Reinforcing the case for Singapore law

ALMOST two years ago, one of us wrote in BT that further liberalisation of the legal sector will be necessary to take Singapore law to the next level (“Making the case for Singapore law”, BT, Dec 7, 2022). The point was made in the context of a discussion on what more could be done to develop and promote the adoption, and use, of Singapore law in cross-border transactions in this region. It was argued that this was (or ought to be) a matter of national pride, and would benefit the Singapore legal profession as a whole.

It will be recalled from the findings of a 2019 survey conducted by global research company Ipsos Pte Ltd, which was cited in the 2022 article, that Singapore law (29 per cent) was the second most widely adopted governing (substantive) law in cross-border transactions in Asia after English law (43 per cent).

The Ipsos survey also found that where Singapore was chosen as the dispute resolution venue, the most frequently used governing law was Singapore law (37 per cent).

As the 2022 article highlighted, these findings were consistent with those of a study conducted in 2021 to 2022 involving transaction (corporate and finance) counsels from international firms with a presence in Singapore. In particular, it was found that English law was still the preferred governing law, albeit with Singapore law coming a close second.

Has Singapore law made further headway since then? Based on informal discussions with various counsels, the answer would appear to be in the affirmative. While several transaction counsels have affirmed their preference for English law as the governing law, citing reasons of comfort and familiarity (including, crucially, on the part of sophisticated clients such as global corporates), increasingly, there are others who recognise that Singapore law is an acceptable (or even, in some cases, the preferred) choice.

These anecdotal “findings” provide some basis for the view that Singapore law may have made further headway, even (or perhaps, especially) in transactions where there was no ostensible nexus to Singapore.

For instance, one project finance counsel cited a Taiwanese project where neither the parties nor the assets were located in Singapore, and Singapore law was chosen as the governing law. Another corporate (M&A) counsel confirmed that Singapore law is increasingly the default choice of law, including in transactions with no nexus to Singapore.

Arbitration centre

Aside from this, other counsels have continued to affirm the popularity of Singapore as the chosen forum, especially for arbitration (and the Singapore International Arbitration Centre in particular), which confirms that Singapore has achieved the status of a nodal jurisdiction for dispute resolution.

In this pleasing context, we argue that policymakers should continue with their endeavours to promote the adoption and use of Singapore law. Singapore law is part of the “soft infrastructure” of the Singapore legal system and its supporting eco-system. Besides enhancing Singapore’s stature as a leading financial and legal hub, and the gateway to Asia, promoting the adoption and use of Singapore law, especially by users overseas, would enlarge the economic pie for lawyers.

We are already experiencing the “Asian century”, with the International Monetary Fund reporting that economic activity in the region, which is described as “the world’s most dynamic”, has outperformed expectations. Within Singapore’s immediate vicinity, a report by the Angsana Council, Bain & Company and DBS predicts that South-east Asia will likely outpace China in gross domestic product and foreign direct investment growth over the next decade.

Transnational dispute resolution

Just as the government has encouraged Singapore businesses to venture overseas, in the same vein, Singapore law and its institutions could be “exported” to suitable overseas markets. Most recently, a Bill to establish an International Committee of the Singapore International Commercial Court was introduced in Parliament. The International Committee will hear certain civil appeals and related proceedings from prescribed foreign jurisdictions. The Bill follows the signing of a bilateral treaty between Singapore and Bahrain in March 2024 to establish the new Bahrain International Commercial Court (BICC) and the International Committee in Singapore to hear appeals from the BICC.

These efforts to promote the adoption and use of Singapore law and institutions as part of transnational dispute resolution, continue to expand the legal pie even as Singapore law continues to make headway in areas (for example, in commodities trading) where English law was traditionally the default choice.

There are historical reasons for the popularity of English law, especially in key industries such as banking and finance, maritime, and insurance. However, as global trade increasingly becomes decentralised, and with South and South-east Asia poised to be key regions that will drive growth in the 21st century and possibly beyond, Singapore law and its institutions are well placed to further develop in tandem with the growth of cross border commercial transactions with an Asian focus (or perspective).

