A minority shareholder of a holding company was also its managing director, and the managing director of its various subsidiaries. As managing director of the subsidiaries, he engaged in various breaches of fiduciary duties against the subsidiaries. The majority shareholder brought an action against him seeking, among other things, relief from oppression under section 216 of the Companies Act. The Court of Appeal held that the majority shareholder was not entitled to relief under section 216 of the Companies Act because it had the power to stop the appellant’s oppressive conduct, as it eventually did, by exercising its rights as a shareholder to remove the appellant as a director. It further observed that the majority shareholder’s complaints appeared to be corporate wrongs (as opposed to personal wrongs suffered by the majority shareholder) that could have been pursued by way of a derivative action under section 216A of the Companies Act.
INTERNATIONAL ARBITRATION: Asia’s Diversity: The Strength of Asia’s 7
Arbitration Centres Lies in Their Differences, Not in Their Similarities
Asia’s arbitration centres face a similar challenge on how best to address the projected exponential increase in commercial disputes as a consequence of the robust growth in international trade and commerce across Asia. In this respect, the differences between Asia’s arbitration centres make institutional arbitration in Asia attractive as a whole by catering effectively to the varying needs of commercial parties. However, the real strength of Asia’s arbitration centres lies in the integration of the differences to develop an Asian international arbitration culture. This article first appeared in (2014) 80 Arbitration 370.
WILLS AND SUCCESSION: Kuek Siew Chew v Kuek Siang Wei & Anor  16 SGHC 237 (Singapore, High Court, 18 November 2014)
The deceased died leaving behind an unsigned note setting out how he wished his estate to be distributed (“Note”). The Note is not enforceable, as it is not a valid will. The deceased’s family executed the following documents:
A letter of consent (“Letter of Consent”) by the parties named in the Note around 19 March 2007, signifying their consent to abide by the
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deceased’s wishes in the Note.
A deed of consent (“Deed of Consent”) by some of the family members named in the Note dated 8 July 2010 incorporating the Letter of Consent and authorising the defendants to, among other things, apply to be the administrators of the deceased’s estate and to enter into negotiations with other family members. Signatories to the Deed of Consent included the Plaintiff. A deed of family arrangement on 11 November 2010 (“DFA”).
In the Note the Plaintiff receives 9.2% of what she would have received under the laws of intestacy. The extent of the deceased’s estate was not disclosed to the Plaintiff. Held that the Letter of Consent was unenforceable, as it was neither executed as a deed nor as a contract for consideration. Further held that the Deed of Consent and the DFA were also unenforceable as there was no full and frank disclosure, in particular, as to the extent of the deceased’s estate. The assets of the deceased’s estate were ordered to be distributed in accordance with the Intestate Succession Act.
WONGPARTNERSHIP ACTS IN…
Combination of Keppel Infrastructure Trust (“KIT”) and CitySpring Infrastructure Trust and acquisition by KIT of a 51% stake in Keppel Merlimau Cogen Pte. Ltd
The Firm is acting for KIT in relation to:
Ltd., which owns Keppel Merlimau Cogen Plannt (a 1,300 MW combined cycle gas turbine generation facility on Jurong Island) from Keppel Energy Pte. Ltd. for approximately S$510 million.
When completed, the combined trust will be the largest Singapore infrastructure-focused business trust, with total assets of over S$4 billion, listed on the Main Board of the Singapore Exchange Securities Trading Limited.
Partners from a number of the Firm’s Practice Groups are advising KIT in respect of the transactions, including Joint Managing Partner of WongPartnership, Ng Wai King. The other Partners involved are Low Kah Keong and Quak Fi Ling from the Corporate/Mergers & Acquisitions Practice, Karen Yeoh from the Equity Capital Markets Practice, Angela Lim and Ethel Yeo from the Corporate Real Estate Practice, and Lam Chung Nian from the Intellectual Property, Technology & Media Telecommunications Practice.
