Choice of Court Agreements Bill

Order for Second Reading read.

2.55 pm

The Senior Minister of State for Law (Ms Indranee Rajah): Mdm Speaker, this is the last Bill on the last day of a long and intensive Parliamentary session. So, I know how much Members will be looking forward eagerly to this Bill with keen interest and the Ministry of Law will endeavour not to disappoint.

Mdm Speaker, on behalf of the Minister, I beg to move, "That the Bill be now read a Second time".

The Choice of Court Agreements Bill seeks to give effect to the Convention on Choice of Court Agreements done at The Hague on 30 June 2005, which establishes an international legal regime for upholding exclusive choice of court agreements in international civil or commercial cases and governs the recognition and enforcement of judgments amongst parties to the Convention.

Globalisation has led to unprecedented growth in international trade and investment. This has seen a corresponding increase in cross-border disputes, and a heightened demand for cross-border dispute resolution services. Current economic conditions notwithstanding, in the long term, international trade and, consequently, the need for international dispute resolution, are expected to grow. The establishment of the ASEAN Economic Community in 2015, which allows for freer movement of goods, services, investments, skilled labour and capital in the region, will add to this demand.

Singapore is well-placed to meet this increased demand. Today, we already offer a full suite of international dispute resolution services.

In arbitration, we are one of the most preferred seats of arbitration in the world. The Singapore International Arbitration Centre (SIAC) had a record year in 2015, with 271 new cases involving $6.23 billion in disputes.

For litigation, we recently established the Singapore International Commercial Court (SICC) to meet demand for commercial dispute resolution in the region and internationally.

And for mediation, we established the Singapore International Mediation Centre to provide mediation services for international disputes.

In the recently concluded Committee of Supply debates, the Minister for Law informed Members that the Government will create new frameworks to help our lawyers seize opportunities. The Convention regime, which today's Bill seeks to implement, is one such framework.

This Bill will boost Singapore's position as a dispute resolution hub in Asia by enhancing the international enforceability of Singapore Court judgments. Greater enforceability will make our Courts a more attractive forum for determining cross-border disputes. This, in turn, will generate more opportunities for our legal industry.

The implementation of the Convention also demonstrates Singapore's commitment to be a global player in facilitating international commerce. Drawing more complex cross-border commercial cases to our Courts will allow us to develop and shape commercial law, as well as international jurisprudence, relating to the Convention.

Let me, first, explain the broad framework of the Convention which is being implemented by this Bill.

Parties to commercial contracts commonly specify where disputes arising under the contract are to be resolved. If the parties specify that disputes arising from the contract are to be resolved in one jurisdiction to the exclusion of other jurisdictions, that is known as an exclusive choice of court agreement. If they specify one jurisdiction, but do not exclude other jurisdictions, then that is known as a non-exclusive choice of court agreement.

When choosing the jurisdiction or forum to resolve their disputes, parties typically consider several factors, including whether the forum:

(a) provides certainty as to how the law is to be interpreted and applied;

(b) is a trusted forum, that is, neutral and not corrupt;

(c) is competent and efficient in resolving disputes; and

whether the judgment or award obtained can be easily enforced domestically and overseas. This is particularly relevant where parties' assets are located in another jurisdiction.

Arbitral awards have wide enforceability because of the New York Convention.

In contrast, court judgments are generally more difficult to enforce in other jurisdictions, especially if the two jurisdictions concerned do not have reciprocal arrangements or treaties on the enforcement of judgments.

In common law jurisdictions, for example, a party would, generally, have to commence fresh proceedings in that other jurisdiction and sue on the court judgment as a debt.

This incurs additional time and costs. It can also be open to more challenges, especially if the defendant disputes that the original court had jurisdiction to make the judgment sought to be enforced.

The Convention provides greater certainty on where disputes between parties will be litigated and where judgments can be enforced. And it does so in two ways.

First, it establishes an international legal regime for upholding exclusive choice of court agreements in international civil or commercial cases.

Second, it governs the recognition and enforcement of judgments amongst courts of the contracting states. In this regard, it does for court judgments of contracting states what the New York Convention does for arbitral awards.

