‘There was a point where centres in Africa, Asia and other parts of the world started saying, “hang on, we have lots of parties from this region doing international arbitration but they’re all going to London, Paris, Geneva – we should have some of it here”,’ recalls Herbert Smith Freehills London-based global arbitration partner and president of the London Court of International Arbitration (LCIA), Paula Hodges QC.
Over the past decade we have seen the rise of alternative international arbitration seats, particularly in Asia where Singapore and Hong Kong have steadily grown in popularity. But in 2021, for the first time, Singapore was named the top choice of seat for parties to international arbitration alongside London in a study conducted by Queen Mary University of London and White & Case.
While Singapore has been around the top three for years, this signals a shift in the market. The ranking is decided by participating organisations, which pick up to five preferred seats. Across the study, more than 90 different seats featured from a range of jurisdictions globally, with London and Singapore coming out on top both having been included in 54% of respondents’ top five.
For Singapore, this is an impressive jump from 2018 where London was firmly the top seat selected by 64% of respondents while the city state came third with 39%. In 2015, Singapore came in fourth after London, Paris and Hong Kong, chosen by just 19%.
The Singapore International Arbitration Centre’s (SIAC) data tells a similarly auspicious story. In 2020, SIAC saw 1,080 new cases administered, which was more than double the 479 cases in 2019. This marks a stratospheric 299% increase in five years from 271 new cases in 2015. This growth is more impressive when compared to the LIAC, which administered 407 cases in 2020, up only 18% from the previous year.
So, what is driving this? And what does it mean for London?
Rise of Asia
‘It’s a function of the stability, neutrality and sustainability that Singapore offers, coupled with its geographic proximity to some of the largest economies of the world such as China, India and Southeast Asia,’ says Daryl Chew, who joined Three Crowns from Shearman & Sterling when the arbitration boutique launched its first office in Asia in 2022.
‘The flexibility of arbitration is much more aligned with fast-moving modern businesses than the more formal procedures adopted in the courts.’
Paula Hodges QC, HSF
Three Crowns is one of many firms pursuing opportunities in the city state, with the rise of global powers, foreign investment, infrastructure development and the boom of sectors such as tech in the region, have created an influx in cross-border disputes suited to arbitration.
The belt-and-road initiative is oft-cited as one source of more international arbitration though the extent to which this has come to fruition thus far is challenged by practitioners – disputes are expected further down the line. However, the rise of technology disputes in Asia is undeniable. As a booming
sector in the region, with cross-border contracts and a host of emerging players, arbitration is an obvious choice for tech companies. As Hodges QC notes: ‘The flexibility of arbitration is much more aligned with fast-moving modern businesses than the more formal procedures adopted in the courts.’
The importance of proximity to booming economies in Asia is reflected by the fact that Hong Kong has had similar success as an international arbitration seat over the past decade. In fact, 50% of respondents picked Hong Kong as a preferred seat in the 2021 study. But while parties’ confidence around Hong Kong’s neutrality and political stability has been rocked, particularly following China’s national security law for Hong Kong, which came into force in June 2020, Singapore has continued to demonstrate itself as a reliable base. This disparity is reflected in HKIAC’s data, which shows 514 cases in 2020, up 6% from 483 the previous year. While still impressive, this falls notably behind SIAC’s striking figures.
‘Singapore started by catering for quite local regional disputes but as it became more established, it has cast the net wider and wider. That will happen in other places in Asia too.’
Tomas Furlong, HSF
Further, it is becoming increasingly common for law firms to opt for Singapore as their sole Asia base, as was the case with Three Crown’s recent launch. This can also be seen in The Legal 500’s 2021 APAC guide, which cites 40 recommended law firms, including five new practices, in its Singapore international arbitration rankings, compared to 20 ranked firms in Hong Kong.
Beyond its economic and political stability, the government has intentionally positioned the city state as an attractive seat says HSF Singapore-based partner, Gitta Satryani: ‘It is not an accident and is actually a product of the government’s will to turn Singapore into a legal hub, as well as the external economic factors that have taken place in the last ten years.’