Other recent matters that the Firm was involved in were:
NG Wai King
d: +65 6416 8022
e: waiking.ng@ wongpartnership.com
LAM Chung Nian
d: +65 6416 8271
e: chungnian.lam@ wongpartnership.com
d: +65 6416 8012
e: angela.lim@ wongpartnership.com
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Sale by Mr Martin Fassler and Ms Jaclyn Ang Peck Neo of Fassler Gourmet Pte. Ltd., a producer of fine smoked and value-added seafood specialties, to Credence Partners Pte. Ltd., a Singapore-based private equity firm, through Credence Capital Fund II (Cayman) Limited
LOW Kah Keong
d: +65 6416 8209
e: kahkeong.low@ wongpartnership.com
Mandatory conditional cash offer by Credit Suisse (Singapore) Limited, for and on behalf of New Precise Holdings Limited, for Forterra Trust
Subscription by a subsidiary of Vibrant Group Limited of convertible bonds with a total face value of S$25 million issued by Blackgold International Holdings Limited, a company listed on the Australia Securities Exchange
Sale by Tiger Airways Holdings Limited of its entire 40% shareholding interest in its Australian subsidiary, Tiger Airways Australia Pty Ltd., to VAH Newco No. 1 Pty Ltd., a wholly-owned subsidiary of Virgin Australia Holdings Limited
US$8.75 million investment by API (Hong Kong) Investment Limited, a subsidiary of Ant Financial Services Group (the microfinance unit of Alibaba), for a minority stake in Singapore-based mobile security software developer, V-Key
Voluntary conditional offer by Perennial Real Estate Holdings Limited (“PREHL”) (formerly known as St. James Holdings Limited) for all the issued units in Perennial China Retail Trust other than those already owned, controlled, or agreed to be acquired by PREHL
QUAK Fi Ling
d: +65 6416 8023
e: filing.quak@ wongpartnership.com
d: +65 6416 2552
e: ethel.yeo@ wongpartnership.com
d: +65 6416 2482
e: karen.yeoh@ wongpartnership.com
S$368 million financing by a syndicate of lenders to Harmony Convention Holding Pte. Ltd. to, among other things, refinance an existing loan facility and for general corporate funding needs
Banking & Finance, Corporate Real Estate
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S$1.62 billion financing by a syndicate of lenders to Central Boulevard Development Pte. Ltd., relating to Marina Bay Financial Centre, Tower 3, a prime commercial development located along Marina Boulevard
Banking & Finance
A minority shareholder of a holding company was also its managing director, and the managing director of its various subsidiaries. As managing director of the subsidiaries, he engaged in various breaches of fiduciary duties against the subsidiaries. The majority shareholder brought an action against him seeking, among other things, relief from oppression under section 216 of the Companies Act. Held that the majority shareholder was not entitled to relief under section 216 of the Companies Act because it had the power to stop the appellant’s oppressive conduct, as it eventually did, by exercising its rights to remove the appellant as a director. Further observed that the majority shareholder’s complaints appeared to be corporate wrongs (as opposed to personal wrongs suffered by the majority shareholder) that could have been pursued by way of a derivative action under section 216A of the Companies Act:
-- Ng Kek Wee v Sim City Technology Ltd  SGCA 47 (Singapore, Court of Appeal, 9 September 2014)
This case involved an application under section 216 of the Companies Act. This section allows a shareholder to bring a claim against the other shareholders of a company for oppression. Under this section, a court has a wide discretion as to the orders that it can make, including ordering a buyout of shares or a winding up of the company. Such a claim is usually brought on the basis of minority oppression. In this case, the respondent had made this application in order to seek various reliefs for wrongdoings committed by the appellant. These wrongdoings were alleged by the respondent to amount to commercial unfairness under section 216, thus entitling it to relief under that section.
The respondent was a company, Sim City Technology Ltd. It was the majority shareholder of Singalab International Pte Ltd (“SI”), holding about 54% of the shares in SI. SI was a joint venture company that had been started by the respondent and the appellant. The appellant was a minority shareholder in SI and held 15% of the shares. The remaining shares were held by two other minority shareholders who did not play a part in the proceedings.
SI was the parent company of two wholly-owned subsidiaries, Singalab Pte Ltd and Beans Factory Hong Kong Co Limited. Although the appellant was only a minority shareholder in SI, he was its managing director, and also the managing director of Singalab Pte Ltd and Beans Factory Hong Kong Co Limited.
To discuss the possible implications of this for your business, please contact:
CHOU Sean Yu
d: +65 6416 8133
e: seanyu.chou@ wongpartnership.com
Manoj Pillay SANDRASEGARA d: +65 6416 8106
e: manoj.sandra@ wongpartnership.com
Sometime after the incorporation of SI, the respondent discovered that the appellant had engaged in various wrongdoings in relation to SI and its subsidiaries. These wrongdoings, among others, were as follows:
•HeaddivredSingaabPteLtd’susness,ssets,andtalnttoanothr yyed y,nbrachofhsdutissa dirctor fbe
The respondent therefore commenced a suit against the appellant seeking relief under section 216 for commercial unfairness. The Singapore High Court granted the respondent the relief sought, and the appellant appealed to the Singapore Court of Appeal.
Before the Court of Appeal, the appellant claimed that the respondent was not entitled to relief under section 216 of the Companies Act. The appellant did not dispute that he had engaged in the acts which were the alleged wrongdoings, but he argued that the respondent’s application for relief under section 216 was misconceived because all the acts had been in relation to Singalab Pte Ltd and not its holding company, SI. The second issue before the court was whether the fact that the respondent was the majority shareholder in SI precluded it from claiming relief under section 216.
The Court of Appeal found in favour of the appellant:
•ngescefrssiveconuctundrsction216,it heldthatacourtwsnotconfiedtofocsingonwrongoinscmmitted dirctly against a holdig comanyin a section216 applcaton by a shreoldrofthatholdingcomany.Ins,tdttddsfteef
•Hwever,theCourthedthatthersondntwsnotentitledtorelief undrsctin216bcasethersndenthadtepowrtostopthe appelant’spprsivecndctbyexercsigitsrightsasthemajority r,sty,yremovingtheapellantasadrector.