Under the convention regime, parties will have greater assurance that: the court chosen by them under an exclusive choice of court agreement will hear their dispute and not some other courts; and the courts of contracting states will enforce the judgment of the chosen court.

This gives greater certainty which will, in turn, enable parties to better manage the risks involved in cross-border business and promote a more conducive legal environment for international trade investment.

Singapore signed the Convention on 25 March 2015. The Convention came into force on 1 October 2015. There are presently 28 states which are parties to the Convention.

It is an opportune time for Singapore to implement and ratify the Convention. Doing so will be beneficial to our position as a dispute resolution hub. First, it will enhance the enforceability of Singapore judgments in other jurisdictions. This includes judgments from SICC, which was established as a specialist court to hear international commercial disputes, including disputes which have no substantial connection to Singapore. Second, the ability to enforce our judgments more widely will be an added incentive for parties to choose Singapore courts, including SICC, in exclusive choice of court agreements.

We have consulted various stakeholders, such as the Law Society, foreign law firms, academics and the Judiciary. They support the signing of the Convention as they recognise the benefit that will result from judgments of the Singapore Courts being more easily enforced or recognised in foreign jurisdictions.

I will now highlight some important features of the Bill.

In line with the Convention, the Bill only applies to international civil or commercial matters. It does not apply to exclusive choice of court agreements in personal, family or consumer matters. It would not, therefore, apply to matrimonial matters, bankruptcy, insolvency, employment or personal injury.

Part 2 of the Bill deals with the jurisdiction of the Singapore Courts in cases of an exclusive choice of court agreement that falls within the scope of the Bill.

Briefly, if a Singapore Court is the chosen Court under an exclusive choice of court agreement, the Singapore Court will have the jurisdiction to decide the dispute at hand. The Singapore Court, generally, cannot decline jurisdiction on the ground that the dispute should be decided by a court of another state. Conversely, if the Singapore Court is not the chosen court, the Singapore Court must, generally, stay or dismiss the matter.

Clause 2(2) of the Bill makes it clear that references to the High Court in an exclusive choice of court agreement to which the Convention applies is to be construed as including SICC, unless a contrary intention appears in the agreement.

This addresses a situation where an action which is commenced in the High Court pursuant to an exclusive choice of court agreement specifying the Singapore High Court as the forum is subsequently transferred to SICC. Clause 2(2) makes it clear that the High Court includes SICC and removes any doubt that the intention of this Bill is for the Convention regime to apply to SICC, notwithstanding the transfer.

Part 3 of the Bill relates to the recognition and enforcement of foreign judgments. Generally, where a foreign judgment is valid and enforceable in the state in which the judgment originated, it will be recognised and enforced in Singapore. However, the Convention provides certain limited grounds on which the Singapore Courts must or may refuse to recognise or enforce such foreign judgments.

Examples of where a foreign judgment will not be recognised or enforced include where the foreign judgment was obtained by fraud or where recognition and enforcement of the judgment would be against Singapore's public policy. In such instances, the Bill makes it mandatory for the Singapore Courts to refuse recognition and enforcement. The Bill also provides certain discretionary grounds for refusal.

Declarations can be made under the Convention to exclude or modify its application to specific matters; to allow the Courts to refuse to hear disputes or decline to recognise and enforce foreign judgments in certain limited circumstances; or to extend the Convention obligations to non-exclusive choice of court agreements. Singapore is currently not making any declarations, but the Bill provides the Minister with the power to make regulations to incorporate the effect of any such future declarations.

The Bill only applies vis-à-vis other contracting states to the Convention. It would not apply where the court chosen under the exclusive choice of court agreement is a court of a non-contracting state. In such cases, the current law applicable to enforcing such agreements, as well as the recognition and enforcement of foreign judgments, would apply.

Finally, in line with the Convention, the intention of the Bill is that when it is applied, regard shall be had to its international character and the need to promote uniformity in its application.

