Wall St Journal: Singapore Aims to Outpace Hong Kong in Arbitrating Disputes Southeast Asian Cities Compete for Growing Market for Legal Services

Something we all knew already… but now it must be true if the WSJ are saying it !


Singapore Aims to Outpace Hong Kong in Arbitrating Disputes
Southeast Asian Cities Compete for Growing Market for Legal Services

SINGAPORE—Singapore is gaining ground against Hong Kong as Asia’s center for international arbitration by aggressively marketing such enticements as hefty tax breaks, squaring off in the legal-services sector that last year generated US$1.7 billion in Singapore alone.

Singapore’s Ministry of Law says that with global trade and investment flows shifting to Asia from the West, the number and complexity of cross-border disputes to be settled in the region are expected to increase.

“It is in this context that we are looking to develop our dispute-resolution services to become the leading dispute-resolution hub in the region,” a ministry spokesman said.

Cities like London, Paris and New York have long been global centers for arbitration, a service that helps companies resolve disputes outside courts.

Arbitration tends to be cheaper, more private and faster than traditional litigation, plus rulings are enforceable, unlike settlements reached through mediation.

As Asian economies have grown in recent decades, companies in the region have increasingly sought to resolve disputes closer to home, according to several arbitration lawyers.

In response, a group of businesspeople and the Hong Kong government in 1985 opened the Hong Kong International Arbitration Centre, which now offers services ranging from offices for dispute resolution and its own team of arbitration specialists to managing paperwork and finance arrangements for companies.

The city has especially drawn business from parties in mainland China, where its judgments have a strong record of enforcement, according to HKIAC, which says that none of its rulings has been refused enforcement in the last five years.

Six years after HKIAC’s launch, the Singapore International Arbitration Centre opened. Data for 2013 show SIAC had 259 new cases filed, up from 235 a year earlier. By comparison, HKIAC had 260 cases, down from 293 in 2012.

At SIAC, the total sum in dispute in 2013 amounted to US$4.8 billion. The highest claim amount was S$3.5 billion. At HKIAC, disputed sums totaled US$2 billion in 2013, according to the center’s annual report.

Singapore’s rise partly reflects a series of steps by the government.

In 2012, for example, it offered tax breaks of as much as 50% for law practices on income derived from arbitration cases held in Singapore.

It has also retooled legislation to make it easier for foreign law practices and local law firms to tie up, and eased some restrictions on foreign law firms to practice in Singapore.

Meanwhile, SIAC has been on roadshows across the world to raise its profile.

Singapore’s efforts have won over lawyers like Jelita Pandjaitan, Asia disputes partner at law firm Linklaters, who moved from Hong Kong in November to set up a disputes service in Singapore.

“The move is really a reflection of transaction flows,” Ms. Pandjaitan said. “As the economies of Southeast Asia have picked up, we’re seeing a lot more activity in this office [in Singapore] and in this part of the world more generally.”

Singapore is especially doing well in attracting arbitration business from India, with 85 cases last year filed at its arbitration center. That is the most from any single country for the center.

India has recognized judgments from Singapore arbitrators since 1999; Hong Kong and China decisions weren’t recognized until 2012. As Indian companies expand abroad and trade flows grow, India is seen by many arbitration lawyers as fertile ground for offering disputes services.

India scores 66th on the World Justice Project’s rule of law index, compared with Hong Kong’s 16th and Singapore’s 10th, making the two cities attractive dispute hubs for companies doing business in India.

To be sure, Hong Kong has plenty of supporters who say it will keep its leading role in Asia arbitration, and many lawyers say that there isn’t much difference between the two cities. Both “have supportive governments which recognize that international arbitration is good for their economies,” said Singapore-based Matthew Skinner, a partner at Jones Day.

HKIAC says that while Hong Kong doesn’t offer targeted tax breaks for arbitration like Singapore, its fees are more competitive than Singapore’s and Hong Kong’s national tax rate is very low. The center also says its record of enforcement and the range of products it offers represent an advantage. “Judicial independence and rule of law are still very much alive in Hong Kong,” said Teresa Cheng, chairwoman at HKIAC. “The choice of the seat in Hong Kong gives parties access to a broad pool of international arbitrators,” she said.

Hong Kong’s role in China has raised some concern among non-Chinese companies that they wouldn’t be treated fairly by arbitrators or enforcement agencies in a Chinese city, according to lawyers in both Hong Kong and Singapore.

“When I deal with Indonesian or Indian clients, the natural tendency is to pick Singapore as a seat because it is seen as more neutral [than Hong Kong], particularly when they have to deal with a Chinese party on the opposite side,” said Hri Kumar, a director of dispute resolution at Drew & Napier in Singapore.

HKIAC denies any favoritism to mainland Chinese companies.

“There is no evidence that shows growing influence of China over Hong Kong in arbitration,” said Ms. Cheng. Ms. Cheng said the city prides itself on offering “a broad pool of international arbitrators, which will be unaffected by any local politics.”

Corrections & Amplifications

India scores 66th on the World Justice Project’s rule of law index. A previous version of this article said the index was compiled by Transparency International.