By Ajinderpal Singh and Alexander Lee (Dentons Rodyk)
On 13 December 2024, the SIAC released for public consultation a draft of the SIAC Insolvency Arbitration Protocol (the “Protocol”).
The Protocol applies to any dispute that parties have agreed to submit to arbitration under the Protocol arising out of or in connection with, or in anticipation of, any insolvency proceedings.
The Protocol provides a procedure for arbitration at the SIAC for the resolution of disputes arising in relation to, or in anticipation of, any insolvency proceedings; or for specific use in the context of insolvency notwithstanding whether such dispute arises in anticipation of, or in relation to, any insolvency proceedings.
The Protocol adapts the SIAC Rules for use in the context of insolvency disputes.
According to the SIAC, the Protocol was developed in close consultation with local and overseas judges, insolvency and arbitration practitioners, and the Court of Arbitration of the SIAC. It was open for public consultation until 17 January 2025.
Applicability
The Protocol defines “insolvency proceedings” broadly, to mean and include “any judicial or administrative proceeding, including an interim proceeding, pursuant to a law relating to insolvency or adjustment of debt, in which proceeding the assets and affairs of a person or entity are subject to, or will be subject to, control or supervision by a court, for the purpose of reorganization or liquidation” ([2] of the Protocol).
According to the Note for Public Consultation for the Draft Protocol, the current broad wording on the applicability of the Protocol is intended to be permissive as to the insolvency-related scenarios whereby it may be utilised.
The Protocol is consent-based. Practically, such consent may be contained in agreements executed prior to any dispute or insolvency proceedings, in agreements entered into during any insolvency proceedings, or on the recommendation of a court or other person such as an insolvency professional or liquidator to consider utilising arbitration for the resolution of disputes and claims in the context of any insolvency proceedings. Agreements to adopt the Protocol may also be entered into where there are no ongoing or anticipated insolvency proceedings at the time of the agreement. (Note for Public Consultation)
Features
By agreeing to submit a dispute to arbitration under the Protocol, the parties agree that, subject to the modifications set out in the Protocol and any specific directions of the Tribunal, the SIAC Rules for the time being in force will apply ([3] of the Protocol).
Under the Protocol, there is a shorter timeline of 7 days for the Respondent to file its Response to the Notice of Arbitration ([6] of the Protocol). Under the SIAC Rules, the Respondent has 14 days.
In the case of a sole arbitrator, the parties must jointly nominate the arbitrator within a shorter period of 14 days ([9] of the Protocol). Under the SIAC Rules, the relevant time is 21 days. The timeline for parties to make nominations of a co-arbitrator to a 3-member tribunal has also been truncated to 7 days in the Protocol. Further, the timeline for joint nominations of arbitrators in the case of multiple parties has been shortened to 15 days.
The timelines for dealing with a challenge to an arbitrator have also been truncated.
The Protocol provides that the default seat of the arbitration is Singapore, and that Singapore law governs the agreement to submit disputes to arbitration under the Protocol. That is, subject to the parties’ agreement or the Tribunal’s determination ([7] of the Protocol).
If Singapore is the seat of arbitration, the Singapore International Arbitration Act 1994 or the Singapore Arbitration Act 2001, as the case may be, will apply to the conduct of the arbitration.
Whilst the Protocol provides for Singapore as the default seat and Singapore law as the default governing law of the arbitration agreement, the parties may agree on alternatives to these.
A sole arbitrator will be appointed, unless the Registrar is of the view (after considering the parties’ views) that the complexity, quantum, or any other circumstances require a panel of 3 arbitrators ([8] of the Protocol).
The SIAC plans to develop a specialist panel of arbitrators with expertise in insolvency-related disputes. An arbitrator nominated or appointed under the Protocol may, but need not, be from this panel ([12] of the Protocol).
Upon the parties’ request, the Tribunal may suspend proceedings for up to 3 weeks, for the parties to attempt a resolution via mediation ([8] of the Protocol). In the event that the mediation is successful, the Tribunal may record the settlement in the form of a consent award ([19.2] of the Protocol).
According to the Note for Public Consultation, the Protocol provides a specific cue to arbitrators and parties to consider mediation, and this is intended to promote the use of mediation in the context of insolvency-related disputes, even within the arbitration process. The understanding is that such a mediation is a separate process, and subject to any applicable law, no member of the Tribunal appointed shall act as a mediator in such a mediation.
Generally, the final award must be made within 6 months from the date of the Tribunal’s constitution ([24] of the Protocol). Under the SIAC Rules, there is no such timeline, save for under the Streamlined Procedure (3 months) and Expedited Procedure (6 months).
Under the SIAC Rules, the Tribunal must submit the draft award to the SIAC Secretariat within 90 days of the date of submissions. However, under the Protocol, this period is only 30 days ([25] of the Protocol).
According to the Note for Public Consultation, the Protocol provides a cue to Tribunals to elicit the views of the parties at the outset of proceedings as to the need to join any other party to the arbitration. This is intended to ensure that Tribunals are alive to the necessity for, subject to the views of the parties, all relevant and interested parties to be party to the arbitration. In particular, within 7 days of the Tribunal’s constitution, it shall conduct a case management conference to discuss, inter alia, the parties’ views on the joinder of any third party ([21] of the Protocol).
In respect of confidentiality issues, the parties may request for a redacted award, and disclose such award in any relevant insolvency proceedings. Further, parties may, with the Tribunal’s leave, disclose the status and progress of an arbitration conducted under the Protocol, in any relevant insolvency proceedings. ([28] of the Protocol)
Views
According to the SIAC, the Protocol is the first proposal by an international arbitral institution to determine insolvency-related disputes by way of arbitration.
The Protocol envisages a bespoke mechanism to deal with specific insolvency-related disputes, under the auspices of an established arbitral institution. The proposed development of a specialist panel of insolvency arbitrators would be a key development to support this initiative.
Given the increasing complexity and cross-border nature of insolvency disputes, the Protocol is a positive initiative which will give insolvency practitioners and parties another option to efficiently resolve such matters. The streamlined timelines under the Protocol, which envisage the swifter resolution of disputes, can help parties to obtain an outcome in a more time and cost-efficient manner.
The confidential nature of arbitration is an important element which may facilitate the resolution of insolvency disputes, particularly in cases concerning sensitive information. Also, the ability to request an anonymised / redacted copy of a decision, order, ruling, or award, allows parties to adapt confidentiality provisions to suit their needs. This is in line with the reporting duties owed by insolvency practitioners to the court and creditors.
The fact that parties can rely on an award from an internationally recognized arbitral institution may assist with enforcement. It should however be borne in mind that certain jurisdictions take the view that insolvency disputes are not arbitrable. In such scenarios, enforcement is likely to be more complicated.
The Protocol’s encouraging of the use of mediation is also consistent with Singapore’s promotion of mediation as an important alternative dispute resolution mechanism.
As the public consultation period has just ended, we look forward to the SIAC’s updates and the final form of the Protocol.
The Protocol is a welcome development, given the rise in cross-border insolvencies, and Singapore’s goal of becoming an international restructuring hub.
* This article was originally published by Dentons Rodyk.