•TheCortasobservedthatthemajrityshreoler’scomplatswre moreaprriatelycharctersedscorpratewronssufferdbySI rathrthanersonalwrogscommittedagaisttherespodent,andthe moreaprpriateremedywsaderiviveactionundersectin216Aof theCmpanesct.Hwever,theCurtreraiedfromrechigafirm gns
The Court first considered whether an application under section 216 of the Companies Act required that the wrongdoings committed be directly against the company in respect of which the application was brought. In this case, the wrongdoings had been committed by the appellant against the subsidiaries of SI rather than directly against SI itself.
The Court stated that in the context of groups of companies, the courts took a practical rather than narrow and legalistic approach in construing the words “affairs of a company” in section 216. The Court held that commercially unfair conduct in the management of a subsidiary would be relevant to the extent that such conduct affected the holding company whose member was claiming relief under section 216. In this instance, SI’s sole assets were its wholly- owned subsidiaries. Accordingly the Court held that the appellant’s misconduct in relation to Singalab Pte Ltd was relevant under section 216 because the appellant’s actions against SI’s subsidiaries denuded SI of all its value and reduced it to a shell company. As such, the appellant had enriched himself at the expense of SI.
The Court then considered whether the respondent was precluded from obtaining relief under section 216 as a majority shareholder of SI. The Court held that it is a substantive requirement for a claim under section 216 that a shareholder (here the respondent) claiming relief must be otherwise powerless to change its fate by taking control of the company. In this respect, it stated that the touchstone is not whether the respondent was a minority shareholder of SI, but whether the respondent lacked the power to stop the allegedly oppressive acts. Where a plaintiff was able to remedy any prejudice or discrimination he had suffered through the ordinary powers he possessed by virtue of his position, the conduct of the wrongdoer could not be said to be unfair to him.
In this instance, the fact that the respondent was a majority shareholder per se did not disentitle it from relief under section 216. However, since the respondent as the majority shareholder had the majority voting power and was able to use it to take control of SI and remove the appellant from SI’s board, the Court held that it was not entitled to relief under section 216. On this ground, the Court allowed the appellant’s appeal.
The Court further observed that section 216 was intended as a remedy for personal wrongs committed against a shareholder, not for corporate wrongs committed against the company of which the applicant was a shareholder:
•ntyynewulessofthewrongoerscndctas evideceofthemanerinwchthewrondorhadcodctedthe comany’saffairsindsrgardofthecomplaiant’sinterstasaminority shreoldrtobringnaconunersection216.
•Hwever,anoverlyperssiveinterpretationofsection216wuldrun contertohersentlegisatie,hsrcomeceentofastatoryderivativeactionunrsction21Aofthe ComanisActwhrecroratewrogshavebeencmmittedaganstthe comanyofwhchtheaplicntisasareoldr.
•Furthr,allowingacorpreclaimtobepursueduersction26ofthe ComanisActwouldeanabseofprocssasitamountstoan imprpercrcumventinofprincipethatwhereawroghsbeen peretratdagaistacmpany,theproerpartytobringteactin agaistthewrngorshouldbethecompnyadnotitsshrehodrs (i.e.,theprperpaintiffprincpl).Thisisbcase,inschnistace, esfresofthecoanyaswellasthe comany’screditrswillhavebeensimilarlyafected.Theclaimant shreoldrshouldnotbeallowedtoocedbywyofapersoalactin andrcovrttheexpenseofthese othrsimilrlyaffectedartis.
In this case, the Court noted that the acts complained of by the respondent appeared on their face to be corporate wrongs that could have been pursued against the appellant by way of a derivative action under section 216A of the Companies Act, but it declined to reach a firm landing on this issue.
Although the Court of Appeal allowed the appeal, it refused to order costs against the respondent in light of the appellant’s egregious wrongdoings and breaches of his fiduciary duties.
Our Comments / Analysis
The Court of Appeal’s decision is a welcome clarification on the threshold and scope of statutory relief under section 216 of the Companies Act:
•First,anappicantwillonlybegrantedreliefundersection26wherehe seoropeyec.esss anf,nrayseersylrightsaaorityshrederwillsayeerodallegdlyopressivects.
•Secodly,anapplicatinforreliefudrsction216maybepremisedn ecsgoesiiaryofacmpanyofwhichte applcantsashrholerproviddthatesfesyrteg
•Finally,sctin216sintdedsa reedyforersnalwrogs gaista shreoldr.Theaproraterecouseforcororatewrnsaainsta ysaen comecedndrsction26A.
In view of the above, a shareholder who has been prejudiced by oppressive conduct should first consider whether there are any ordinary remedies available to him to stop the oppressive conduct. If there are none, the shareholder should then have regard to whether the wrongdoings are against the shareholder in his personal capacity or are against the company in deciding whether to apply for statutory relief under section 216 or section 216A of the Companies Act.
