Singapore is making strides in being recognised as a global trading hub in more ways than one. Beyond infrastructure for physical trade, the country is also building on less tangible facets of international trade — namely, its strong institutional reputation for rule of law — as it works towards becoming a leading centre for international mediation.
The availability of reliable, impartial international tribunals could be more important now than ever. In his welcome address at the UN Commission on International Trade Law (UNCITRAL) Academy Conference on Aug 30, Minister for Home Affairs and Minister for Law K Shanmugam highlighted the importance of multilateralism in the face of unpredictable macroeconomic conditions which is seeing businesses impacted by a “confluence of factors”.
“In this environment, countries have to work even harder to try and come together, to keep to what is possible in terms of cooperation, and try and keep the global trading environment as healthy as possible,” he said at the conference, which was part of Singapore Convention Week 2022.
Singapore made headway in its journey to becoming a leading centre for international commercial dispute resolution in 2020 when the Singapore Convention on Mediation (SCM) came into force.
The SCM was negotiated to provide global businesses greater certainty in resolving cross-border disputes, allowing businesses seeking mediation to apply directly to the courts of countries that have signed and ratified the treaty on international commercial dispute resolution. To date, there are 10 parties to the SCM — including Singapore — and 55 signatories.
Before the enforcement of the treaty, mediated settlement agreements — the result of mediation negotiations between at least two commercial parties in a dispute — were not able to be enforced across country borders.
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The UN treaty is the first to be named after Singapore, which was recommended to host the signing by UNCITRAL, as the country had played a key role in the negotiations and drafting of the treaty. The chairman of the working group that negotiated the SCM was Singaporean Natalie Morris-Sharma, who was then also the director of the International Legal Division of the Singapore Ministry of Law.
She is now the deputy senior state counsel for the International Affairs Division of the Singapore Attorney-General’s Chambers, as well as rapporteur to the UNCITRAL Working Group on investor-state dispute settlement (ISDS) reform.
In an interview with The Edge Singapore, Morris-Sharma says that she believes it is precisely Singapore’s global trade connections that strengthen its ability to be an independent and honest broker in the international dispute resolution circuit.
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“Our interests are simply in smooth and open trade, and our views on international dispute resolution are very principled. We’re all about rule of law and the peaceful, efficient settlement of disputes. You see this feeding into Singapore’s approach to policymaking and legislation, ensuring that we’ve got a strong ecosystem of international dispute resolution services in Singapore,” she explains.
Investor-state dispute settlement
Morris-Sharma’s current role with UNCITRAL on ISDS reform could take Singapore’s reputation as a global mediation hub even further.
Beyond the international commercial disputes for which the SCM seeks to offer redress, ISDS is a legal system through which sovereign nations can be taken to court by businesses or foreign investors for state actions that have affected their foreign direct investments (FDI).
The process often involves international arbitration between the foreign investor and the recipient country and is a unique instrument of public international law, granting private parties the right to sue a sovereign nation in a forum outside of that nation’s domestic courts.
“With ISDS, the innovation is that investors, whether companies or individuals, can bring a claim directly against a state without having to go through their home countries. What this means is that the dispute is effectively de-politicised by removing the state-to-state element of dispute resolution,” explains Morris-Sharma.
“The historical narrative was that it promotes access to justice for investors, it promotes foreign investment flows because investors are better able to assure themselves that in the event of an issue, they are [able] to decide whether or not to bring a dispute, rather than having to go through the political process,” she adds.
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In 2020, at least 68 known treaty-based ISDS cases were initiated, according to the UN Conference on Trade and Development (UNCTAD). At the end of 2020, the total ISDS case count had reached over 1,100, while 124 countries and one economic grouping were known to have been respondents to one or more ISDS claims. Singapore has not had any claims taken against its government by an international investor.
Given that global FDI rebounded strongly in 2021 — according to UNCTAD it was up 77% to an estimated US$1.65 trillion ($2.26 trillion) from US$929 billion in 2020, surpassing pre-Covid-19 levels — ISDS could play an increasingly important function of international law.
At the Singapore Convention Week 2022, an ISDS capacity-building workshop was supported by the Singapore International Dispute Resolution Academy (SIDRA) and the International Centre for Settlement of Investment Disputes (ICSID). The workshop took a deep dive into the practical considerations surrounding such meditation — including the independence and impartiality of arbitrators.
Panellists discussed reforms to the ISDS system, with a focus on perspectives from the Asia Pacific region. Mediation emerged as a key reform option, with panellists discussing how it could play an even greater role in the context of ISDS reforms.
“Asia Pacific has largely taken country-specific directed reforms through their bilateral investment treaties. Broadly speaking, the concerns that have attracted the reform efforts have been in the range of ensuring that the outcomes of any dispute settlement or arbitrations are consistent, coherent and correct,” says Morris-Sharma. “I do see a consonance between some of the concerns that are being articulated from the Asia Pacific region and what is being articulated globally.”
She believes the jury remains out on the extent of reforms with which individual countries may be comfortable and that there may end up being a spectrum of positions taken up across the Asia Pacific region, which she highlights is highly diverse after all.
Don’t overlook reputational factor
Morris-Sharma says that Singapore’s position as a global trading hub and a key node in the region has been a key influencing factor in also becoming an international dispute resolution hub — and will continue to be so.
“In the specific context of mediation, ensuring that Singapore can be an independent voice in advocating for mediation, which is important to promote awareness of the issue,” says Morris-Sharma, who adds that Singapore is motivated by its connection to the SCM — not just in name, but also in principle.
Economically, she notes that there are also distinct benefits to Singapore’s position as a hub for international dispute resolution due to the country’s “ecosystem approach”. Beyond the legal system that benefits both domestic and international lawyers, the wider circle of services that facilitates the dispute resolution landscape, including the financial and hospitality sectors, will also profit from this activity.
However, she emphasises that another aspect of being a global hub that should not be overlooked is the virtuous cycle of Singapore’s reputation. “Singapore in general is regarded internationally as very stable; we function by rule of law and our courts support the dispute resolution framework and are seen as an independent and trusted judiciary.
“These reputational factors are good in and of themselves but, in turn, they also then provide a launchpad for other benefits that may be reaped, such as international companies being more willing to base themselves in Singapore” she adds.
