Keynote Speech by Second Minister for Law Mr Edwin Tong SC, at IBA Conference 2022
1 September 2022 Posted in [Speeches]
Mr Peter Bartlett, Chair of the IBA Legal Practice Division,
Representatives from IBA,
Fellow members of the Bar,
Ladies and gentlemen,
1. Good morning.
2. I think this session is a success. To look around the room and see everyone here is itself a success, because we have not been able to do this for some time now – coming back in person, sharing a coffee, sharing an anecdote or two. I think what moves the needle for us in the legal practice is this human touch and connection.
3. Today is the fourth day of the Singapore Convention Week, and the second consecutive week that we have had conferences, conventions and sessions in Singapore.
4. Dinesh asked me to speak at this session a year ago. He was the first, after last year’s Singapore Convention Week, to say they were coming. I started preparing for this session, but of course, we had to write and rewrite the script many times because Asia Pacific has changed so much. One year ago, we could not have done this session. Even six months ago, this was probably not something we could be sure we could do. But I am glad that all of you are back here, and I hope that you had been able to be part of some of our events, including the street parties and welcome drinks, amongst other things. These are all occasions for us to reconnect and build networks.
5. Today’s conference is on litigating in the Asia Pacific region. I sat down for a while and wondered what I could say that was not already said, and I figured not very much, because we have spent so many sessions speaking about this. I thought I would share with you, from my perspective, how we see this region, and why we, in government, have confidence, looking at it from the perspective of dispute resolution, and what we think we can do to marshal that confidence into something that is tangible for the legal industry.
6. First, let me share with you some of the reasons why we feel confident about the Asia Pacific region. What are some of the opportunities that are growing?
7. I think we all know that law follows business. If there is no business activity, there will be no legal activity, so this is very much shaped by confidence in the region – confidence of businesses, investors, and corporates wanting to come and invest into Asia, in a sense, literally putting their money where their mouth is. I think we have quite a bit of optimism. Let me share with you why.
8. The Asia Pacific region is the largest economy in the world today. It accounts for 40% of global GDP, and this is expected to increase to 50% by 2040. It is a very sharp trajectory relative to the other regions in the world.
9. As a subset of that region, ASEAN, which is where we are, is one of the fastest growing regions in the world. A lot of the ASEAN countries have major infrastructure projects going on. They are all developing as a country, and so, the headroom for growth is tremendous. ASEAN as a collective region is expected to become the fourth largest economy in the world by 2030.
- At the same time, Asia Pacific’s contribution to global trade and investment has also increased tremendously. Just to give you a sense of the numbers, foreign direct investment (FDI) inflows have seen a very sharp upward trajectory. If you go back to 2000, that contribution was 12%. In 2020, it was at 53%. My point is that it is not just growing, but growing at a much faster rate than almost every other region in the world. At the same time, FDI outflows, which represents the wealth in Asia Pacific flowing out, making investments in other regions, has risen in the same fashion – 10% in 2000, 50% in 2020. Import of goods and services was now at 33%, and export at 35%, to give you a sense of the growing business strength in this region.
- So, it is not surprising that close to half of the Fortune 500 companies are headquartered in Asia. This is another strong indicator of growth of business, and consequently, growth of the legal industry.
- In 2019, just before the pandemic set upon us, McKinsey said that Asia’s future is now. Today, three years after the onset of the pandemic, we continue to see that upward trajectory in investment, development, and a number of projects. This region is now also home to 50% of the world’s fastest growing companies, according to Nikkei. So, not just in terms of value, but also in terms of the rate of growth. That is a very useful and important indicator.
- Overall, these statistics and numbers show are not just academic interest, but it shows that there has been an increase in business activity in this part of the world, relative to others. If you use that as one predictor, that tells us that the demand for legal services, and the demand for dispute resolution services will grow.
- Indeed, over the last couple of years, we have already seen some tangible signs of this. According to Statista Research Department, the US currently accounts for almost half the global market, and Europe for just over one quarter. However, growth in Asia Pacific is expected to outpace that of America and Europe in the coming years. International law firms have reported significant upticks in their revenue. Take White & Case for example, they recently reported higher growth in revenue from the offices in the Asia Pacific region compared to the overall global average.
