After the award: trends in arbitration challenges – Singapore

Transcript

Anand: Hello, and thank you everyone for joining us on this episode of Arbitral Insights. My name is Anand Tiwari. I am a senior associate with Reed Smith in Singapore, practicing international arbitration. I'm joined by two of my international arbitration colleagues, Min Jian Chan, who's a counsel here in the Singapore office, and Michael Chee, who is a senior associate here in the Singapore office. Together we are three of the five co-authors of the Singapore chapter of the 2025 Reed Smith Report on Analysis of Challenges to Arbitration Awards.

The report is the first of its kind and essential to all arbitration users. Before the report, there was no publicly available empirical and data-driven study analyzing court decisions in key arbitral seats on challenges to arbitration awards. The report gives practitioners, clients and, more generally, all arbitration users concrete indicators of how courts in key arbitral seats treat challenges to arbitration awards. This, in turn, informs the seat selection process, dispute management strategy, and overall risk assessment.

Singapore is widely known as one of the most preferred arbitral seats in the world, frequently ranking alongside London, Hong Kong, and Paris. The exponential growth of Singapore as a popular arbitral seat is a result of many factors, not least of which the application of the Model law to challenges to arbitration awards in Singapore, the establishment and strong support of the government for the Singapore International Arbitration Center, or SIAC, which is regarded as one of the world's most preferred arbitral institutions, the pro-arbitration and minimal curial intervention policy of the Singapore courts, and the strong support of the government in establishing an arbitration-friendly legal framework.

This episode is part of a series covering the various jurisdictions covered in this report. In this episode, we will be delving only into the Singapore chapter of the report, discussing how we approach the report, the methodology and data underlying the report, key findings, and our practical takeaways. Michael, could you please help us to understand the methodology and data underlying the report first?

Michael: Thanks for the introduction, Anand. Well, without further ado, let's dive into the numbers. As part of this report, we had looked into data available for the years 2001 to 2024. However, our analysis focused primarily on the period from 2018 to 2024 to align with the other jurisdictions that were involved in the 2025 report, such that meaningful comparisons can be made on an even footing. So, in the period of 2018 to 2024, 95 setting-aside cases were reported, comprising first instance decisions of the Singapore High Court and the Singapore International Commercial Court, and appeals to the Singapore Court of Appeal. Of those 95 reported decisions, 23% were successful, 26% reported decisions were appeals to the Court of Appeal, of which 42.3% resulted in arbitral awards being set aside. For context, the reason for such a high percentage is that the reported appeals involved first instance decisions in which the awards were already successfully set aside.

Looking at the data between 2001 and 2024: while the success rates of setting aside appeals was 41.18% as opposed to the 19.8% success rates of first instance decisions, 35.29% of those appeal decisions involved awards that had already been successfully set aside at first instance. So, as briefly and mentioned by Anand earlier, in terms of the grounds for setting aside an arbitral award in Singapore: through the International Arbitration Act or the IAA, the UNCITRAL Model law was given force of law in Singapore, including the grounds for setting aside at Article 34 subarticle two.

In addition, the IAA provided for two supplementary grounds for setting aside, being where fraud or corruption is involved, or where there is a breach of natural justice. Digging deeper into the details, we see that overall, when looking at all reported decisions, including appeals, the most commonly argued grounds for setting aside are breach of natural justice at 30.2%, the lack of proper notice or the inability of a party to present its case at 20.8%, and where it's found that the tribunal exceeded its jurisdiction when rendering the award at 19.8%. Less commonly argued are the grounds of breach of public policy, improper composition of tribunal or improper procedure, invalid arbitration agreement, as well as fraud and corruption, which have percentages in the low teens or less. No challenges were brought on the ground of non-arbitrability. Interestingly, this ground was only argued unsuccessfully once between the period of 2003 and 2024.

Looking at the rates of success, it's notable that the top three grounds with the highest rates of success, being breach of natural justice, lack of proper notice, or inability of a party to present its case, and the tribunal's excess of jurisdiction reflect the fact that they are the more popular grounds for seeking to set aside an arbitral award, both at the first instance and also on appeal. This is is not unexpected, given the broad nature of these grounds and the limited cost consequences of challenging an arbitral award, resulting in some of these challenges being brought as a tactical move to delay the enforcement of the award. Min Jian will be talking more about this later on.