Asia’s Diversity: The Strength of Asia’s Arbitration Centres Lies in Their Differences Not in Their Similarities
Benson Lim, an associate with the Firm, won the Chartered Institute of Arbitrators’ (“CIArb”) Singapore branch essay writing competition in 2014. The essay first appeared in Volume 80 of Arbitration – The International Journal of Arbitration, Mediation and Dispute Management. We are pleased to reproduce his essay here with the kind permission of CIArb.
In a diverse geographical region where there are 51 distinct legal cultures and jurisdictions, it is unsurprising and natural that differences between Asia’s arbitration centres should exist. These differences are also partly a result arising from both the states’ objectives in instituting the legal rules as well as the practices and traditions derived from the many years of practising arbitration in Asia.
However, these differences do not mask the fact that Asia’s arbitration centres face a similar challenge: how best to address the projected exponential increase in commercial disputes as a consequence of the robust growth in international trade and commerce across Asia. In this respect, Asia’s arbitration centres derive their strengths from their differences which make institutional arbitration in Asia attractive as a whole by catering effectively to the varying needs of commercial parties. Further, the real strength of Asia’s arbitration centres lies in the integration of these differences to develop an Asian international arbitration culture.
To discuss the possible implications of this for your business, please contact:
Andre MANIAM, Senior Counsel d: +65 6416 8134
e: andre.maniam@ wongpartnership.com
CHOU Sean Yu
d: +65 6416 8133
e: seanyu.chou@ wongpartnership.com
d: +65 6517 3770
e: benson.lim@ wongpartnership.com
II. The Differences between Asia’s Arbitration Centres Make Institutional Arbitration in Asia Attractive as a Whole by Catering Effectively to the Varying Needs of Commercial Parties
The different—but equally robustly drafted—sets of institutional rules promulgated by Asia’s arbitration centres enable parties to select the most appropriate arbitration centre to assist them in resolving their disputes.
With the increase in the volume of trade and commerce in Asia, there is naturally a greater diversity in the types of commercial disputes and the complexities of the same would also vary. This means that the most appropriate way of resolving a commercial dispute is unlikely to be identical even if the general means of dispute resolution (e.g. arbitration) is the same. In meeting parties’ varying commercial objectives, the different – but equally robustly drafted – sets of institutional rules promulgated by Asia’s arbitration centres give parties a real choice in terms of the most appropriate form of institutional arbitration for their disputes.
The idea that Asia’s arbitration centres should focus on addressing parties’ diverse commercial needs is consistent with the original driving force behind arbitration in general. Arbitration was initially intended to be a solution to resolve commercial disputes which traditional dispute resolution institutions (such as national courts) could not resolve in a manner satisfactory to commercial parties. Arbitration then became relevant and viable as an alternative dispute resolution means over the years because the arbitral process was robust and reliable enough to retain the trust and respect of both commercial parties and national courts. In particular, parties choose arbitration over litigation because the arbitral awards issued have a greater predictability of global enforcement as compared to judgments rendered by national courts. Until and unless the Hague Convention on Choice of Court Agreements becomes as widely ratified as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), arbitration would always retain this advantage over litigation.
In this regard, institutional arbitration has certain perceived advantages over ad-hoc arbitration. Specifically, the structure and procedural predictability in an arbitration administered by an arbitration centre arguably mean a lesser likelihood of court intervention at each stage of the arbitration proceedings (and hence avoids incurring potentially significant costs for parties in this respect). The benefits of the arbitration centre’s administrative services and lower arbitrators’ fees as capped by the arbitration centre usually outweigh the costs of referring a dispute to an arbitration centre, especially in relation to large and complex disputes where many procedural issues are likely to arise.
Hence Asia’s arbitration centres play an important role in enhancing the attractiveness of institutional arbitration (and arbitration as a whole) because a reputable arbitration centre’s endorsement of an arbitral award can increase the likelihood of the losing party voluntarily complying with the arbitral award. The then Chief Justice of India, Justice K.G. Balakrishnan, was of a similar view that
“reliance on recognised international arbitral institutions has a positive correlation with the recognition and enforcement of arbitral awards across different countries.”
Accordingly, he emphasised the need to establish an internationally recognised arbitration institution in India.
Similarly, Henry Brown and Arthur Marriott observed1:
“It is a striking feature, for example, of ICC awards that the majority are honoured without difficulty. There is a very strong moral and practical pressure upon a state, or a state enterprise, to honour an award adverse to it.”
The case statistics show that commercial parties share this observation regardless of whether it is merely perceived or real. As is apparent from a 2008 survey by the Queen Mary University and PricewaterhouseCooper, 86 per cent of arbitral awards rendered arose from institutional arbitration in stark contrast with the remaining 14 per cent that were made in ad-hoc arbitration proceedings.
However, the strength of Asia’s arbitration centres is not merely derived from the fact that they administer institutional arbitration. Instead, it is derived from the diverse sets of institutional rules which allow parties to exploit the perceived advantages of institutional arbitration and yet calibrate the degree of administration exercised over the arbitral procedure as well as the degree of party autonomy which is inherent in arbitration. For example, the Hong Kong International Arbitration Centre (“HKIAC”) prides itself on its “light touch, full service” approach towards the administration of arbitration proceedings conducted under the HKIAC Administered Arbitration Rules.