If we then zoom in specifically on dispute resolution, we see the same story.
a. You cast your eye around the statistics of arbitration and mediation cases around Asia Pacific, you will see a consistent trend – it has been on an upward rise.
b. According to Queen Mary University of London and White & Case’s International Arbitration Survey in 2021, half of the most preferred arbitration seats are now in Asia – Singapore, Hong Kong, Beijing, Shanghai and Dubai. In the past, that list was dominated by countries in Europe, in the Americas.
c. SIAC and HKIAC remain very popular institutions, not just in Asia, but in the world.
- All these reflect the concomitant growth in business activities here. With countries now opening up again – Singapore has opened up the past couple of months, Japan just announced yesterday – encouraging travel, inflows, outflows, business activity, meetings, incentives, conferences and exhibitions (MICE), I think we can begin to see the seeds and the ingredients for significant growth in this region.
- Just as it is useful to look at the level of economic activity, it is also useful to cast an eye on the type of economic activity, particularly those in the growing sectors. There are particular bright spots in certain industries and I think it would be good for us as disputes lawyers, to take note of what these areas might be.
- First in the area of technology, AI, and blockchain – key buzzwords today. These are new emerging areas in which parties transact, they do businesses now. It will not be the traditional offer and acceptance, and signing of contract and agreement. Those are still very important but we are increasingly moving into blockchain, non-fungible tokens (NFTs), and cryptocurrencies.
- AI is expected to grow in Asia by four to five times within the next five years, up to 2027. Again, a sign that it is not just growing, but growing exponentially, and in particular, relative to other regions.
- Asian markets accounted for 43% of global cryptocurrency activity between June 2020 and June 2021, in the middle of and at the height of the pandemic. You can see the volume of trade and where that trajectory is taking us.
- Related to this area is intellectual property (IP). Intangible assets today comprise more than 90% of the value of the tS&P500 companies. When I met with WIPO Director-General Daren Tang in Singapore, he shared with me that seven out of ten IP applications (for trademarks, patents, utility models, industrial designs and so on) are filed outside the US and Europe, in Asia. Again, as the Harbingers and as the indicator of where this is going to take us, this gives us a good sense of where future business activity, innovation, development will be.
- Another growing area which I think Peter touched on briefly was that of environmental and social governance (ESG) and climate change. Those of you who operate in Europe and America probably see or have seen quite a bit of this. But in Asia, this is a growing area, in terms of the kind of disputes that you might see in the next couple of years.
- Asia is one of the regions that is most vulnerable to climate change, with over 57 million people affected by climate disasters in the region. Climate lawsuits itself have increased by 185% between 2018 and 2021 with claims filed in India, Japan, Indonesia, Korea, Pakistan, and the Philippines.
Looking at the growth in business activity and investments, to growth in new novel niche areas, to the scale of projects that have been committed, the size of the disputes in the Asia Pacific region is also expected to be growing at a fast pace. That is really a reflection of the size and scale of the projects that have been undertaken.
a. A number of the world’s largest construction projects are now taking place in this part of the world, ranging from cities, to airports, roads, rail, dams, power infrastructure, energy infrastructure and canals, in China, Dubai, Japan, UAE and really right across Southeast Asia here.
b. There were more than 50 deals with values over the US$ 1 billion each, announced, which were targeted at Asia Pacific so far, and that is just this year alone. This is an increase of almost five times year-on-year. It of course reflects, perhaps, some amount of reticence during the COVID period, but I think this trajectory tells us something.
- I think there is a lot more data that is out there about the optimism and confidence in Asia and the extent to which you can do business in Asia. We can expect the demand for legal services to rise and if I can guess, rise quite significantly over the next five, ten, fifteen years.
- The question for us in government is what do we do? How do we take advantage of this, and how do we best marshal resources around it to develop the legal industry? I thought I will share two areas. One micro, looking at our own jurisdiction internally, how we can deal with it and one which we can better control, and the other, more macro, what we do with multilateral relations and try to bring unity to a region and even to a world that is accentuated by differences today.
- First, on what Singapore has done. I must say that I cannot profess to speak on behalf of other jurisdictions. Singapore is unique in the sense that we are so small, we have no natural resources, but we have human capital, and we look at services as being our key to the value chain. Different countries will of course also have to take into account the nuances and differences that your own considerations might present – your own circumstances, objectives and goals, and also challenges.
