With its transparent, speedy and cost-effective procedures, Singapore has emerged as a global arbitration hub, leaving behind London, Prague and other international mediation centres, writes BK Jha
During a global economic slowdown or a phase characterised by the US-China trade war, any big or small business is desperate to avoid litigation in their financial disputes. Hence, when a quarrel erupted recently over a partnership between a Singapore-based start-up company and its sourcing partner, a small firm based in Bangkok, the Asian business communitykept a close eye on developments related to arbitration.
On one side of the tussle was the start-up, Zilingo Pte Ltd, an online fashion marketplaceowned by two young Indian entrepreneurs, known for their ability to raise funds from venture capitalists worth USD 265 million this year. On the other was the smallerfirm in Bangkok, Misty Interactive Studio, an electronic goods supplier company, also owned by Indian entrepreneurs. These parties are seekinga conciliatory solution to their differences in Singapore, the nation-city which has emerged as a global hub for resolving commercial disputes, leaving behind London, Prague and other European mediation centres.
Singapore International Arbitration Centre (SIAC), a not-for-profit organisation located at the city’s Maxwell Chambers,is now a favourite site for Asian companies to settle any disputes which surface due to breaches of contract or trust, unpaid bills, and so on. These are on the rise as a result of the sluggish global economy. In such a hostile business climate, legal action consumes too much time and money, and arbitration has proved typically a quicker and cheaper option.
Over the years, a large number of cases have been brought to SIAC’s notice, with a 300 per cent rise in the past 15 years. Singapore has been attracting companies from across the world seeking dispute resolution. The United States tops the list, followed by China, thenIndia, as well as South Koreaand the British Virgin Islands.Russian firms, too, are increasingly looking east- rather than westwards for this service.
The Singapore International Arbitration Centre has earned significant credibility for its provision of neutral, transparent, cost-effective and quick services to the global business community. A senior official at the centre, who recently visited India, reportedly said that the SIAC handled 222 new cases in 2014, with the total sum in dispute amounting to SG$ 5.04 billion. Over 15 per cent of those involved at least one Indian party. The Centre provided arbitration services to Indian firms for disputes of SG$ 652.3 million. Data available at the SIAC official website reveals that, as on March 31, 2017, the Centre had nearly 650 active caseloads.
One-third of the total cases are trade-related disputes, while other categories include commercial, maritime/shipping, and corporate and construction disputes. Due to its ‘Global Business Hub’ status, Singapore positively shines and it is now surely the most sought after location, not only toraise international funding, but also to conduct arbitration.
A case in point is Zilingo Pte Ltd, whose row with Misty Interactive Studiogained importance, as this is a ‘David versus Goliath’ style struggle of a small business pitted against a giant tech platform.
Even though Zilingo Pte Ltd got a low rating from international rating agency Dun & Bradstreet (D&B), the company managed to attract a lot of funding from lender giants like Siquoua and Temasek. In its report of October 2018, D&B pointed out two major concerns with Zilingo:on an overall assessment of the company there were potential payment concerns and, based on financial strength, the rating agency reported low ability to pay obligations.
Under the contract between the two companies, they agreed to arbitration of any disputes arising between them during the currency and termination of the said agreement by a sole arbitrator based at Singapore under the Arbitration Rules of the SIAC. The world of industry is keeping a close eye on the outcome, as it would have a big impact on the sentiments of small businesses in these times of global economic slowdown.
Singapore has not only been contributing significantly to the Asian economy; it is also challenging established arbitrationcentres such as London, Paris, Hong Kong, Geneva and Stockholm. More than 40 per cent of cases have no connection with Singapore, which shows the growing use of Singaporean law to underpin business contracts in Asia.
An added advantage is that English is widely spoken in Singapore which is, along with India and Hong Kong, one of the few common law jurisdictions in Asia. These two features also make Singapore an attractive international arbitration centre.
For such aggressive disputes as that between Zilingo and its partner, Singapore also offers mediation and conciliation services. In arbitration, the arbitrator goes through evidence and arguments of the concerned parties and gives a decision, while mediation is a process of negotiation involving the help of a neutral third party, and a resolution is not complete unless all parties give their consent.The parties attempt mediation after they start arbitration proceedings. Settled disputes are classified as a consent award, which can be enforced in more than 150 countries. In case a consensus is not arrived at, the parties continue to arbitration.
Facing hard times, especially due to the international trade war between the US and China, smaller companies are finding it difficult to cope up with non-payment of bills, so the work of the SIAC will continue to have wider implications for business sentiments and practices in the region.
Those firms seeking solace in Singapore just need to keep their figure crossed.