A milestone change was the liberalisation of the legal market to allow foreign law firms to handle arbitration in the city. More recently, Singapore benefited from the legalisation of third-party funding for arbitration in 2017 and the Legal Profession (Amendment) Bill, which passed into law on the 8 February
this year to support the use of conditional fee arrangements (CFAs) and other fee arrangements.
This continues to boost an already attractive environment for international arbitration, says Satryani’s colleague Tomas Furlong: ‘I think it’ll be very good for the future of Singapore; our clients are already reacting to very positively. It’s very strongly embedded in the culture of our clients here in Asia that they would like to see their lawyers taking some risk on cases or at least sharing that risk. It’s not even really a financial point – it’s a cultural point that they want to be working with someone who is in it with them.’
Elsewhere in the region, Beijing and Shenzhen are among the top ten most popular seats in the Queen Mary study, while Malaysia and South Korea are other jurisdictions making a play.
South Korea’s sole arbitral institution, the Korean Commercial Arbitration Board in Seoul, shows promising data, consistently handling over 400 disputes each year with 443 in 2019 and 405 in 2020. The centre also benefited from its consolidation with Seoul International Dispute Resolution Center (SIDRC) – a hearing centre and education facility dedicated to international arbitration that opened in 2013.
Although only 69 (17%) of those arbitration cases handled in 2020 were international in nature, this is like Singapore’s early trajectory, according to Furlong: ‘Singapore started by catering for quite local regional disputes but as it became more established, it has cast the net wider and wider. That will happen in other places in Asia too.’
Emerging seats
This trend is not isolated to Asia, with globalisation also driving the rise of emerging arbitration centres in other regions.
In Africa, so far, no one jurisdiction has yet risen to the fore for arbitration but that does not mean that certain locations are not making a push, says Hodges QC: ‘In Africa, regionalisation is definitely continuing but not at the same pace as we have seen in Singapore. You can understand why – there are many more countries, with more differences and not the same sort of political climate to make it happen.’
Kigali, Lagos and Johannesburg are among the cities vying to become notable arbitration seats while Cairo and Nairobi were among the preferred seats for African disputes in the Queen Mary study. And with the ever-resurfacing promise of an ‘Africa rising’ international trade revolution, opportunities
in the region are plenty.
Dubai is another centre to watch. It had risen in popularity as a seat following the tie up between Dubai International Financial Centre (DIFC) and LCIA in 2015. But after the government of Dubai’s bullish decision to abolish the joint venture became effective on 20 September 2021, it is trying to concentrate institutional arbitration into the Dubai International Arbitration Centre (DIAC).
Elsewhere, in Latin America many jurisdictions have seen an influx of direct foreign investment followed by stalled development projects and regulatory shifts due to the pandemic. Resulting disputes means the prospect of more international arbitration. Although Miami, as an already popular seat for disputes in the region due to geographical proximity, time zone adjacency and volume of Spanish speaking counsel, could be an obvious seat with the opportunity to grow its reputation, local jurisdictions are also ready to compete.
Among them is Panama, which has seen a number arbitration-friendly court and policy decisions in recent years. ‘Panama has the benefit of being centrally located in the region. Infrastructure-wise it is good, and it has a growing and increasingly strong arbitration community. It is very much a seat that adopts the general pro-arbitration policies that folks are looking for,’ says Washington DC-based Foley Hoag partner Kenneth Figueroa, who co-heads the firm’s Latin America practice.
Of course, Brazil already has a vibrant international arbitration community, having imposed somewhat of a monopoly on international disputes arising from domestic projects. Says Figueroa: ‘It is kind of its own universe in all of this. They have done an amazing job of creating this bubble, because of their policy that only a Brazilian seat can be effectively executed in Brazil, so that effectively excludes all other seats.’
While many of these centres are yet to make an impact comparable to Singapore’s, this move towards greater regionalisation would be positive, says Hogan Lovells partner Akima Paul-Lambert: ‘Proximity of justice matters, and it matters a lot particularly looking at cash-strapped individuals or cash-strapped states in a dispute. If you’re a Caribbean government having to come to London or go to Washington to get a dispute resolved, it is not just expensive, but probably culturally dissonant. It will add a much-needed dimension to the way in which disputes are resolved and hopefully new
seats in new jurisdictions will encourage different cultural approaches which altogether will strengthen the arbitration offering.’