In contrast, the China International Economic and Trade Arbitration Commission (“CIETAC”) promotes a (controversially) greater degree of administration where its secretariat retains wide overarching powers to oversee arbitral tribunals. In spite of recent initiatives by CIETAC to cede greater control to parties in relation to the arbitral procedure, these aforementioned powers have not been affected significantly. For example, CIETAC case managers even arguably exercise some of the functions of an
arbitral tribunal by taking part in site inspections, collecting evidence, and conducting research under the arbitral tribunal’s instructions. Professor Kun Fan concluded2 that: “Thus the CIETAC is said to be more ‘institutional’ than many other arbitration institutions.”
Yet, in departing from the common practices of other arbitration centres in Asia, this CIETAC model would appeal to parties who are of the view that the expeditious resolution of commercial disputes is more important than the parties’ control over the arbitral process. This echoes an observation made in “The SIAC Rules 2010 and the KLRCA Arbitration Rules 2012: Some observations on the key differences”3 that the Singapore International Arbitration Centre (“SIAC”) Rules provide a “more top down approach in favour of expediency” (e.g. the default operation of the expedited procedure provisions where a party can invoke the expedited procedure even in the absence of consent by the other party) while the Kuala Lumpur Regional Centre for Arbitration Rules demonstrate a greater emphasis on party autonomy (e.g. even in the absence of express agreement on the appointment of arbitrators and even if only one arbitrator is to be appointed, parties’ views on such an arbitrator’s appointment are taken into consideration).
Further, in terms of the costs of arbitration, the differing institutional rules by Asia’s arbitration centres provide various fee structures which address parties’ concerns about the costs of arbitration. It is generally true that parties give scant consideration to the possibility of disputes arising at the making of a contract and hence to the costs of arbitration when selecting an arbitration centre in a “midnight clause” of an arbitration agreement. Nevertheless, when a dispute first arises, the costs of arbitration inevitably always become a critical factor in determining how parties resolve the dispute.
A Global Arbitration Review survey of potential costs arising from arbitration under the various arbitration centres in Asia has shown stark differences which would become more apparent as the quantum of the dispute increases. In this regard, the different fee structures offered by Asia’s arbitration centres enhance the appeal of institutional arbitration in Asia because parties can better gauge which arbitration centre is most appropriate having considered the likely disputed quantum in any potential dispute. For example, HKIAC stands out as the only arbitration centre in Asia which provides institutional rules empowering parties to decide whether the arbitral tribunal’s fees should be calculated in accordance with an ad valorem fee schedule or hourly rates4. Such an innovation is spurred by the same impetus alluded to by Chan Leng Sun, S.C. and Tan Weiyi5:
“This perception [that arbitration is expensive] creates an impetus for arbitral institutions – no doubt driven at least in part by
competitive sentiment – to streamline arbitrations so that their particular institution’s rules will be more attractive, and will allow the institution to administer more arbitrations, more quickly.”
Similarly, the differences in the institutional rules drive Asia’s arbitration centres to address certain lacunae in the practice of arbitration. For example, in the recent decision of the Singapore High Court in FirstLink Investments Corp Ltd v GT Payment Pte Ltd6, the absence of an express choice as to the law governing the arbitration agreement led to a dispute before the court. The court rejected the English position in Sulamérica Cia Nacional de Seguros SA v Enesa Engelharia SA7 and found that the law of the seat of the arbitration should be implied as the proper law to govern the arbitration agreement unless there are contrary indications. The conflicting decisions, albeit in two different jurisdictions, create unpredictability and uncertainty which are inimical to commercial parties. It is noteworthy that the HKIAC recently highlighted that it is the only arbitration centre in Asia with an express reference to the law of the arbitration agreement, which is included in its amended model arbitration clauses for its Administered Arbitration Rules.
Hence, the different sets of institutional rules promulgated by Asia’s arbitration centres allow parties to choose a form of institutional arbitration which fits their commercial objectives best. The existence of such a choice enhances the strength of arbitration over litigation as a dispute resolution mechanism and this is how differences in Asia’s arbitration centres make arbitration under Asia’s arbitration centres an effective and desirable means of dispute resolution in Asia.
The unique approaches towards arbitration by Asia’s arbitration centres make arbitration viable as an alternative dispute resolution option across various cultural contexts in Asia.
The differences between Asia’s arbitration centres arise from the arbitration centres taking cognisance of the cultural contexts in different states and the existence of such adaptations is the reason why arbitration is a viable option in many states in Asia. The cultural context and legal traditions in a particular state influence whether arbitration is recognised as a viable dispute resolution tool in that state. This was astutely noted by Aleksander Goldštajn8:
“For parties belonging to the same or similar economic, legal and cultural circles and having the same political philosophy it is easy to agree to the competence of institutional arbitration in a country which belongs to the same circle. Reservations with respect to institutional arbitration bodies tend to be voiced when
these are located in a country outside the circle to which one of the parties belongs.”