- Let me just share Singapore’s approach and what has worked for us. Peter mentioned earlier that we started SIAC in 1991. Almost immediately, for the first time, we said that foreign lawyers were welcome to come in to practise arbitration. We did that initially, tied up with local counsel, so that on cases where you have points of Singapore law, you needed local counsel. But eventually, a few years later, we did away with that and since that period of time until now, foreign counsel have complete rights of audience in arbitration.
- Fundamentally, we have made sure that, at the core of what we have done, we look at the rule of law, neutrality, governance and transparency, as the key driving ethos behind what we do. From the start, we also set out to be truly international, because we know that if we want to bring people to come in to use legal services in Singapore, we cannot be parochial. We cannot look at Singapore as a jurisdiction for Singapore counsel or Singapore arbitrators only, and if you come, you can use only Singaporean expertise. We know that users of the legal system would want to come to Singapore if they can find the best services here in the world. So we gave businesses choice – choice of counsel, choice of law, and choice of institution, and increasingly also as we built a hub, a choice of the modality of the resolution, i.e. arbitration, mediation, litigation, international litigation, or a combination of them. You would all be very familiar with the multi-tiered approach to resolution – arb-med-arb or med-arb and so on. All of that is available here.
- We also ensured that our institutions were varied and broad, and are truly international. When we say “Singapore International Arbitration Centre”, it is somewhat of an anomaly, the name really means, Singapore International. On the SIAC board, we have had foreign expertise and talent in our board for more than 10 years, since 2009. On the SIAC court, 90% of our court members are foreigners.
- Why? Because we believe in looking at the best talent around the world. To do this, we have to be agnostic as to whether you are Singaporean. As long as you contribute well, bring up the value of the institution, and contribute to legal services development in Singapore, come and join us.
- On the SIAC panel, we have close to 600 arbitrators from 41 different countries including Singapore, and close to 80% of this 600 are based overseas. The ratio is similar on the SIMC panel. SIMC is still a relatively newer institution, and we have just signed the Convention a couple of years back, but it is growing in the same way and on the same trajectory.
- At the same time, we think that international thought leadership being in Singapore is important. We work closely with UNCITRAL, ICC, PCA, WIPO, AAA, and INSOL. All of these are located in Singapore. We built Maxwell Chambers to do that. Because we believe that having thought leadership in Singapore, not just on an institutional basis where it is very formal, but on a day-to-day experience basis, where members of each of these tribunals or each of these institutions, will meet with and mingle with our local bar, exchange information not just in a formal setting, but informally. All of this helps the jurisprudence.
- This openness to global talent has enabled us in our experience, to be truly an international hub. Not just in areas of dispute resolution, but increasingly, our new focus areas in restructuring, intellectual property, intangible assets, as well. We also want to look at positioning ourselves in Singapore. Looking forward, looking ahead a bit more, to being a hub for projects and infrastructure. Can you manage and drive a project that may take place elsewhere, but from or through Singapore, using Singapore services, expertise and resources?
- In addition, we have also been fortunate that as a small jurisdiction, we have a close relationship. That has been another real value-add for us. The government is very close to the bar, bench, legal academia, local lawyers, and foreign lawyers. This strong, symbiotic, very tight relationship has helped us move the needle on many occasions. We get feedback from users, from our lawyers, who tell us what their clients want. We get feedback from international counsel and we understand movements and trends around the world.
- One advantage we have is we are able to put these proposals very quickly through the parliamentary process, and it becomes law. We made many changes to our International Arbitration Act. It has been in existence for 20 odd years, and we made 11 amendments in Parliament, of which five are substantive. We made changes to reflect day-to-day needs, e.g. multi-party appointment of arbitrators, often a conundrum caused to parties; emergency arbitrations, where you need things done urgently. We have put in place those as well, reacting and responding to mercantile and business users. That has been a very important consideration for us.
- Second, let me touch on some of the broader macro considerations – what we are faced with, which present challenges because we cannot quite control it in the same way. I will just share some thoughts with you. I am sure all of you agree that in today’s globalized world, interconnected through devices, technology, travel, we cannot exist in a vacuum, even though Singapore is an island, but really, no man is an island. Our progress and our fates are very much intertwined with our neighbours’, the broader region’s, and indeed with the world’s.
