The Singapore International Commercial Court and its role in establishing Singapore as a nodal jurisdiction
By Clayton Chong and Muhammed Ismail Noordin (WongPartnership LLP)
Singapore has made no secret of its ambitions to be an international debt restructuring hub. In recent years, significant legislative changes have been made to refine the tools available for companies restructuring in Singapore. These include the introduction of enhanced moratorium protections, super-priority for rescue financing, pre-pack schemes of arrangements, and restrictions on the operation of ipso facto clauses.
In the latest of a series of legislative reforms, the Supreme Court of Judicature Act 1969 has been amended to clarify that the Singapore International Commercial Court (“SICC”) has jurisdiction to hear cross-border restructuring and insolvency matters.
This is an important step as the SICC provides “a conducive, if not, perhaps natural forum, for cross-border insolvency matters that have a significant foreign element”, as observed by Minister for Culture, Community & Youth and Second Minister for Law Edwin Tong SC in his keynote speech at the Singapore Insolvency Conference 2021.
The SICC has the capability and a robust framework for adeptly resolving foreign law issues, which reinforces Singapore’s ability to serve as a nodal jurisdiction for the coordination of international restructurings and insolvencies. The term “nodal jurisdiction” was coined by the Honourable Chief Justice Sundaresh Menon in his keynote speech at the 18th Annual Conference of the International Insolvency Institute in 2018, and it was emphasised by the Honourable Justice Kannan Ramesh in his speech at the Texas International Law Journal Symposium in 2021 to refer to “key seat jurisdictions amid a decentralised network of courts” which have “the right DNA or ecosystem for developing good restructuring solutions”.
The SICC
The SICC is a division of the High Court of Singapore, and was conceptualised as a forum dedicated to handling international commercial disputes. Its initiation was a confluence of two key ideas: (i) the realisation that the exponential growth in economic activity in Asia would give rise to a concomitant rise in commercial disputes; and (ii) the continuing effort to position Singapore as a centre for the resolution of commercial disputes.
With these ideas in mind, the SICC was formed with 11 International Judges in 2015. Changes were also made to allow foreign lawyers to appear before the SICC and argue appeals on particular questions of foreign law in specific cases.
This has grown to 18 International Judges, with Judge Christopher S. Sontchi being one of the most recent appointments announced in 2021. Judge Sontchi is one of the world’s leading insolvency judges. Before joining the SICC, Judge Sontchi was Chief Judge of the United States Bankruptcy Court for the District of Delaware. He is also a Lecturer in Law at The University of Chicago Law School and teaches restructuring to international judges through the auspices of the World Bank and INSOL International. He is a member of the International Insolvency Institute, Judicial Insolvency Network, National Conference of Bankruptcy Judges, American Bankruptcy Institute and INSOL International. He is also a member of the International Advisory Council of the Singapore Global Restructuring Initiative and the Founders’ Committee for The University of Chicago Law School’s Center on Law and Finance. Judge Sontchi’s term at the SICC commenced on 4 July 2022.
The importance of giving due regard to foreign laws in restructuring and insolvency proceedings
In cross-border restructuring and insolvency matters, situations will invariably arise where the law of the proceedings (the lex fori concursus) is at odds with the parties’ chosen contract law or the insolvency law of other jurisdictions which the debtor has connections with.
There are a myriad of issues where domestic and foreign laws may not perfectly align, necessitating a choice of law determination and the application of foreign law in addition to (or in lieu of) domestic law where appropriate. Such issues include the priority conferred to employees or trade creditors, the applicability of set-off, the avoidance of preferences, the validity of third-party releases, and the preservation or termination of contracts and licences.
For a jurisdiction to be an effective nodal jurisdiction, it is crucial that it be equipped to give proper consideration and due regard to potentially applicable foreign laws, rather than applying a parochial attitude in applying its own laws to the exclusion of others.
The regard for foreign laws finds its greatest expression in the concept of “synthetic proceedings” –proceedings of a domestic court applying the foreign law of another jurisdiction in order to create an effect which would have been achieved had insolvency proceedings been commenced in that foreign jurisdiction. The Honourable Justice Kannan Ramesh has observed that synthetic proceedings can be used to facilitate an efficient, effective and cohesive restructuring process by centralising the resolution of key issues within a single proceeding, thereby reducing the prospect of inconsistent outcomes.
How the SICC enhances Singapore’s ability to function as a nodal jurisdiction
With the flattening of the globe and corporate groups increasingly having operations across jurisdictions, conflicts between applicable laws will likely become more pronounced in future restructuring and insolvency proceedings. This gives rise to a concomitant need to resolve such conflicts efficiently and fairly, including through the adoption of synthetic proceedings.
The SICC, with its deep bench of renowned international judges, is well positioned to be a platform for conducting synthetic proceedings for the resolution of foreign law issues in restructuring and insolvency matters. It is not merely that the SICC’s international judges have an extensive understanding and knowledge of the law of their home jurisdictions, but they also have the insight into the conditions, circumstances, and context of the law which informs the interpretation of the law in the penumbra of cases.
Further, the SICC permits foreign lawyers to represent parties and to make direct submissions on foreign law issues in certain circumstances, thereby allowing them to assist the international judges in the resolution of legal disputes in a manner that is likely to be more effective and expeditious than through an ordinary expert evidence procedure. This could enable a deeper and more attuned examination of issues of foreign law than would otherwise be possible.
Conclusion
Leveraging on the expertise of international judges of the SICC would improve the likelihood of orders made through synthetic proceedings being recognised and given effect in the relevant foreign jurisdictions. This would build on the already strong position that Singapore holds as a centre for restructuring. It would also further strengthen the ability to effect cross-border restructurings using a selected nodal jurisdiction, as recently seen in the restructurings of Prosafe SE (which received recognition of its Singapore moratorium and scheme in Brazil) and PT Pan Brothers Tbk (which received recognition of its Singapore moratorium in Indonesia and the recognition of its Singapore scheme in the US).
*This post summarises an article published by the authors in the International Insolvency & Restructuring Report 2022/23. The full article can be found here.