The Draft SIAC Investment Arbitration Rules: Key Themes & Innovations

By Manu Misra, Doctoral Candidate at Bocconi University, Milan

1. Introduction

According to the 2015 International Arbitration Survey conducted by the QMUL School of International Arbitration, the worst characteristics of international arbitration include cost, delay and inefficiency. On 1 February 2016, the Singapore International Arbitration Centre (‘SIAC’) introduced a draft set of bespoke rules (‘the SIAC Rules’) for investment arbitration, the final version of which are set to be released later this year following an extended public consultation process. The SIAC Rules, originally drafted by the SIAC’s Rule-Revision Subcommittee on Investment Arbitration, contain a number of innovations which seek to address some of the current criticisms of the investment arbitration system such as inefficiency and inadequacy of rules relating to third-party funding and amicus curiae submissions.

2.1. Efficiency

Investment arbitration proceedings are often protracted due to inordinate delays that occur during the constitution of the arbitral tribunal. In RSM Production Corp. v. St. Lucia ICSID Case No. ARB/12/10 for example, the constitution phase of the ICSID tribunal was concluded after 470 days.  The SIAC rules seek to prevent such delays by introducing a strict time-limit of 28 days for the parties to agree on the appointment of a sole arbitrator or to nominate their respective arbitrators for a three-member panel.  In either case, if the 28-day deadline is not met, the SIAC Court is obligated to appoint the sole arbitrator or the arbitrator on behalf of the delaying party.  The SIAC Court will also then appoint the presiding arbitrator, unless the parties agree otherwise.  Such time-limits would be a significant improvement in comparison to Article 38 of the ICSID Convention, which allows 90 days to pass before empowering the chairman, at the request of either party, to appoint the arbitrator(s) not yet appointed.

It is well known that recalcitrant parties sometimes challenge an arbitrator’s appointment as a delay tactic. The SIAC Rules address this concern by prescribing strict time-frames for any objection.  Parties may only file their notice within 14 days of becoming aware of the circumstances that give rise to the challenge.  In addition, the challenge does not operate to suspend proceedings automatically unless ordered by the SIAC Registrar.  Also, unlike the ICSID Rules, it is the SIAC Court that rules on the challenge and not the remaining members of the arbitral tribunal.

A particularly notable feature of the SIAC Rules is that they provide for the appointment of an emergency arbitrator, if agreed so by both parties. Besides the Stockholm Chamber of Commerce (‘SCC’), no other institutional rules currently allow for such a possibility. The International Chamber of Commerce 2012 Rules (the ‘ICC Rules’) do provide for an emergency procedure but investment treaty disputes are implicitly excluded by Article 29(5).  Although offering claimant investors the ability to apply for expedited interim relief prior to the constitution of the tribunal is commendable, it remains to be seen precisely how an emergency procedure may operate without undermining the mandatory cooling-off periods that are commonly present in investment treaties.  That said, recent decisions of emergency arbitrators in cases such as TSIKinvest LLC v. Moldova SCC No. EA 2014/053 and Evrobalt LLC v. Moldova SCC No. EA 2016/082 have not considered cooling-off periods as being jurisdictional barriers.  In any event, given the additional resources required and lack of obvious procedural benefits, it may be rare to expect a respondent state to consent to an emergency procedure.

A further way in which the SIAC Rules may improve the efficiency of investment arbitration proceedings is by restricting the time period within which parties may file an application for the early dismissal of a claim to no later than 30 days after the constitution of the tribunal.  This restricted time-limit may help filter out frivolous and unmeritorious claims.  Although the same time limit is already present in Rule 41(5) of the ICSID Rules, the SIAC Rules provide greater clarity on the matter by expanding upon and specifying the grounds for dismissal.

Lastly, the SIAC Rules provide for a maximum of 30 days for the tribunal to declare the proceedings closed after the final hearing on the merits and a further time limit of 45 days for issuing a draft award from the date of such closure.  By contrast, the ICSID Rules do not specify any time limits for the closure of proceedings, instead granting the tribunal full discretion on the matter.