For example, party autonomy is generally deemed as a sacrosanct principle in arbitration. Yet in China, while the Arbitration Law of China enshrines party autonomy as one of the basic principles, there are many statutorily imposed restrictions on party autonomy in arbitration such as a limited choice of arbitration centres for arbitration conducted in China and a limited choice of arbitrators from the arbitration centres’ closed panel list who have to fulfil strict qualifying standards under Chinese laws. Professor Kun Fan explained this phenomenon9:
“In China, however, the nature of arbitration remains more administrative than contractual. The concept of party autonomy is traditionally foreign to Chinese minds.”
In spite of this, there is a general preference by non-Chinese parties involved in business in China for arbitration as a dispute resolution means due to the perceived lack of transparency of the Chinese courts. However, it is usual for Chinese counterparties to reject the choice of international arbitration centres such as ICC in any arbitration agreement between parties. Hence the choice of arbitration under CIETAC’s auspices is a reasoned compromise between the quirks of Chinese legal culture and parties’ desire for greater certainty and predictability in dispute resolution. Indeed, as is apparent from the statistics, other arbitration centres in Asia (in particular, SIAC and HKIAC) are increasingly being favoured to resolve disputes related to business in China because these respective arbitration centres are deemed to hold to generally accepted arbitration norms, address the cultural contexts of an Asian society, and yet offer a predictable framework for dispute resolution.
Further, Asia’s arbitration centres expound approaches to arbitration with consideration of cultural contexts which go beyond legal traditions. A classic example would be the use of mediation during arbitration proceedings which originated from China. In China, the preferred cultural slant towards resolving disputes not involving the state is through private and informal dispute resolution means such as mediation. Jeff Miller10 considers this cultural attitude towards the rule of law to arise from the implications of guanxi.
As a preliminary point, the use of mediation in arbitration proceedings is fraught with obvious difficulties. While an arbitral award may be issued along the terms of the settlement agreement and hence the settlement terms would have the benefit of the ease of enforcement of an award under the New York Convention, the use of mediation during arbitration proceedings may demonstrate a real or apparent risk of bias on the part of
the arbitral tribunal. This is of practical concern to parties especially since the ground of natural justice is increasingly invoked in challenging an arbitral award before national courts due to the recent limited success in invoking the public policy ground. In any event, the appointment of the arbitral tribunal as mediators ignores the fact that mediation involves a different skills set than that required of an arbitrator.
However, in an astute recognition of the cultural context underlining this practice, the Hong Kong Court of Appeal has held that while the use of mediation during arbitration proceedings may demonstrate a real or apparent risk of bias to the enforcement courts, the latter must accord due weight to “an understanding of how mediation is normally conducted in the place where it was conducted”.11 Accordingly, the arbitral award was upheld.
Nonetheless, the concerns with regard to arbitration and mediation are being addressed. The Beijing Arbitration Commission (“BAC”) amended its rules in 2008 to enable parties to request a replacement of an arbitrator on the ground that any subsequent award may be affected by the mediation proceedings12. Similarly, Article 45(8) of the CIETAC Rules 2012 provides that where parties do not wish for the arbitral tribunal to be involved in the mediation, parties may consent for CIETAC to mediate instead.
Hence the fact that Asia’s arbitration centres take cognisance of the different cultural context (and hence are different) is a strong point because this enables arbitration to be a viable dispute resolution tool in all the states in the first place.
III. The Real Strength of Asia’s Arbitration Centres Lies in the Integration of the Differences to Develop an Asian International Arbitration Culture
The real strength of Asia’s arbitration centres does not lie in the mere existence of differences but the integration of the same to develop an Asian international arbitration culture. Such a development involves integrating Asia’s cities into the global international arbitration community. Even though the focus of arbitration in Asia is on the unorthodox approach in mainland China and the internationally recognised hubs in Hong Kong and Singapore, the active participation of all stakeholders including other major business centres is a fundamental necessity for a truly Asian international arbitration culture to flourish. SIAC’s office in Mumbai, the recent opening of an office in Seoul by HKIAC and CIETAC’s establishment of its first sub-commission outside mainland China in Hong Kong are physical examples of this integration across Asia.
By integrating the differences between Asia’s arbitration centres to develop an Asian international arbitration culture, this would parallel the commercial realities that global economies of today interact closely and that there is greater economic convergence in Asia and beyond. Such greater interaction of economies and greater economic convergence would naturally give rise to more international trade disputes which are not best resolved by the practices of an arbitration culture in a particular state. Just as the needs of commercial parties in international contracts drove the harmonisation of the common law and civil law traditions in arbitration, the development of an Asian international arbitration culture would enable Asia’s arbitration centres to take full advantage in handling the disputes arising from these global economic phenomena.
