Offshore Cases In The Singapore International Commercial Court.

Legal News & Analysis - Asia Pacific - Singapore - Dispute Resolution

6 July, 2016

 

After much anticipation, the Singapore International Commercial Court (“SICC”) released its first judgment in BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2016] SGHC (I) 01 on 12 May 2016. This judgment, released only four months after closing submissions were filed, is significant in illustrating the efficiency of the SICC in resolving transitional commercial disputes. 1

 

As the SICC has only just been established, a number of procedural aspects of litigating in the SICC remain untested. One such feature, which finds scant analog in other jurisdictions, is that a case heard in the SICC can be deemed an “offshore case” pursuant to O 110 r 36 of the Rules of Court (2014, Rev Ed) (“the Rules of Court”). Such “offshore cases” are cases that, although heard in the SICC, do not have a “substantial connection” to Singapore.

 

This was the focus of the second judgment released by the SICC, in Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02 (“Teras Offshore”). [Duane Morris & Selvam represented Teras Offshore Pte Ltd in this case.]

 

The following examines the application of the provision of the Rules of Court relating to offshore cases in light of the decision in Teras Offshore. It also points out that parties to exclusive jurisdiction agreements in favor of Singapore courts should be cognisant of the possibility that their dispute may be heard in the SICC on 22 June 2016 and be deemed an “offshore case,” which could alter the shape and conduct of the litigation as compared with an ordinary action heard in the High Court of Singapore. 

 

Offshore Cases

 

It may safely be said that the raison d’être of the SICC is the provision of an “internationally accepted dispute resolution procedural framework for the resolution of international commercial disputes in accordance with substantive principles of international law.” 2

 

On this note, the Honorable Chief Justice has set out two main drivers for the establishment of the SICC as a dedicated international court: the need for judicial instructions to adapt to the increase in economic growth in Asia, as well as the desire to position Singapore as a center for commercial dispute resolution. 3 Accordingly, “[f]rom its inception, the SICC was envisaged as a forum dedicated to handling only international commercial disputes. As such, unlike the DIFCC, the SICC’s jurisdiction does not have a significant domestic component, if at all.” 4

 

The international character of the SICC is reflected in, inter alia, the special provisions for matters that do not have a “substantial connection to Singapore”—i.e., offshore cases. 5 Order 110 r 1(2)(f)(i) and (ii) of the Rules of Court state that an action has no substantial connection to Singapore where:

 

  • Singapore law is not the law applicable to the dispute and the subject matter of the dispute is not regulated by or otherwise subject to Singapore law; or 
  • The only connections between the dispute and Singapore are the parties’ choice of Singapore law as the law applicable to the dispute and the parties’ submission to the SICC.

 

Paragraph 29(2) of the Singapore International Commercial Court Practice Directions (“SICC PD”) provides the following illustrations as to when a dispute or its subject matter would be subject to Singapore law and not be deemed as an offshore case:

 

  • where there is a dispute over the sale of shares in a Singapore-incorporated company pursuant to a share purchase agreement governed by New York law, the subject-matter of the dispute (i.e., the shares) is regulated by or otherwise subject to Singapore law;
  • where there is a dispute over the transfer of land in Singapore pursuant to a contract governed by English law, the subject-matter of the dispute (i.e., the land) is regulated by or otherwise subject to Singapore law; and
  • where there is a dispute over the affairs of a company pursuant to a shareholders’ agreement governed by Indonesian law and one of the issues relates to the use of a patent registered in Singapore, the subject-matter of the dispute (i.e., the patent) is regulated by or otherwise subject to Singapore law. 

 

The relevant factors to determining the presence of a substantial connection to Singapore is provided at paragraph [29] (3) of the SICC PD reproduced below as follows: 

 

“Substantial connection to Singapore” 
 

(3) For the purposes of Order 110, Rule 1(2)(f)(ii) of the Rules of Court, the existence of each of the following factors will not, by itself, constitute a substantial connection between the dispute and Singapore: 


(a) any of the witnesses in the case may be found in Singapore; 
(b) any of the documents that are relevant to the dispute may be located in Singapore; 
(c) funds connected with the dispute have passed through Singapore or are located in bank accounts in Singapore; 
(d) one of the parties to the dispute has properties or assets in Singapore that are not the subject matter of the dispute; 
(e) where one of the parties is a Singapore party, or where a party is not a Singapore party, but has Singapore shareholders.

