitration law to maintain trust from business and legal communities and to stay within such an ecosystem.
Today, more than ever, business and legal professionals have options and flexibility in determining the course of dispute resolution. But, in doing so, they should also consider having their disputes administered by a reputable arbitral institution - one with a proven track record of providing such services over the last one hundred years and a seat of arbitration most suitable for the circumstances of their disputes be it Singapore, London, or elsewhere.