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The SIAC Investment Arbitration Rules are Here. And they look Good.

Abhishek Dwivedi, Advocate – Bombay High Court

Singapore International Arbitration Centre (SIAC) has published its first edition of the rules applicable to Investment Arbitrations (IA Rules) conducted under its aegis. These IA Rules were published on 1st January 2017 and have been drafted with specific requirements of investment arbitration in mind. While many institutions such as LCIA and ICC administer investment arbitration, there is no specialized procedure or separate set of rules for investment arbitration. The rules are an indication of the growing importance being given to investment claims in South Asia. In recent times, many South Asian countries such as India, Indonesia and Malaysia have received several investment claims and are contemplating a new regime of Investor-State Dispute Settlement (ISDS) mechanism. These IA Rules have to be seen in context of the recent aversion of developing countries to established regimes such as ICSID.  Another important point is that India, the largest contributor to SIAC in 2015, is not a party to ICSID.

Unlike commercial arbitration, investment arbitration has its basis and origin in public international law. There are more than 2000 Bilateral Investment Treaties and more than 15 multilateral instruments under international law that govern the Investment arbitration. The entire premise of crystallization of a dispute and the threshold of breach of legal principles under international law are fundamentally different from commercial transactions and disputes thereof. When the entire premise of a dispute and its resolution are different, there is no reason that there cannot be separate set of procedures for the two types of arbitration. Many issues such as jurisdiction, sovereign immunity and even the pleadings require a completely different level of procedural sensitivity in investment arbitrations. The IA Rules precisely attempt to bring that level of efficiency and sensitivity. Traditionally it has been seen that the investment arbitrations require a longer time to end than commercial arbitrations due to the complexities of the issues involved and higher threshold of evidence submission. In order to streamline the process and address the efficiency issues, it is always better to have a separate set of rules dealing with investment arbitration.

SIAC has attempted, quite successfully, to make the rules as customized to investment arbitrations as possible. The important aspects of the IA rules are:

The IA rules are promising and more than welcome. Their publication could not have been at a better time when many Asian, African, Latin American and few European countries (Poland) are eager to renegotiate their BITs or are reconsidering the ICSID regime. These IA Rules can be an attractive proposition to countries like India and Indonesia who have a successful record of enforcing SIAC awards. There can be no doubt that SIAC has taken the lead in the field and we can only expect others to follow. Especially, one can expect LCIA to publish rules on investment arbitration in coming months as it readies to overcome the post-Brexit challenges and tries to maintain its position as the preferred choice of arbitration in Europe.

However, in our eagerness to welcome these rules, we may tend to overlook the crucial issues that have forced many developing nations to move away from the traditional ISDS mechanisms. The IA Rules provide for waiver of sovereign immunity, power of Tribunal to impose sanctions and involvement of non-disputing parties in the arbitration process which may not go down well with the States. However, it can be argued and quite successfully so, that these IA rules will be subject to the underlying treaty or instrument that may clearly provide for such exclusions. It remains to be seen whether SIAC will accept reservations to its rules within the arbitration agreements that are present in these underlying instruments or treaties. Whatever the case maybe, these rules are an indication of times to come in the field of investment arbitration (which are bound to be interesting).

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