In conclusion, Mdm Speaker, this Bill will give effect to the Convention and allow Singapore to ratify it. Such implementation and ratification will enhance the overseas enforceability of judgments of our Courts, further incentivise parties to litigate their disputes here, and demonstrate our commitment to contribute towards facilitating international commerce. Mdm Speaker, I beg to move.

Question proposed.

3.06 pm

Mr Dennis Tan Lip Fong (Non-Constituency Member): Madam, I declare my interest as a lawyer with a practice involving international commercial work. I rise in support of the Choice of Court Agreements Bill. On 25 March 2015, Singapore signed the Hague Convention on Choice of Court Agreements of 2005. For the rest of my speech, I shall refer this as the Convention of Hague or the Hague Convention.

Singapore joined the European Union (EU), the United States (US) and Mexico as the current states who have signed up to the Convention. The present Bill is being passed to ratify the Convention and bring it into law in Singapore.

Choice of court agreements are clauses in commercial contracts where parties to a contract nominate the courts of a particular country to decide on any legal disputes that may arise from the contract. They are often known as jurisdiction clauses.

The Convention seeks to provide uniformity in the way the courts of contracting states should decide on choice of court agreements in contracts. In particular, it provides specific rules in the way the courts of contracting states can decide on how they should rule on exclusive choice of court agreements.

The Convention also seeks to provide uniformity in the way the courts of contracting states will decide on the recognition and enforcement of foreign civil judgment of fellow contracting states. Presently, under our present law, there are only 11 countries whose civil judgments may be recognised and enforceable in Singapore. Likewise, by way of reciprocity, our civil judgments may be recognised and enforced in the same 11 countries.

With the Convention and passing of this Bill, the 11 countries will be joined by another 28 states that include Mexico and all countries in the EU, except Denmark. Our civil judgments may be recognised and enforceable in these additional countries and, likewise, we may recognise and enforce their courts' judgments. Hopefully, the US will ratify the Convention soon. More than that, I hope that it will be a matter of time before other parties sign up to the Convention. When more countries sign up and ratify the Convention, more countries will be added to the 39 states.

The mutual recognition and enforcement of judgments among contracting states will certainly help to promote international trade. The cooperation of contracting states and the recognition and enforcement of judgments will, hopefully, help to enhance our Courts as one of the leading judiciaries in the area of commercial law.

It has been said that the Hague Convention seeks to create a regime for recognition and enforcement of court judgments comparable to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the New York Convention. The New York Convention applies to the recognition and enforcement of international arbitration awards and currently has about 156 signatories. Hopefully, in time to come, the Hague Convention will be as successful as the New York Convention.

Over the years, Singapore has grown to be a leading forum for international arbitration in the world. SIAC has become one of the leading international arbitration centres. In more recent years, the Singapore Chamber of Maritime Arbitration (SCMA) has become a leading maritime arbitration body.

The Government has been trying to develop Singapore as an international dispute resolution centre. International arbitration is one pillar of this thrust. The other pillar is our Courts, particularly where it involves adjudication of disputes arising from international contracts.

Our High Court and Admiralty Courts have their share of landmark decisions in international jurisprudence. It is not by chance that the signing of this Convention, and now this Bill, coincides with the recent setting up of SICC in January this year. And, indeed, rightly so. By enhancing the enforceability of our Court judgments abroad, I hope that they can enhance the attraction of SICC and, indeed, Singapore Courts generally, and persuade more international commercial parties to have their disputes decided in our Courts. To this end, I am in support of the ratification of the Hague Convention and of this Bill.

I hope SICC will develop to be a premier international commercial Court. The Court has already appointed distinguished and reputable judges from different countries to sit on its bench. But we also need to think about the mechanics of getting our Courts to be chosen as the exclusive choice of court in the jurisdiction clause of the commercial agreements that international parties enter into.

We have to persuade people to put Singapore Courts or SICC into their contracts as a court of choice to adjudicate any dispute that may arise. We need to approach multinational corporations and other international companies. We can start by persuading our own Singapore companies to use our SICC or Singapore jurisdiction clauses. We need to persuade them to fight for such clauses to be used, even in the face of their international business counterparts disagreeing.