Figueroa echoes this sentiment, highlighting that the ability to tailor international arbitration – often touted as a main benefit of arbitration over litigation – is only enhanced by greater strategic discretion as to which locations might benefit a case. ‘It gives users more options and it increases the responsibility of parties and their lawyers to really analyse where they’re going, and why,’ he says. ‘ It’s not just an issue of geographic convenience, but really an analysis of the domestic law and how that will impact the particular case.’
‘Proximity of justice matters, and it matters a lot particularly looking at cash-strapped individuals or cash-strapped states in a dispute.’
Akima Paul-Lambert, Hogan Lovells
However, as we have seen with Singapore and Hong Kong, growing an internationally accepted centre is no easy feat, stresses Satryani: ‘Growing a legal hub requires an entire ecosystem. You also need supportive courts, because they are the place where awards get scrutinised and arbitrator appointments are challenged.’
Further, as political and economic instability surges globally, parties will increasingly prioritise the likelihood of constancy, says Chew: ‘Amid all the volatility in the world, clients place an increasing premium on stability and neutrality because it facilitates certainty and that’s critical for business planning. Especially in the resolution of cross-border disputes.’
London’s falling?
With its perceived reliability, impressive track record and respected courts on its side, every arbitration practitioner we spoke to agreed that London will remain among the top choices for the foreseeable future.
London’s international arbitration market has itself made impressive strides. The LCIA caseload continues to mount and the City is still regularly nominated as the preferred seat for disputes not associated with London or even Europe.
As a financial services hub, an increase in banking and finance disputes going to arbitration is another important development, accounting for 20% of LCIA cases in 2020 and 32% in 2019. It is its third most active sector behind energy and resources and transport and commodities, which make up 26% and 22% of cases respectively.
However, the UK is not as nimble as Singapore in updating and innovating around international arbitration, notes Hodges QC: ‘When Singapore decides to do something, it does it and everyone gets behind it. Being quite a small country where the government is very influential, you can get everybody rowing in the same direction – that’s much more difficult somewhere like London.’
Further, UK law firms have been notoriously slow to utilise alternative fee arrangements, such as CFAs. If this is something that their Singaporean counterparts can quickly master, this could prove to be an attractive proposition, particularly for cash-strapped clients or those looking to see their law firms take on risk.
But credit where credit is due, the UK legal market has proved over and again that it is able – even if it can be a little slower. In November 2021, the Law Commission announced its intention to review the UK’s principal legislation governing arbitration (Arbitration Act 1996) ‘to ensure that the UK remains at the forefront of international dispute resolution’. Areas touted for possible alterations include the power to summarily dismiss unmeritorious claims, procedures for jurisdictional award challenges and the availability of appeals on points of law.
But Hodges QC asserts that such amendments are not a necessity to keep up with other seats: ‘I don’t think we need to keep up with anyone else. I don’t think it needs reforming but of course, there’s always things that you can do better. Singapore amends its rules on an annual basis, which I don’t think is a good thing because parties need certainty.’
Manish Aggarwal, Three Crowns
Chew disagrees, proposing that constant review could be key to keep up with parties’ commercial objectives: ‘A jurisdiction has to constantly and relentlessly innovate and ensure that it’s creating the right environment for parties to arbitrate and be able to make use of the right range of tools to meet their commercial objectives.’
Ultimately this diversity of opinion itself shows the value of diversity of seat choice. For financial institutions, for example, which may be seeking the certainty and a traditional approach, London’s more conservative style might suit. Meanwhile neophiles – for example those in the tech space – may want to opt for Singapore. The much-commended flexibility of arbitration should offer this choice.
But despite London’s practitioners largely sharing this optimistic outlook, Singapore’s quick ascent shows that the City should not take its lofty position for granted. After all, according to Furlong, Singapore’s upward trajectory is only likely to continue: ‘I don’t think we have seen arbitration peak in Singapore yet by any measure. All factors that have led to growth over the last five or 10 years are still very much there and will still generate further growth.’ LB