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London off the pace as Singapore arbitration centre opens in Shanghai

With London in fierce competition with Singapore, Hong Kong and Paris to become the dominant international arbitration hub, it has fallen a step behind after the Singapore International Arbitration Centre (SIAC) launched in Shanghai.

SIAC has opened a representative office in the Shanghai free trade zone in a move underpinning Singapore’s growing status as the dominant legal hub in Asia. Its third overseas office, following launches in Mumbai and Seoul, SIAC is to target Chinese companies as they increasingly turn to arbitration to solve corporate disputes.

Chinese parties have consistently ranked amongst the top five foreign users of SIAC in the last five years, and were the top foreign user of SIAC in 2012 and 2014. SIAC chair Lucien Wong said the opening will ‘enhance our existing ties with the legal and business communities in China by allowing us to interact more closely with users and other key players in international arbitration’.

With London lawyers having long benefitted from Asian disputes played out in English courts or arbitration venues, Singapore’s increasing status as a legal hub puts that flow of work at risk. Indeed, the percentage of the London Court of International Arbitration’s (LCIA) caseload from both Chinese and Indian parties fell slightly between 2012 and 2013. (There are still no caseload statistics from the LCIA for 2014.)

SIAC undertook a promotional campaign across the region in 2015 as it took advantage of fears over the neutrality of Hong Kong, following comments from the then president of the Hong Kong Law Society Ambrose Lam that lawyers should be more patriotic towards China, and European rivals London and Paris following the EU’s economic sanctions against Russia.

A new court, called the Singapore International Commercial Court, launched last year to handle international disputes that don’t go to arbitration. It has a global mandate, with 12 international judges including former English judges Sir Bernard Eder and Sir Bernard Rix and allows parties the freedom to use overseas counsel.

SIAC received 259 claims in 2013, a record year for the centre, but still 11% lower than the 290 received by the LCIA. Clyde & Co co-chair of arbitration Ben Knowles expects SIAC’s push into China to pay off given the ‘financial instability in China that will inevitably lead to cancelled projects and therefore disputes’.

‘China is a very big opportunity,’ he added. ‘Chinese companies have written arbitration clauses into a lot of contracts so we are starting to see arbitration involving Chinese parties. That’s only going to grow. If you’re an international company in a contract with a Chinese company, you’re not going to want to litigate in China.’

Fountain Court Chambers has become one of many UK barrister sets to launch in Singapore and its head of chambers, Stephen Moriarty QC, told Legal Business that SIAC is attracting an ‘increasing amount of work from India, Indonesia and China’.

With many Chinese companies looking to invest outside the country as economic growth slows, economic research firm Rhodium Group and the Berlin-based Mercator Institute for China Studies recently projecting that the country’s overseas assets will triple from $6.4trn now to nearly $20trn by 2020, Moriarty says the SIAC is ‘in a position to clean up a lot of work’.

‘If Chinese companies are going to do big contracts with foreigners who want to arbitrate in a neutral jurisdiction they’re going to be sucked into Singapore because it’s a forum in which big international parties are more than happy to arbitrate,’ he said. ‘Our sense of the arbitration world is that the impetus is very much in favour of Singapore and away from Hong Kong.’