SIAC Model Arbitration Clause: What You Need To Know

Written by Team Farallon

  • Farallon Law Corporation
  • June 26, 2023

The Singapore International Arbitration Centre (SIAC) has established itself as a prominent player in the field of arbitration institutions. It is ranked as the most popular seat in Asia and the second most popular globally, according to a 2021 survey by Queen Mary University of London. SIAC’s caseload has also been consistently increasing, with 469 new cases administered in 2021, marking the third-highest in its history.

When parties enter into contracts, they have the option to agree to adopt SIAC Arbitration Rules to resolve their disputes, which enable them to resolve disputes through arbitration under these rules. The inclusion of an arbitration clause in the contract plays a crucial role in streamlining the dispute resolution process and reducing time and costs. To ensure effectiveness, it is important to draft an arbitration clause using clear and straightforward language, avoiding any potential ambiguity. The SIAC provides recommendations for a standardized arbitration clause suitable for international contracts, tailored to meet the specific needs of the parties involved.

In January 2023, the Singapore International Commercial Court (SICC) introduced the SICC Model Jurisdiction Clause, which allows parties to designate the SICC as the court with supervisory jurisdiction over their international arbitrations. In response, the SIAC has revised its widely used Model Arbitration Clause to encourage the inclusion of the SICC Model Jurisdiction Clause in arbitration agreements.

With the revised Model Clause, parties now have the explicit option to choose a seat of arbitration outside of Singapore. This update provides parties with increased certainty and flexibility, enabling them to select a seat that best suits their requirements, even if it has no direct connection to Singapore, while still benefiting from the services and rules of SIAC.

SIAC Model Clause:

 In drawing up international contracts, we recommend that parties include the following arbitration clause:

 “Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity, or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

 The seat of the arbitration shall be [Singapore].[1]

 The Tribunal shall consist of _________________[2] arbitrator(s).

 The language of the arbitration shall be ________________.

[1] Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace “[Singapore]” with the city and country of choice (e.g., “[City, Country]”).

[2] State an odd number. Either state one, or state three.

(In respect of any court proceedings in Singapore commenced under the International Arbitration Act 1994 in relation to the arbitration, the parties agree (a) to commence such proceedings before the Singapore International Commercial Court (the “SICC”); and (b) in any event, that such proceedings shall be heard and adjudicated by the SICC.) [3]

 Parties should also include an applicable law clause. The following is recommended:

 This contract is governed by the laws of _________________.[4]

[3] The inclusion of this sentence is recommended if the arbitration commenced to resolve the dispute will be/is an international commercial arbitration, and Singapore is chosen as the seat of arbitration.

[4] State the country or jurisdiction.

Some Key Considerations of the Model Clause:

First, the parties have the flexibility to choose the seat of arbitration, which does not necessarily have to be in Singapore. Selecting the seat involves considering the mandatory laws applicable at the chosen jurisdiction, as well as potential proceedings related to the annulment of the award. Parties may also opt for hearings to be conducted in a different city for the convenience of the arbitral tribunal and the parties involved.

Second, the choice between one or three arbitrators depends on the complexity and value of the dispute. Opting for a sole arbitrator is suitable for low-value disputes, while complex cases with substantial amounts at stake may benefit from a three-member tribunal. If the SIAC Model Clause does not specify the number of arbitrators, the default rule is the appointment of a sole arbitrator, unless the Registrar deems the dispute to require a panel of three arbitrators.

Third, the language of arbitration is the same as the language used in the contract. However, if the contract involves multiple languages, parties may consider allowing evidence to be presented in different languages without the need for translations, thus reducing unnecessary translation costs. It is also possible to have two languages of arbitration, but this may result in additional expenses for interpreters and translations.

And finally, selecting the law that governs the contract allows parties to determine the rules that will apply to their disputes. While parties are not obligated to choose a state law and may refer to international conventions like the United Nations Convention on Contracts for the International Sale of Goods, it is advisable to elect an applicable state law as international conventions may not address all contractual issues.

Types of Arbitration Clauses:

Unilateral Clauses

 A unilateral arbitration clause allows one or more parties in a contract to choose arbitration when a dispute arises. If a properly drafted clause clearly shows the parties’ intention to allow unilateral arbitration, it is enforceable in Singapore.