To be sure, integration of differences between Asia’s arbitration centres does not mean eradicating the same. Instead, as succinctly summarised by the Hong Kong Secretary of Justice, Rimsky Yuen, S.C. in his keynote address at ICC-HK Arbitration Week 2013: “An international arbitration culture should be truly international and yet flexible enough to cater for regional or cultural differences.”
In a fashion, the integration of differences between Asia’s arbitration centres is similar to the many States’ ratification and application of the UNCITRAL Model Law on International Commercial Arbitration (the UNCITRAL Model Law). This was the intention behind the UNCITRAL Model Law which was explained by the secretariat of the United Nations Commission on International Trade Law in its notes:
“As a legislative act, the Model Law shares the destiny of all legal rules, all the more so because it aims to satisfy the international business community. Consequently, it strives to reconcile the differences existing between various legal systems with different traditions and practices.”
Today, the widespread adoption of the UNCITRAL Model Law by states has led to the uniformity of approach towards arbitration but with adaptations to the different legal cultures where relevant. In addition, the adoption of other concepts vis-à-vis the arbitral procedures has also enhanced the uniformity of approach towards arbitration. For example, Asia’s arbitration centres have largely adopted emergency arbitration rules because they have proven useful in addressing the needs of commercial parties ever since the International Chamber of Commerce (“ICC”) successfully pioneered its “Pre-Arbitral Referee Procedure” in 1990. The integration of differences between Asia’s arbitration centres should also promise the same benefits.
It should be cautioned, though, that the Asian international arbitration culture should not develop in a manner which erodes the advantages of arbitration as a dispute resolution means because such a development would be inimical to the integration of differences in the first place. The raison d’etre of arbitration is to obtain a decision which is enforceable across jurisdictions and avoids problems with enforcing foreign judgments. Accordingly, an Asian international arbitration culture must promulgate, among others, the effective enforcement of arbitral awards and access to justice before non-traditional dispute resolution institutions internationally.
For example, the questions arising from the enforceability of awards involving two former CIETAC sub-commissions are worrying. The feud between CIETAC and its breakaway Shanghai and Shenzhen sub-commissions has raised the issue of whether the two new arbitration commissions—Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration Centre (“SHIAC”) and the South China International Economic and Trade Arbitration Commission/Shenzhen Court of International Arbitration (“SCIA”)—still have the jurisdiction over disputes referring to CIETAC. Different Chinese courts have unfortunately adopted different approaches towards this issue and there remains no clear line of reasoning in the cases. In spite of the Supreme People’s Court of the People’s Republic of China’s Notice on Certain Issues Relating to Correct Handling of Judicial Review of Arbitration Matters which require lower courts to submit similar cases to the higher court for instructions before a ruling is issued, the validity of arbitration agreements referring to the breakaway sub-commissions (especially involving the effect of SHIAC and SCIA’s change of names on the awards rendered subsequently) remains unclear.
In conclusion, Asia’s arbitration centres derive their strengths from their differences which make institutional arbitration in Asia attractive as a whole by catering effectively to the varying needs of commercial parties. Further, the integration of the differences between Asia’s arbitration centres would enable Asia’s arbitration centres to create an Asian international arbitration culture as well as influence the international arbitration culture on a global level.
Henry Brown and Arthur Marriott, ADR Principles and Practice (London: Sweet & Maxwell, 2011) para. 4-115. Kun Fan, Arbitration in China: A Legal and Cultural Analysis (Oxford: Hart Publishing, 2013), p.132 Colin Ng & Partners, “The SIAC Rules 2010 and the KLRCA Arbitration Rules 2012: Some observations on the key differences”, CNP Update, 14 November 2012, available online at: http://www.cnplaw.com/ cnpupdate/Media/Content/Articles/2 012/06/CNP%20Update_14%20No v%202012%20-%20The%20SIAC
e%20KLRCA%20Arbitration%20Ru les%202012.pdf [Accessed October 6, 2014]
See the HKIAC Administered Arbitration Rules art. 36.2. Chan Leng Sun S.C. and Tan Weiyi, “Making Arbitration Effective: Expedited Procedures, Emergency Arbitrators and Interim Relief” (2013) 6(2) Contemporary Asia
Arbitration Journal 349, 351.
6  SGHCR 12
7  EWCA Civ 638;  1
Aleksander Goldštajn, “Choice of International Arbitrators, Arbitral Tribunals and Centres: Legal and Sociological Aspects” in Peter Sarcevic (ed.), Essays on International Commercial Arbitration (London: Graham & Trotman, 1989), p.39. Kun Fan, Arbitration in China: A Legal and Cultural Analysis (Oxford: Hart Publishing, 2013), p.24. Jeff Miller, “International Commercial Arbitration in China: Locating the Development of CIETAC in the context of international and domestic factors” (2013) 22 Dalhouse Journal of Legal Studies 83. Gao Haiyan v Keeneye Holdings
 HKCA 459 at .
See BAC Rules 2008 art.58(2).