Jurisdiction clause is frequently not an item of priority to consider when parties are negotiating a contract. They may be more excited about the price of the contract or the operational details of the contract. Most people think that jurisdiction clauses are not something that should break a deal. This may make the task of persuading a change of mindset a little bit more difficult.

We need to persuade lawyers who draft contracts for their clients; sometimes, we need to persuade lawyers to persuade their clients. From my experience, some clients are creatures of habits and may take time to be persuaded.

We should also try to persuade the many international lawyers based in Singapore or in Asia to promote Singapore, whether for SICC or for arbitration. We should take a leaf from the experience of SIAC and, in recent years, SCMA, their marketing efforts, to persuade companies to use their respective house of arbitration clauses. Over time, SIAC has grown in its reputation and stature. On the other hand, SCMA has come a long way in the last few years. SCMA has become a much better known name in the international maritime circle. The SCMA arbitration clause is becoming more and more widely used in the world.

In 2013, SCMA has even managed to persuade the Baltic and International Maritime Council (BIMCO) to have SCMA BIMCO arbitration clause options in its many standard contract templates. BIMCO is the world's largest shipping association with 2,200 members worldwide. Its contract forms are recognised and used by shipping companies worldwide as industry standard templates. Persuading BIMCO to have an SCMA arbitration clause was no mean feat for a relatively young maritime body like SCMA. Before that, only London and New York made it. Efforts like this should inspire all stakeholders in their promotion drives for not just arbitration in Singapore, but also in the use of SICC or Singapore Courts as a chosen choice of court for dispute resolution.

One of the strengths of Singapore as a legal hub is that it can and often does provide a neutral forum for non-Singapore parties. For example, for international arbitration, Singapore is often a preferred neutral forum of choice for a dispute involving, say, two Asian parties, for example, Chinese and Indian parties or between, say, a European party and a Chinese party. We can and should tap on this for SICC, too. Certainly, with the 27 states in the EU being contracting states under the Hague Convention, European parties must, certainly, be a key object of our persuasion.

Finally, with the establishment of the ASEAN Economic Community in 2015, it will make sense to have reciprocal recognition and enforcement of civil judgments among all ASEAN countries. Currently, such reciprocity only extends to Brunei and Malaysia. For example, our Court judgment is not recognised in Indonesia. I know that many Indonesians prefer to have their commercial disputes determined by arbitration in Singapore and frequently SIAC, and, sometimes, even when their business counterparts in the same contract are also Indonesians. We should persuade our ASEAN neighbours to follow our footsteps in signing up to the Hague Convention. Madam, with that, I support the Bill.

3.14 pm

Mr Vikram Nair (Sembawang): Mdm Speaker, I rise in support of this Bill. I should declare my interest as a lawyer who practises dispute resolution and deals with cases that would be considered international cases under this Bill.

This Bill is an important development in Singapore. Singapore started developing as a centre for international dispute resolution in the 1980s. We became a party to the New York Convention on Enforcement of Arbitral Awards in 1986 and this heralded the rise of Singapore as a dispute resolution centre for international arbitration in the 1990s. The importance of arbitration, and especially international arbitration, was manifold.

First of all, it provided parties the opportunity to have their disputes resolved before a confidential forum. It was a one-stop solution; there was no appeal on the arbitral award generally. But perhaps, most importantly for international disputes, it also allowed an arbitral award obtained in Singapore to be enforced in many other countries and, in particular, all the countries that are parties to the New York Convention. At the moment, there about 156 such countries.

What this means is that parties who are involved in a dispute that involved multiple jurisdictions, can now choose any country that is a party to the New York Convention and that includes Singapore, have the dispute resolved there, and if that dispute is an international arbitration, they can enforce it in many other countries. This has been an important attraction of international arbitration.

It is in this context that this Bill changes the equation somewhat. What this Bill does is that it gives Court judgments an effect that might be similar to international arbitral awards as far as enforceability goes.

There are three key components to this Bill. The first, and this is reflected in Article 5 of the Convention as well as section 11 of the Bill, is that a court that is chosen, as long as it is one of the courts that is in the contracting states, these courts will have to take up the dispute, subject to certain exceptions. But otherwise, if a court is chosen as the venue for dispute resolution, it has to take up the case. This is even if the case has no other relationship with the country concerned.