The Singapore courts have already led the way in doing so: for instance, in 2012, they departed from established English jurisprudence by holding that agreements to negotiate in good faith (and, by extension, agreements to mediate) are enforceable.

The Singapore Court of Appeal stated that such clauses “do serve a useful commercial purpose in seeking to promote consensus and conciliation in lieu of adversarial dispute resolution. These are values that our legal system should promote.”

Sophisticated clients sometimes speak favourably of the “highly regulated” environment in Singapore. What they (and their counsels) really mean is that they desire transparency and predictability, the hallmarks of Singapore law which enhance the attractiveness of Singapore as an investment destination and which continue to make Singapore law attractive to its users. To this end, efforts to enhance Singapore law so that there is greater “brand awareness” should continue apace. Indeed, there is already evidence that Singapore law is increasingly receiving recognition as a an established “brand”, particularly in areas where it has made significant contributions (such as in arbitration law).

Based on a cursory search conducted through Westlaw (a legal database), the number of Singapore court decisions cited by the UK courts has been steadily increasing since 2014. This peaked in 2021, when there were 50 instances of the UK courts citing Singapore court decisions on a variety of areas including, notably, arbitration law. Of course, there will need to be a qualitative analysis of the data to draw more substantial conclusions.

As new technologies emerge, including in “greenfield” sectors such as artificial intelligence, fintech, blockchain and cryptocurrencies, and augmented and virtual reality technology, there are opportunities for Singapore law to assert its “brand” and establish its credentials. The Singapore courts have already issued various landmark judgments relating to blockchain technology and cryptocurrencies. To further develop Singapore’s “brand”, similar efforts could be made in relation to other types of cases in the appropriate circumstances. Given that foreign courts are increasingly prepared to embark on a comparative analysis in the spirit of judicial comity, the promotion of Singapore law will arguably reap benefits far beyond Singapore’s shores.

Crucially, Singapore commercial jurisprudence must continue to keep pace as the market, and business environments and practices continue to evolve. If Singapore law is to establish itself as the lex mercatoria in the region, commercial law must assume a central role to the development of Singapore law.

It may be helpful to conduct studies on the various aspects of commercial law which would be engaged in a typical commercial transaction (involving, for instance, the sale and purchase of private companies that are not operating in regulated industries) where Singapore law is the same as or similar to English law, which might provide clarity (and comfort) to those clients and counsels who would otherwise be inclined to choose English law.

On the other hand, where Singapore law has diverged from English law, it would also be helpful for counsels to advise whether this divergence is, or is not, helpful in the particular case at hand – and thus, which governing law would be preferable in the circumstances.

For example, where parties wish to impose a contractual obligation to engage in “good faith negotiations” (see above) before commencing litigation or arbitration, or to ensure that no party may appeal an arbitral award made in an international arbitration on a point of law (this is permissible for international arbitrations in the UK, but not in Singapore). Naturally, these considerations do point to choice of law necessarily being a bespoke exercise, and also underscores the need to make Singapore law more accessible – and attractive – to its users.

Staying ahead of the competition

Concomitantly, there needs to be continuous investment in human capital so that there is a sufficient corpus of Singapore lawyers with the requisite international outlook, to say nothing of continuous reskilling and upskilling. As we continue to open our doors to foreign talent, it is crucial to ensure that there is a raising of standards generally in addition to a broadened outlook, which would potentially benefit the whole profession.

At the same time, the increasing prominence of generative AI and the changing expectations of younger lawyers, including the “Gen Zs” (and soon “Gen Alphas”) likely means it will be increasingly more challenging for law firms to meet those expectations.

All of this points to the urgent need to focus on value creation to stay ahead of the competition. In practical terms, this means that the profession as a whole must be enabled to handle more complex high-end work, which requires enlarged and enhanced skillsets. Promoting the adoption and use of Singapore law and institutions must, we submit, also be viewed with these imperatives in mind.

As policymakers and lawyers adapt to new realities, it is time for the profession to ask some hard questions about how it is to evolve and position itself for the future. We must find our niche, or be overtaken by others who will find theirs.

The writers are from Singapore law firm ADTLaw LLC. Dawn Tan Ly-Ru is managing director, and Tristan Teo is of counsel. The views expressed here are the writers’ personal opinions.