Multi-Tiered Dispute Resolution Clauses

A multi-tiered dispute resolution clause establishes a series of steps that parties must follow to resolve a dispute before resorting to arbitration. These steps can include mediation, negotiation, or conciliation. For instance, parties may agree to engage in working level negotiations, executive meetings, or mediation, only initiating arbitration if all prior dispute resolution tiers prove unsuccessful. In the case of International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd [2014] 1 SLR 130, the Court of Appeal ruled that if negotiating or mediating steps are prerequisites to arbitration, and these steps are not undertaken by the parties, a tribunal lacks jurisdiction to determine the dispute. Consequently, the parties must fulfil these preliminary steps in their attempt to resolve the dispute before commencing arbitration.

Model and Bespoke Arbitration Clauses

While not obligatory, incorporating model clause language in contracts aims to address the uncertainties and procedural delays that can arise from defective arbitration agreements. The model clause language either explicitly references the essential elements of an arbitration clause or provides a mechanism for determining those elements.

However, it is observed that contract drafters do not always adopt the model clause language, and even when they do, they often make various amendments. In certain cases, drafters of significant international contracts may prefer to use customized arbitration clauses, some of which can be quite lengthy.

In the context of international joint ventures involving multiple contracts among diverse parties or large construction projects with numerous contractors and subcontractors, legal counsel may opt to draft a multi-party arbitration clause. This clause allows proceedings to be initiated against all or some of the parties involved in the project, irrespective of the specific parties in the ongoing contractual dispute. However, it should be noted that the more complex the clause, the higher the likelihood of potential interpretation issues. Therefore, adopting a model clause generally provides a more reliable alternative.

Defective Arbitration Clauses

The determination of whether a clause constitutes an arbitration agreement or if a defective clause can be enforceable has resulted in significant litigation. Defects often arise from references to non-existent arbitral institutions, non-existent rules, or organizations unrelated to arbitration. These defective or “pathological” arbitration clauses are frequently encountered in practice.

In Singapore, there is a judicial inclination to uphold parties’ intentions to resolve their disputes through arbitration. The case of Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR (R) 936 (“Insigma”) clarified this stance. The Singapore Court of Appeal held that if the parties clearly express their intention to settle a dispute through arbitration, that intention should be given effect, even if certain aspects of the agreement are unclear, inconsistent, incomplete, or lacking in certain details. As long as the arbitration can proceed without prejudicing the rights of either party and aligns with the parties’ expectations, the courts will uphold such intentions.

In Re Shanghai Xinan Screenwall Building & Decoration Co, Ltd [2022] 5 SLR 393, the Singapore High Court held that a defective arbitration clause, referring to a non-existent institution, was valid and the resulting award from the tribunal was binding. Despite the parties’ agreement to submit disputes to the non-existent “China International Arbitration Center,” the claimant proceeded with arbitration under the CIETAC Arbitration Rules 2015 and obtained an award when the respondent did not participate. The respondent later sought to set aside the order enforcing the CIETAC award.

The High Court dismissed the application, finding that rational commercial parties would not deliberately choose a non-existent institution. The court examined the arbitration agreements and determined that the parties intended CIETAC to be the administering institution based on the use of “China,” “International,” and “Arbitration” in CIETAC’s name. The court also considered that among the five arbitral institutions in China, only the China Maritime Arbitration Commission qualified “China” with “Maritime.” With the parties’ intent established, the court upheld the binding nature of the tribunal’s award.

In conclusion, the SIAC Model Clause offers parties a well-defined framework for incorporating arbitration into their contracts. By adopting this clause, parties can establish a clear mechanism for resolving disputes, benefiting from the efficient and effective arbitration services provided by SIAC. Through careful consideration of the seat of arbitration, number of arbitrators, language of arbitration, and governing law, parties can create a robust and tailored dispute resolution process.

Legal Assistance in Drafting or Interpreting Arbitration Clauses

Drafting arbitration clauses can be challenging especially if this is the first time you are doing it. The consequences of a defective or pathological arbitration clause can be quite serious as it would result in the inability to resolve the dispute through arbitration, and would result in a lot of loss of time and expense to resolve through the domestic courts in one or more jurisdictions. If you require legal assistance in drafting or interpreting arbitration clauses, please do not hesitate to contact us.

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