That said, most reported setting aside applications were challenged on more than one ground. Only 12.6% were brought on a single ground, while the remaining 87.4% of reported applications were brought on multiple grounds, with parties most commonly arguing two to three grounds amounting to almost 70% of reported decisions. There appeared to be a trend whereby applications that challenge an arbitral award on the basis of natural justice would concurrently allege that they were unable to present the case. In terms of the timing between the issuance of an arbitral award and the decision of a setting-aside application, first instance decisions were issued within 506 days on average from the date of the issuance of the arbitral award, which is just under 1.4 years. As for decisions that were appealed, the final judgment was issued on average within 921 days or more than 2.5 years from the date of the award.

Lastly, I would like to touch on something close to my heart: data crunching. Given my engineering background, I thought it would be worthwhile to test whether there's a correlation between the number of SIAC awards and reported court decisions. Using the data from 2013 to 2023, we found a statistically significant positive correlation with a Pearson coefficient of 0.78 and a p-value of 0.0035. In simple terms, as SIAC award volumes increase, so do setting aside challenges at first instance. I should note some limitations. We are working with a small sample, 11 years of data, and only reported decisions. Unreported challenges are not captured, and we use SIAC awards as proxy for all Singapore-seated arbitrations, so these findings are exploratory.

Anand: Thank you, Michael. While we will never know for certain the actual success rate because, presumably, not all final decisions are reported, the available data does paint an interesting picture, which we can get into a bit later. Min Jian, could we now turn over to your thoughts on comparisons between our findings from the data and findings in other jurisdictions?

Min Jian: Thank you, Michael and Anand. So, how does Singapore compare with the other jurisdictions that the report surveyed? Well, there is a wealth of data from these jurisdictions we can compare. In this podcast, we look at three different measures. First, number of cases, second, costs, and third, success rates.

First, in terms of the absolute number of cases, Singapore saw 95 setting aside cases in the period 2018 to 2024. This was the fourth highest number of applications in the jurisdiction surveyed, behind Paris, England, and somewhat surprisingly, Bahrain. Of these 95 cases, 69 were first-instance decisions. Interestingly, there were fewer cases heard in Singapore than in Bahrain, despite the higher relative popularity of Singapore as a seat of international arbitration. Another interesting comparator is Hong Kong, which is similarly an established arbitration seat in close proximity to Singapore. Despite their similarities, however, Singapore had more than three times the number of setting-aside cases than Hong Kong within the period 2018 to 2024, although the success rates were very similar: 22% for Hong Kong versus 23% for Singapore.

The report posits that this may be because of Hong Kong's unique costs regime, which as a default awards indemnity costs to a successful award creditor who defeats a challenge by an award debtor. This may have the effect of increasing the cost of challenging an award and dissuading unmeritorious challenges. However, and as the report acknowledges, Hong Kong's success rates are very similar to Singapore. This may very well reflect the fact that factors other than costs drive challenges to awards, including proportionality considerations. So for example, if an award is very large, then the cost of challenging it may well be worth paying indemnity costs, despite the low chance of actually successfully challenging the award.

So this brings us to the second issue, which is the issue of costs. So the general cost rule for setting-aside cases heard in Singapore is that of costs follow the event, which as most listeners will be familiar with, means that a party successfully defending a setting-aside application will be able to recover some measure of the costs incurred in doing so. This is largely consistent with the practice of the English and French courts, although proponents of the Hong Kong position will argue that an award of indemnity costs is more consistent with international arbitration practice, where successful parties will generally expect to recover reasonable costs in full. So proponents of this position posit that a cost regime that does not allow for full recovery or the recovery of indemnity costs would encourage tactical challenges to arbitral awards, leading to increased costs and inefficiency, or strategic applications to delay enforcement. To bridge this difference in expectations, which the report describes as an expectation gap, more parties defending setting-aside proceedings in Singapore are now bringing these cases to the Singapore International Commercial Court, where there's generally much better cost recovery for parties that successfully defend challenges to arbitration awards.

