A progressive overhaul SCMA releases 2022 Arbitration Rules

At a glance, the new edition represents a significant and progressive overhaul. As well as a general restructure, the salient changes include:

(a) revisions to accommodate the increasing resort by parties to partly or wholly virtual arbitration;

(b) a new rule providing the Tribunal with power to prevent prejudicial changes in party representation throughout the arbitration;

(c) new mechanisms on tribunal constitution introduced to reflect existing maritime arbitration practice;

(d) much needed clarity on the circumstances in which a hearing must take place;

(e) more specificity as to the time limits on award issuance; and

(f) higher claim thresholds for expedited proceedings.

Accommodating virtual arbitration

COVID-19 has undoubtedly accelerated the prevalence of partly and wholly virtual arbitration. The 2022 SCMA Rules wholeheartedly embrace and accommodate this practice. Rules 17.3 and 25.3 now expressly allow the Tribunal to determine the medium in which case management meetings and hearings are to be held, whether that be "in person, by telephone, by video-conference, or in any other manner the Tribunal deems appropriate".

As with most institutional rules, email is recognised as a valid means of service. Rule 3.3(b) goes one step further to recognise service on email addresses used "habitually and effectively between the parties in the course of business relating to the dispute in which the arbitration is commenced". This recognises the situation where certain designated email addresses may no longer be in use and parties have been corresponding through or with other personnel. While there may be scope for dispute as to whether particular email addresses have been used "habitually and effectively" or in relation to the particular dispute in question, this is a welcome revision to help avoid technical objections on grounds of lack of notice.

The revisions also provide in Rule 34.4 for the possibility of electronic signatures in an award and/or that the award be signed in counterparts and assembled into a single electronic document. This is a welcome attempt to reduce delays in award issuance. Further, and in apparent recognition that some jurisdictions may still require wet signatures for enforceability of an award, Rule 34.4 allows any party to request or the Tribunal in its discretion to decide that wet signatures be used.

Power of the Tribunal to prevent prejudicial changes in party representation

The 2022 SCMA Rules have also taken aim at obstructionist tactics in arbitration. One such tactic is for parties to change legal representation at key junctures in the arbitration whether as a means to delay proceedings or, more perniciously, to attempt to create conflict issues for arbitrators. Under the previous edition of the Rules, parties are only obliged to notify the Tribunal of the names and addresses of their party representatives. Rule 4.4 of the new Rules has been amended to give the Tribunal the power to withhold its approval of the change in party representatives if it is satisfied that there is a substantial risk that such change might prejudice the conduct of the proceedings or the enforceability of any award.

We see this as a positive step consistent with modern practice, reflecting both the approach taken by many tribunals in their standard procedural orders as well as the rules of other established arbitral institutions.

Codifying maritime arbitration practice on Tribunal constitution

New Rules 8.4(c) & (d) and 33.2 aim at codifying practice in the maritime industry of two party-appointed arbitrators proceeding with the arbitration and the third arbitrator being appointed only if necessary.

Rule 8.4(c) permits the two party-appointed arbitrators to constitute the Tribunal "for the time being" and gives them the discretion to appoint a third arbitrator "so long as this is done before any substantive hearing or without delay if the 2 arbitrators cannot agree on any matter relating to the arbitration". Rule 8.4(d) clarifies that, in the latter scenario of the 2 arbitrators not agreeing, the SCMA Chairperson has the power to appoint the third arbitrator if the 2 arbitrators do not do so within 14 days of one calling upon the other for such appointment.

Rule 33.2 confirms that, if no third arbitrator is appointed, the 2 party-appointed arbitrators if agreed on any matter have the power to make decisions, orders and Awards.

Clarifying the hearing rule

Rule 28.1 of the previous edition of the SCMA Rules provides that "[u]nless the parties have agreed on a documents-only arbitration or that no hearing should be held, the Tribunal shall hold a hearing for the presentation of evidence by witnesses, including expert witnesses, or for oral submissions."

This Rule has seen its fair share of controversy, most recently before the Singapore Court of Appeal in CBS v CBP [2021] SGCA 4. In that case, the arbitrator had interpreted Rule 28.1 as providing that, if the parties do not agree on a documents-only arbitration, the arbitrator has discretion to decide whether to hold a hearing for the presentation of witness evidence or only for oral submissions. While the Court of Appeal ultimately rejected this disjunctive interpretation (and found that the arbitrator had committed a breach of natural justice in denying the respondent's request to lead witness evidence at the hearing) the Rule was widely seen as requiring revision for clarity's sake.

New Rule 25.1 delivers. It provides that "[t]he Tribunal shall decide if a hearing should be held or if the matter is to proceed on documents only, save that there shall in any event be a hearing so long as any party requests one." This Rule reverses the mandatory requirement for a hearing (absent positive agreement to the contrary) and places the discretion as to whether to hold a hearing with the tribunal. Like Article 24.1 of the UNCITRAL Model Law, however, this discretion is subject to a party requesting a hearing (thus preventing a repetition of the circumstances in CBS v CBP).

More specificity on time limits for award issuance

Delays in the issuance of awards is an oft-cited frustration among users of arbitration. Under the current SCMA Rules (like other rules), the tribunal has the discretion to decide "at an appropriate stage" to declare the closure of proceedings. As awards are to be issued within three months from closure of proceedings, tribunals tend to declare closure of proceedings only when they are certain that their draft award is close to being finalised. This inevitably leads to delays in drafting and issuing awards.

New Rule 27.1 now provides greater certainty to parties as proceedings are deemed to be closed "after the lapse of 3 months from the date of any final written submission or final hearing". While this is subject to party agreement or Tribunal direction to the contrary, these amendments promote greater accountability as the Tribunal now has to justify its reasons for delaying any closure of proceedings.

Higher claim thresholds for expedited proceedings

Finally, an Expedited Procedure with a claim value threshold of US$300,000 replaces the existing Small Claims Procedure with a threshold of US$150,000. The Expedited Procedure is designed to be a quick and cost-effective method of resolving disputes using a sole arbitrator. Under the procedure, the issuance of an Award is expected within 21 days of receipt of all parties' case statements or, if an oral hearing is fixed, from the close of the oral hearing.

Conclusion

All-in-all, the 2022 SCMA Rules represent a progressive step forward for the SCMA. They tackle head-on persistent issues of delay, high cost and party misconduct in arbitration, as well as embracing and accommodating the new virtual world in which we all work. The changes are to be welcomed and the SCMA commended on a job well done.

Authors: Michael Weatherley, Partner (Ashurst); Cathryn Neo, Senior Associate (Ashurst ADTLaw)