The second is that – this is in Article 6 of the Convention as well as section 12 of the Bill – the courts of the countries that are parties to it must actually stay proceedings or dismiss proceedings if they are subject to the jurisdiction of another court. So, what this means is that even if the court might otherwise have had jurisdiction, as a result of this clause, they would have to decline to take up the case. This is very similar to what happens in the arbitration framework as well. If a dispute is subject to arbitration and it is governed by the International Arbitration Act, typically the courts will stay any court cases that try to go around that clause.

The final component is the enforcement of judgments and it is under Article 8 of the Convention and section 13 of the Bill. This basically says that courts have to give effect to judgments from another contracting state.

What these three mechanisms do is, in effect, they give judgments in Singapore an effect similar to an international arbitral award, in that a judgment that is made here can be enforced on any other party that is a contracting party to the Hague Convention.

It is in this respect that it is also important to look at some of the implications. I will just do a quick comparison. There are still important differences between the two for parties that are deciding whether to choose to use arbitration or to use the Courts.

As a practitioner, I can say that one the biggest advantages of the Courts is that where a dispute is complex and where non-parties may be involved, it is easier to get them involved if the dispute is in Court. So, it is one of the classic rules of arbitration that only parties to the arbitration agreement can bring their dispute in that arbitration agreement. If there is a dispute that involves the two parties in the arbitration agreement as well as non-parties, the only way the non-parties can get involved is with the consent of both parties to the arbitration agreement.

However, if the same dispute is brought into Court, there is no such limitation on the Courts' power to bring the other parties involved in the dispute into that dispute, provided the Court otherwise has jurisdiction. This actually gives the Courts a great deal more flexibility and, in fact, the choice of using a Court would give you more flexibility if you envision that your dispute may involve other parties.

So, this is an important advantage the Courts have over arbitration. This used to be counter-balanced by the limitation on enforceability of a Court award in other jurisdictions, but this Bill will remove that limitation somewhat.

It is also here that we come into one of the limitations of this new development and, that is, the number of contracting states. The New York Convention for Arbitral Awards has about 156 parties. That means an international arbitration award can be enforced in 156 different countries. This current Convention is relatively young. Mexico was the first country to ratify it. The EU was the second and that took place only in about October last year. The EU brought in the other 27 countries. Singapore is the next country to ratify it. The US has signed it but has not yet ratified it.

In fact, right now, the only parties to which this Bill will apply would be Mexico, Singapore and most of the EU, with one exception. I believe that this Bill has tremendous potential but it still does not have the same reach as an arbitral award because of the number of signatories to the underlining Convention.

One of my suggestions, in fact, if we were to make this Bill even more meaningful, would be to try and get more of our friends to sign up to the Convention. We could start with ASEAN because a lot of our business is in ASEAN, and other trading partners as well, potentially India, China. This would help to give the Bill even more reach because the more parties that ratify the Convention, the more we will allow the dual enforceability of court judgments. Courts, otherwise, have a big advantage over arbitration as a forum for dispute resolution.

I should also caveat that there are some complex disputes for which even this Bill will not provide easy answers. I explained that multi-party disputes are one of the biggest limitations of arbitration. That limitation may still apply in Court. For example, if a dispute were to occur entirely, say, in a third country, but the parties of that dispute ask for it to be resolved in a Court in Singapore and there were non-parties involved, it does not automatically follow the Singapore Court's jurisdiction over the non-parties. So, it does not overcome all the limitations but I think it still gives more flexibility to involve non-parties to the arbitration agreement.

The final thing I should point out is that there are some concerns that there is no limitation on which countries can become parties to this Convention. While we will not name specific countries, there are some countries where people have more doubts about the judicial systems.