 

A number of implications follow from a determination that the action does not share a substantial connection to Singapore and should be deemed as an offshore case. They are summarised as follows: 6

 

  • Parties may be represented by registered foreign lawyers; 7 and 
  • The SICC would take a more liberal approach in making a confidentiality order under O 110 r 30 (1) of the Rules of Court. 8

 

Teras Offshore

 

The foregoing provisions were the focus of the judgment in Teras Offshore. In that case, the defendant entered into a series of contracts with a large corporation based in the US for the provision of various services and provision of equipment relating to three liquefied natural gas projects in or near Queensland, Australia (“the Main Contracts”). The defendant then subcontracted the works under the Main Contracts to the plaintiff. The plaintiff claims approximately USD 29 million relating to works in respect of these projects while the defendant has denied liability and has itself advanced counterclaims amounting to approximately USD 14 million. 

 

The defendant then applied by way of SIC/Summons No 3 of 2016 for a decision that the action is an offshore case. In deciding that the matter was an offshore case within the meaning of O 110 r (1) of the Rules of Court, the SICC made some important preliminary observations as follows:- 9

 

8          First, an “offshore case” is defined by a negative, ie, it is an action that has no substantial connection with Singapore. Thus, it is important to bear in mind that the question is not whether the action has a substantial connection with some place or places other than Singapore but whether the action has no substantial connection with Singapore. It follows that the mere fact that an action may have a substantial connection with one or more places other than Singapore does not necessarily mean that it may not also have a substantial connection with Singapore. It also follows that an action may have a substantial connection with Singapore as well as one or more other places. In other words, as submitted by the Defendant, it is not the presence of substantial connections with other jurisdictions that is important but the absence of a substantial connection with Singapore.

 

The court then considered the submission that the “purpose of an action being designated as an “offshore case” may held guide what was described as a “normative evaluation” of the various connection between the action and Singapore.” 10 It was submitted that the primary purpose of deeming a matter an offshore case is to allow foreign representation. Accordingly, it would be inconsistent with the international character of the SICC to insist on parties being represented by Singapore counsel in cases which share only cursory connections with Singapore. Despite this, the court held that focus should not be on the purpose of an action being deemed an offshore case, but on the action itself, and whether it has a substantial connection to Singapore. 11

 

In determining whether there is a “substantial connection” to Singapore, the court is likely to weigh the connection between the parties or the dispute to Singapore in accordance with paragraph 29 of the SICC PD set out above. On this note, the court will consider the nature of the claim as a whole, which includes the underlying substantive dispute as well as procedural or administrative matters in applying O 110 r 1(2)(f)(ii). 

 

In this regard, the SICC in Teras Offshore agreed with the argument that “the greater that the presence and extent of such factors, the more likely a finding of a substantial connection to Singapore, and the less likely the matter to be considered an offshore case. 12 Indeed, the requirement that a dispute must have a “substantial connection” indicates that there must be a real and significant connection between the dispute and Singapore for it not to be classified as an offshore case. 13

 

In view of these principles, the court considered that the crux of the inquiry was where the services and performance of the contracts between the plaintiffs and defendant took place. It held that the claims and counterclaims related to liquefied natural gas projects in Queensland had “nothing whatsoever” to do with Singapore. 14 Accordingly, the court concluded that the factual basis of the plaintiff’s claims and the defendant’s counterclaims which are at the heart of this dispute between the parties have no substantial connection to Singapore and therefore deemed the action an offshore case. 15

 

Offshore Cases and Exclusive Jurisdiction Agreements

 

Deeming an action as an “offshore case” therefore tempers a fundamental feature of court proceedings in Singapore: that parties will ordinarily be represented by Singapore-qualified counsel. This implication may therefore sit uncomfortably in cases where the parties have agreed for Singapore courts to have exclusive jurisdiction in determining any dispute that may arise out of the relevant agreement. 

