The Impact of The Choice of Courts Act on Singapore Businesses

The Choice of Court Agreements Bill (“CCA”) passed on  14 April 2016 will extend the enforceability of Singapore court judgments in 28 countries, notably, the European Union States (excluding Denmark), United States, Mexico and Ukraine (“the contracting states”). The United States and Ukraine have not ratified the relevant convention as this time. The CCA  has not yet come into operation but is expected to do so later this year.

Weaknesses of the current Framework in Singapore

Presently, a Singapore Court Judgment is only recognized in British Commonwealth countries as well as the Special Administrative Region of Hong Kong, People’s Republic of China. Recognition is only provided to judgments of ‘superior courts’ i.e. from the High Court of Singapore or judgments from the Court of Appeal.

Advantages that CCA will bring to Singapore businesses involved in international commercial transactions

Exclusive Choice of Courts – Parties will be able to contractually provide for their own choice of courts to have jurisdiction over any dispute arising from its commercial transaction. The CCA, in allowing parties to choose their choice of courts, will ensure that a stay is granted by the Singapore Courts in any proceedings brought to Singapore where the parties have chosen the court of another contracting state in an exclusive choice of court agreement. Conversely, where parties have chosen Singapore, the Singapore Court will have jurisdiction to hear the dispute unless certain exceptions apply.

Greater enforceability of Court judgments – Disputes can now be resolved at lower or subordinate courts and its judgment will be equally binding on the adverse party in any of the ratifying contracting states; the position prior to the CCA was that the judgment of a subordinate court was not enforceable at all, even in British Commonwealth countries and present-day Hong Kong. Without the CCA, parties whose counterparty was not within the British Commonwealth countries or present-day Hong Kong would have had to rely on arbitration since international arbitral awards were enforceable amongst the contracting states of the New York Convention of 1958.

Please contact Muralli Rajaram at muralli@straitslaw.com.sg  or the director who usually deals with your matters if you require more information with regards to this article.