WILLS AND SUCCESSION
Documents setting out a family arrangement granting the plaintiff a lesser share in the deceased’s estate than she would have been entitled to under the laws of intestacy were set aside on the basis that there was material non-disclosure to the plaintiff of the full assets of the deceased’s estate:
-- Kuek Siew Chew v Kuek Siang Wei & Anor  SGHC 237 (Singapore, High Court, 18 November 2014)
Kuek Ser Beng (“KSB”) passed away without a will on 30 January 2007. With his first wife, Lim Swee (“LS”), he had three children (the “First Family”). He also had a family with another woman, Goh Ah Pi (“GAP”), with whom he had five children (the “Second Family”).
KSB left behind an unsigned note (the “Note”), setting out how he wanted his estate to be distributed upon his death. The Note set out how the estate was to be distributed between 17 members from the First Family, Second Family, and other relatives of KSB. Among other things, KSB provided for LS and his two daughters from the First Family (namely the plaintiff Kuek Siew Chew (“KSC”) and Kuek Siew Eng (“KSE”)) to get S$200,000 each. A larger portion of KSB’s estate was to go to two of KSB’s grandsons from the First Family, including Kuek Siang Wei (“KSW”). However, as the Note did not meet the formal requirements of a will, it was unenforceable. By default, the provisions of the Intestate Succession Act (“ISA”) would have applied, which would have given LS, KSC, and KSE a much larger share of the estate.
Following KSB’s death, various of KSB’s relatives signed the following documents:
•A r f cst Letter of Consent”)siged by ll 17 prties amed n theNotearund9Mrch207,siggrtoey s ssne
•AdeedofcnsntbythebenefciaresnamedintheNoteelogngtor doetyd8y0Deed of Consent”). esoedftnd,,d.dfstdermsoftheetterofCosentad authorsdKSWandKuekTsigHsia(KTH”)(onefKSB’s graddughers)toapplytobetheamisfsedroosheda
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A deed of family arrangement on 11 November 2010 between representatives of the First Family and the Second Family (“DFA”). The DFA, among other things, stipulated that LS, KSC, and KSE would each get S$200,000.
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KSC then brought proceedings against KSW and KTH (the “Defendants”) challenging the validity of the Letter of Consent, Deed of Consent, and the DFA.
The Singapore High Court held that the Letter of Consent was not enforceable as it was neither a deed nor a contract. The Letter of Consent had not been executed as a deed, as it had not been signed, sealed, and delivered. The Letter of Consent could also not be construed as a contract, as there had been a lack of consideration moving from those parties who would not have any entitlement under the intestacy provisions (e.g., the grandchildren of KSB).
The Court then had to consider if the Deed of Consent could be enforceable. The Court held that the Deed of Consent was a family arrangement. A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or its peace and security by avoiding litigation. The hallmarks of a family arrangement are a pre-existing family dispute, a clearly declared intention to resolve outstanding matters, and a series of arrangements to address outstanding matters.
Unlike commercial transactions, in any family arrangement there must be honest disclosure by each party to the others of all such material facts known to her, relative to the rights and title of each party, as are calculated to influence the others’ judgment in the adoption of the arrangement. An advantage taken by any parties of the others’ ignorance will render the family arrangement liable to be set aside.
The plaintiff’s brother and sister-in-law had, by 23 June 2010, (before the Deed of Consent was executed), known of the full extent of KSB’s estate, which was worth $13.8 million. On the assumption that KSB’s estate was worth about S$13 million, and on the assumption that GAP would not be recognised as a spouse under the ISA, the Court observed that LS and KSB’s daughters (KSC and KSE) could potentially be entitled to considerably more under the intestacy regime than under the Note, as follows:
GAP not recognised as spouse under ISA
Amount Entitled to under the
Difference in Amount
Each of KSB’s daughters
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On the facts, there had been material non-disclosure at the time the Deed of Consent was entered into, and the Deed of Consent was set aside on this basis.
As the Defendants had no authority that could be derived from the Deed of Consent to act on behalf of the First Family, the DFA was also set aside.
The Court observed that even if the Letter of Consent could be construed as a family arrangement, it was liable to be set aside on the basis of either non- disclosure (discussed earlier), or gross inadequacy of consideration. With respect to the latter ground, the Court observed that the significant differences in the entitlements of LS and KSB’s daughters as discussed in the earlier part, could give rise to gross inadequacy of consideration leading to the Letter of Consent being set aside. The Court left it open as to whether or not the gross inadequacy of consideration is to be treated as invalid consideration or evidence of some vitiating factor (such as non est factum, misrepresentation or non-disclosure).
The Court also observed that a lack of independent legal advice is not a sufficient basis to justify setting aside a family arrangement, where a party clearly knew the content and purpose of the family arrangement, and where a party was given ample opportunity to seek independent legal advice prior to executing the family arrangement.
Our Comments / Analysis
This decision illustrates the challenges inherent in drafting and executing a valid family arrangement. Even if the problem of the lack of consideration can be overcome by ensuring the family arrangement is executed by way of deed, there is always the risk that the family arrangement may be set aside, arising from one or more of the parties to the family arrangement failing to fulfill their duty to make full disclosure of all material facts.
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