- Just look at the impact of the pandemic, and of course, the unfortunate war in Ukraine. All of these have had a most direct, tangible, almost immediate impact on the way in which we do business and trade in Singapore. Supply chains are disrupted, countries are beginning to rethink being dependent on other countries, and reconfigure their own priorities. We have seen and heard of so many protectionist measures around the world, to ensure that their own domestic needs, their own domestic population, their needs are served first. But all that becomes very anti-multilateral, anti-cooperation. We bear the brunt of many of these decisions, because we are in such an open economy, completely dependent and reliant on the external influences.
- Many have started to re-shore their production back home. According to Reshoring Initiative, reshoring is expected to bring back 400,000 manufacturing jobs to the US in 2022. Many also start to stockpile inventories of critical components. All of these are very inward-looking measures, driving up pricing, and inflation. When protectionism is on the rise, it may be seen as a short term gain, but overall in the longer term, we will all suffer.
- Countries need to work together, keep the global trading environment healthy and open. What is really needed is an open, multilateral, rules-based system. Building connection and relationship with other jurisdictions, going beyond just the knowledge and the know-how, to the know-who, between lawyers in this sector, will be very important.
- Before COVID, I used to travel. When I joined the government in 2018 after spending 25 years in Allen and Gledhill, I was traveling extensively, because we saw an opportunity from 2018, as we began to encourage signatures for the Singapore Convention on Mediation. We saw it as being very important to strengthen bilateral, multilateral relationships. In 2018 and 2019, I have been to China, Japan, Myanmar, Uzbekistan, India, US, UK, Kazakhstan, to build relations between people coming from different laws and even different legal systems. I think there is a commonality in wanting to service our clients in business.
- This, of course, stopped during COVID, but we continue to deepen that link with other countries or other counterparts. In recent times, we have signed MOUs with China, Japan and Uzbekistan, to work together to open up new frontiers for our legal industry, for our lawyers to be present in that jurisdiction, for their lawyers to bring work into our jurisdiction. I think this is not just necessary, but fundamentally part of our DNA in Singapore, to remain open.
- We sit in the middle of the most diverse region in the world, culturally, ethnically, religion wise language. ASEAN is one of the most diverse regions in the world, with more than 100 ethnic groups, speaking more than 1000 recognized languages and dialects. Many people will find it challenging to navigate in this environment. But I believe that this diversity also has its advantages. Singapore has been fortunate because with our background, being in the middle of ASEAN, and also having very much steeped in Western traditions, like the common law for example. This gives us a unique advantage to be able to link Asia with the rest of the world and understand how Asian businesses might operate, and align with how other parts of the world might do their business.
- Mediation, for example, has been very useful. We have seen a growth. We will begin to see a significant uptick, as more parties sign and ratify the Convention. It becomes a tool like the New York Convention where parties can enter into agreements with the assurance that it can be enforced in a different part of the world. In Asia, we have seen mediation on the rise, because that is the way parties want to do business in Asia.
- Many projects, as I mentioned earlier, are large multi-year, multi-party projects. When you build a power plant, a dam, a huge energy infrastructure, you tend to rely on the same parties, counterparties, suppliers, and your customers and your buyers will invariably be a small pool of people. So parties can ill afford having a dispute break up that relationship, in particularly in Asia, where the ethos of doing business is a lot more focused on trying to find a peaceable common solution. Mediation has the right ingredients for that.
- All of these are challenges that we have both on a micro and macro level. The last point I want to leave you with, is the importance of building networks and relationships – almost the first point I made this morning.
- Looking around the last week or so, lots of good ideas and thought leadership has come forward. We have exchanged good innovations and suggestions with each other. All of that is very good.
- What will move the needle is if you are able to leave Singapore, go back home with a network of new friends, from different parts of the world, practicing in different jurisdictions and different legal systems. This helps to make the practice of law a much smaller place. We are all globalised but highly connected. Having friends and colleagues from different parts of the world, picking up the phone, having a chat, connecting your clients with friendly parties from different jurisdictions, makes the practice of law not just a lot easier, but truly special.
- On that note, thank you very much for listening to me. We will take a couple of questions later on from my ex-partner Dinesh, and I look forward to chatting with you. Thank you
Last updated on 1 September 2022