2.2 Third-Party Funding

Some tribunals, including the ICSID tribunal in Muhammet Çap & Sehil v. Turkmenistan ICSID Case No. ARB/12/6, have ordered the disclosure of a claimant’s third-party funding arrangement by relying upon their inherent powers.  However, it is not yet settled whether the inherent powers of tribunals extends to this issue.  The SIAC Rules overcome this ambiguity by expressly granting tribunals the authority to require the disclosure of a third party funder’s involvement, in order to inquire into any potential conflict of interest.  The exercise of this authority by the tribunal has deliberately been left flexible and may extend to inquiring into not just the existence a third-party funder, but also details of third-party funding arrangement including the identity of the funder, the funder’s interest in the outcome of the proceedings and whether or not the funder has committed to undertake adverse costs liability.

Furthermore, the SIAC Rules are unique in expressly allowing the tribunal to take into account third-party funding arrangements when apportioning the costs of the arbitration and, where appropriate, make order in the award that all or a part of the legal or other costs of a party be paid by a third-party funder.  In this regard, the SIAC Rules may serve to deter the funding of frivolous claims and dilute the perception held by some respondent states that a claimant’s use of third-party funding leads to inherently unfair cost allocations.

2.3 Submissions by Non-Disputing Parties

It is now commonly accepted that investment disputes may influence the regulatory capacity of states and thereby implicate matters of public interest.  In light of this, institutional rules for investment arbitration are increasingly allowing for greater public participation to ensure that a diverse set of viewpoints are considered by a tribunal, where considered appropriate.  To that end, the SIAC Rules also permit a tribunal the discretion to allow a non-disputing party the right to make submissions, without requiring the disputing party’s consent.

The SIAC Rules provide that, in exercising its discretion, the tribunal must consider the extent to which the non-disputing party submissions will bring a different perspective to the legal or factual matters that are relevant to dispute and whether the non-disputing party has a “sufficient interest” in the proceedings (Article 28(3)(c) of the SIAC Rules).  In relation to the latter, i.e. standing, the SIAC Rules set the threshold lower than that found under the ICSID or UNCITRAL Transparency Rules which instead require that the intervening party have a “significant interest” (see e.g. Rule 37(2)(c) of the ICSID Arbitration Rules).  As a result, there is an increased likelihood under the SIAC Rules that a tribunal may permit an amicus curiae submission.

2.4 Confidentiality

The SIAC Rules expressly direct a tribunal to take appropriate measures to safeguard the confidentiality of information related to the proceedings.  Specifically, the SIAC Rules provide that the SIAC may only publish orders, directions and awards after obtaining the express consent of all parties and that the tribunal shall at all times treat all matters relating to the proceedings and the award as confidential.  The default position is that the SIAC may publish limited information regarding the dispute, which may include the identity of the parties, the identity of the parties’ counsel, the tribunal, the date of commencement of the arbitration, and whether the proceedings are on-going or have been terminated.  However, the parties may agree otherwise and elect to maintain absolute confidentiality.  The SIAC Rules are therefore discernibly less far-reaching than the transparency standards of recent reforms such as the UNCITRAL Rules on Transparency and the rules pertaining to the EU’s proposed Investment Court

3. Conclusion

By significantly enhancing efficiency and by correcting party incentives to delay, the SIAC Rules are designed to address some of the main criticisms currently levelled at investment arbitration.  To that extent, the SIAC Rules may be considered pioneering.  When viewed together with Singapore’s status as a regional hub for international arbitration, the SIAC Rules may prove to be a viable alternative for states to include within their investment treaties.

However, the coexistence of the confidentiality provisions with the rules allowing for amicus curiae submissions is uncertain, given how, if the parties so agree, an investment dispute may, in effect, be kept entirely confidential, thereby eliminating any prospect of participation by a non-disputing party who would be left completely unaware of the dispute, despite holding a sufficient interest in the proceedings.  The ultimate success of the SIAC Rules may therefore, in part, depend on how states perceive this issue and whether further adjustments are made to accommodate their response.