For example, for an award where we may suspect the legitimacy of that judicial system, does it mean that we will automatically have to enforce it? Well, the short answer is that apart from one carve-out for public policy, the answer would be yes. This is why it is quite important for parties to make a clear choice on the choice of law because, ultimately, it is for parties to choose which forum they like. This was the criticism that was made about international arbitration as well when it first took off because, ultimately, parties choose their arbitrator. There is no real quality control over that. But international arbitral awards are still in force, and that is because we recognise the choice of parties. So, likewise over here, if parties choose a certain jurisdiction that happens to be a contracting state, then we are obliged to recognise that, subject to public policy and other considerations.

But overall, I think this is an excellent development. I think it gives parties a great deal more choice in resolving their disputes. My only suggestion is that we wear our hats on the international front and get more people to sign up to the Convention.

Mdm Speaker: Senior Minister of State.

3.23 pm

Ms Indranee Rajah: Mdm Speaker, I thank Mr Dennis Tan and Mr Vikram Nair for their strong support for the Bill. There are just a couple of points to which I should reply.

First, Mr Vikram Nair raised the question of whether there was a limitation because of the relatively smaller number of contracting states. The answer to that is we certainly expect it to grow. But even with the present signatories as well as states that have ratified, it is already very promising. Having the EU, for example, as a contracting party immediately extends our reach to the EU, save, of course, for Denmark.

In addition to that, the US and Ukraine are signatories to the Convention and there is growing interest in the Convention in the region. We, for our part, will certainly, as suggested by Mr Dennis Tan and Mr Vikram Nair encourage more ASEAN member states to become parties to the Convention.

I think Mr Vikram Nair also raised the issue of what would happen if we are obliged to recognise judgments from Convention states with less robust systems and whether that would necessarily have to take place. Possibly so, but I think that this is mitigated by two things. One is the element of choice; and second is built-in safeguards in the Bill. Let me explain what I mean.

First, choice. The Convention applies where there is an exclusive choice of court agreement. So, once they choose the forum, it means that parties have made a choice of that court. You have to assume that when they make that choice, they took into account the relevant factors, including the robustness of the judicial system of which that chosen court is a part. This really means that they have taken it into account and what the Bill does is it gives effect to that choice. It means parties must think carefully when choosing an exclusive choice of court forum.

Logically though, I think that this would act as a natural filter because, by and large, parties act rationally. So, they are likely to take into account the factors that I mentioned earlier – neutrality, that the system is not corrupt. They will look at the robustness of the system in which that court resides, and they will make their choices accordingly. So, that would act as a sort of natural filter.

Secondly, the Convention and the Bill have their own safeguards. For example, the Convention permits the Singapore Court to refuse recognition or enforcement of foreign judgments on certain specified grounds. The Courts must refuse to recognise or enforce a judgment where the foreign judgment was obtained by fraud in connection with the matter of procedure or when the defendant was not notified of the proceedings against it, and recognition or enforcement is incompatible with the public policy of Singapore. There are also some discretionary grounds where the Courts can refuse recognition or enforcement. Those operate as safeguards.

Essentially, at the end of the day, what being a party to the Convention means is that it extends the enforceability of the judgments of our Courts and that, in turn, is good for the industry and for Singapore as a dispute resolution hub as a whole. I thank the Members once again for their support.

Mr Patrick Tay Teck Guan (West Coast): Just one point of clarification for the Senior Minister of State. I noticed that clause 9(1)(b) of the Bill specifically or explicitly excludes employment contracts and collective agreements. I am aware the Hague Convention has likewise in pari materia. However, may I know, just to understand the rationale behind it, as well the reasons? Increasingly, we see employees being subjected to multi-jurisdictional kinds of arrangements.

3.28 pm

Ms Indranee Rajah: The reason why the Bill does not include things like employment contracts is because they are not covered in the Convention. The Convention does not extend to this. The reason for that is because this is a Convention that deals with international civil and commercial matters. It is in the realm of international trade and international investment and it is meant to address commercial disputes.

Employment matters fall under the category of more personal law where individuals are concerned. By their nature, they tend to be governed by more domestic regimes, and so it does not fall within the ambit of the Convention and, thus, does not come within this Bill.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Indranee Rajah].

Bill considered in Committee; reported without amendment; read a Third time and passed.