Moving on to the third issue, which is success rates, the overall success rate of setting-aside cases in the relevant period was 23%. At first instance, the success rate is lower still, at around 16%. These numbers are quite low and correctly, in our opinion, reflect the Singapore court's attitude of minimal curial intervention. As Michael noted previously, the true success rates are likely to be even lower, as many cases are unreported, and such unreported cases are more likely to have dismissed setting aside challenges than allowed them.

Based on the data, the success rates of setting-aside applications in the other jurisdictions surveyed range between 0% in the case of the Dubai International Financial Courts and 38% in the case of the English High Court. However, we know that the figure for the English High Court is skewed by a number of factors, primarily the high success rate of reported applications to set aside under Section 69 of the English Arbitration Act, which allows for limited appeal on a question of law arising out of the award.

This figure, however, should be treated with care because such Section 69 challenges require permission from the court to be pursued. This means that clearly unmeritorious challenges would have already been filtered out by the courts by not being granted permission to appeal. As with the success rates reported for Singapore, this figure also does not include unreported cases, which means that the true success rates for challenges in the English High Court is likely to be much lower. Overall, we think that the success rates of challenges in Singapore are well in line with those of other popular seats and reflect a common attitude of minimal curial intervention across these seats.

Anand: Thank you, Min Jian. As you said, the data suggests that the likelihood of success in Singapore is similar to other popular arbitral seats, despite clear practical differences between some of these seats, such as the availability of different costs regimes. The ability to recover one's costs for challenging or defending an arbitration award is clearly useful, whether one is an award creditor or an award debtor, and should play a key role in selecting an arbitral seat and the overall dispute management strategy.

In Singapore, one key practical takeaway that reveals itself from the data is that when challenging an arbitration award, one should try, as far as possible, to keep the matter within the jurisdiction of the General Division of the High Court, as opposed to the Singapore International Commercial Court, or the SICC, so as not to be exposed to an impossible indemnity costs regime in the event the challenge fails. On the other hand, when defending against the challenge, it is more beneficial to move the matter to be heard by the SICC in order to recover costs on an indemnity basis if the challenge is unsuccessful. Ultimately, this matter may not be within parties' complete control since the Singapore courts have the jurisdiction to order the transfer of a matter to the SICC, regardless of whether parties agree, provided that the matter is of an international nature. But it nevertheless remains a useful point to bear in mind when deciding on strategic moves to take.

On the specific grounds for challenge, the data suggests that one needs to focus on a specific ground with a reasonable prospect of success, rather than throwing the kitchen sink at an award. This is, of course, safe for the specific situation where the factual basis for the challenge cuts across several grounds at the same time, such as where a breach of natural justice may be occasioned by being denied the opportunity to be heard. The relatively high success rate for challenges based on breach of natural justice seems to be linked to the higher incidence of such challenges compared to jurisdictions such as France, where due process arguments are the last resort for counsel in distress. However, it also seems to be linked to how the courts consider an award in breach of natural justice to be unsafe and contrary to parties' agreement to engage in arbitration where both parties are afforded their fundamental right to be heard.

At the end of the day, it is heartening to see that the Singapore Court's pro-arbitration policy is reflected in how quickly decisions are issued as compared to other jurisdictions such as France, where it can sometimes take up to five years for a challenge to be finally determined. This is likely a consequence of local court procedural provisions on the availability of expedited timelines for challenges to arbitration awards and a specific docket of judges well experienced in arbitration dealing with challenges to arbitration awards before the Singapore courts.

It remains for me to thank both my colleagues Michael and Min Jian for their incisive insights. Thank you for listening to this episode of Arbitral Insights, a part of a series addressing the jurisdictions covered in the report. A reminder that the full report is publicly available for download from Reed Smith's website. Thank you for listening, and we hope you can join us again on Arbitral Insights.

Outro: Arbitral Insights is a Reed Smith production. Our producers are Shannon Ryan, Amanda Saunders, and Mason Kautz. For more information about Reed Smith's global international arbitration practice, email [email protected]. You can find our podcast on all streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP.

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