 

To elaborate, the fact that the parties agreed to submit all disputes to the jurisdiction of the Singapore courts would mean that the parties must have contemplated that they would, ordinarily, be represented by Singapore counsel in a Singapore court if a dispute under should arise. 

 

Indeed, a party may be represented in Singapore courts only by a Queens Counsel in the Courts of England and Wales (or counsel who holds an equivalent appointment in any other jurisdiction) in the Singapore High Court upon an application under s 15 of the Legal Profession Act (Cap 161) (“the LPA”) read with Legal Profession (Ad Hoc Admissions) Notification 2012. 

 

The requirements established under the LPA and encapsulated by the Court of Appeal in Re Beloff Michael Jacob QC [2014] 3 SLR 424 16 make it apparent that it is only in limited circumstances where foreign counsel would have rights of audience in Singapore courts. The High Court of Singapore would have to exercise its discretion in each ad hoc admission in view of the facts of that particular case. 17

 

Given that courts should hold parties to their contractual commitment by giving effect to exclusive jurisdictional clause, 18 converting an action into an “offshore case” would, arguably, be inconsistent with the implied understanding between the parties that parties would ordinarily represented by Singapore counsel. 

 

This being said, Teras Offshore makes clear that the SICC is likely to deem an action as an offshore case as long as either the dispute, viewed as a whole, does not share a substantial connection with Singapore. This is entirely consistent with the character of the SICC as a platform for international dispute resolution as it confers greater autonomy to parties to select counsel which they feel is best suited to argue their case. 

 

Permitting parties to be represented by counsel with experience in the issues relating to the substance of the dispute operates also in concert with other procedural rules of the SICC, which facilitates the resolution of such disputes. They would include the fact that questions of foreign law can be determined on the basis of legal submissions and do not need to be proved by expert evidence. 19

 

Conclusion

 

 Absent a substantial connection to Singapore, a matter commenced in the SICC pursuant to an exclusive jurisdiction agreement in favor of Singapore courts is likely to be deemed as an offshore case where, inter alia, parties can be represented by foreign counsel. This has the potential to alter the shape and conduct of the litigation and is an issue that should be considered and weighed by parties to exclusive jurisdiction agreements in favor of Singapore courts. 

 

Notes

 

1 See BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2016] SGHC (I) 01. 

2 Report of the Singapore International Commercial Court Committee [15]. 

3 Response by Sundaresh Menon CJ at Opening of the Legal Year 2015 (5 January 2015) [18]-[20].

4 Sundaresh Menon CJ, International Commercial Courts: Towards a Transnational System of Dispute Resolution, Opening Lecture for the DIFC Courts Lecture Series 2015 (19 January 2015), [21].

5 See SICC Report at [4](j); [33].

6 See Singapore International Court User Guide, Note 3, [8].

7 See paragraph 26 of the SICC Practice Directions, Part IVB of the Legal Profession Act (Cap 161, 2009 Rev Ed) read with r 3 of the Legal Profession (Foreign Representation in Singapore International Commercial Court) Rules 2014.

8 See Order 110, Rule 30(2) read with paragraph 97 of the SICC PDs. 

9 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [8].

10 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [10].

11 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [10].

12 Mohan Pillay and Toh Chen Han, The SICC Handbook: A Guide to the Rules and Procedures of the Singapore International Court(Sweet & Maxwell, 2016) at [11.13]; Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [13].

13 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [16]; See also Mohan Pillay and Toh Chen Han, The SICC Handbook: A Guide to the Rules and Procedures of the Singapore International Court (Sweet & Maxwell, 2016 at [11.14].

14 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [17].

15 Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC [2016] SGHC (I) 02, [17]-[19].

16 Re Beloff Michael Jacob QC [2014] 3 SLR 424, at [54].

17 Re Andrews Geraldine Mary QC [2013] 1 SLR 872 at [42].

18 See PT Selecta Bestama v Sin Huat Huat Marine Transportation Pte Ltd [2016] 1 SLR 729 at [28]. 

19 Order 110 r 5 of the Rules of Court. See also Report of the Singapore International Commercial Court Committee at [34].

 

Duane Morris Selvam LLP

 

For further information, please contact:

 

Wei Chern Tham, Director, Duane Morris & Selvam 

wctham@selvam.com.sg