December 10, 2018

Getting on Board: The Singapore Infrastructure Dispute-Management Protocol

I. What is the Singapore Infrastructure Dispute-Management Protocol ("SIDP")?

  • The SIDP is a protocol launched by Singapore's Ministry of Law on 23 October 2018 for the appointment of a dispute board to assist in the management of potentially contentious matters or disputes between parties in mega infrastructure construction projects of more than S$500 million in value.

II. Why was the SIDP launched?

  • Asia is projected to require US$1.7 trillion of infrastructure investments a year from 2018 till 2030. Numerous projects in Asia under the aegis of China's Belt Road Initiative are already underway.
  • Complex infrastructure construction projects like these often run late and exceed the budget. Infrastructure, mining, as well as oil and gas projects have on average been estimated to cost 80% more than budgeted and to run 20 months late.
  • Singapore has built up a reputation as a trusted and neutral venue to resolve these types of disputes. Contracting parties in complex construction and infrastructure projects in the region (who are often from two different countries) frequently agree to resolve their disputes in SIAC arbitration, at the Singapore Mediation Centre, Singapore International Mediation Centre, or in the Singapore Courts. However, proceedings in arbitration or litigation can sometimes be protracted and costly.
  • The use of dispute boards is therefore gaining popularity in Asia as a form of alternative dispute resolution. The general feedback has been that dispute boards can help to prevent and / or efficiently resolve construction disputes. This in turn, helps to reduce overall project costs and aids project delivery.
  • Singapore is also looking to build up its budding reputation as an infrastructure hub given the sizeable demand for infrastructure investments in Asia To that to promote infrastructure development in the region by improving their bankability and visibility by, among other things:
  1. connecting Singapore-based companies with relevant expertise and solutions to meet a project's needs; and
  2. bringing in parties with the requisite expertise to help project stakeholders.
  • The recently introduced SIDP is part of Singapore's effort to complement its objectives of building on its reputation as an established and reliable infrastructure and disputes resolution hub in Asia and beyond. For example, the bankability of infrastructure projects can be increased through the use of the SIDP as disputes will be managed, and the risks of time and costs overruns will be minimised, giving comfort to lenders and investors for infrastructure projects in Asia.

III. Features of the SIDP

  • The SIDP can be incorporated by reference into contracts for construction infrastructure projects. It is primarily targeted for use in construction infrastructure projects in Asia.
  • It is based on well-established dispute board protocols and incorporates elements of a traditional dispute board. However, it places an emphasis on negotiations and mediation as forms of dispute resolution. For example:
    1. an SIDP dispute board is specifically empowered to (among other things):

      1. encourage the parties to co-operate as fully as possible to ensure the timely and proper completion of the project; and

      2. assist the parties in avoiding or resolving differences through informal discussions and negotiations.

    2. further, where the SIDP dispute board thinks that there may be a potential difference between the parties, it may take the initiative to provide assistance to parties to address these before they snowball into larger disputes, even before the dispute is formally referred to them..

  • This enables the SIDP dispute board to:

    1. develop personal relationships with on-site representatives – earning the trust and respect of both parties which can be used to foster open communication between the parties to minimise conflict;

    2. actively work with parties to prevent issues escalating into disputes by foreshadowing conflicts – enabling parties to focus on the execution of the Project, rather than expending energies on posturing with a view to preserving all rights until the final determination of the dispute; and

    3. update off-site senior representatives so that they can make an informed decision based on a construction industry expert’s informal opinion.

  • Should informal discussions and negotiations fail to resolve differences between the parties, SIDP dispute boards may then employ a variety of tools to resolve disputes. These include:

    1. issuing an opinion that might help parties in coming to an agreement;

    2. assisting parties in reaching a mediated settlement; or

    3. issuing a determination so as to break impasse between parties for the works to carry on.

  • The key distinction of an SIDP dispute board compared to other forms of dispute boards is that in order to minimise differences and resolve disputes, the same dispute board (in addition to issuing opinions and/or determinations), is empowered to:

    1. participate in informal discussions and negotiations with the parties; and

    2. act as mediator between the parties.

  • To achieve this, it leverages off the SIDP dispute board’s:

    1. familiarity with the project and the relevant parties' stakeholders and key project personnel;

    2. trust from parties, earned either through the dispute board’s members standing in the industry and/or the working relationship from the start of the project; and

    3. ability to select and use the most appropriate form from a wide range of dispute resolution mechanisms such as issuing opinions, mediation or making determinations to resolve disputes.

  • To limit potential accusations of breach of natural justice in any subsequent determinations, the SIDP requires mediations to be conducted in joint sessions only, with both parties present at all times, and without private caucuses.

IV. Conclusion

  • In Asian cultures, people typically prefer a less confrontational approach to dispute resolution. Asian cultures often emphasis virtues of compromise, yielding, and harmony instead finding a "winner" and a "loser" in a dispute. As a result, Asian contracting parties will often seek to avoid conflict (or avoid acknowledging the existence of conflict) in order to preserve relationships, instead of having to resolving a conflict in a more acrimonious manner.
  • The SIDP empowers the dispute boards with a range of dispute resolution tools, including softer approaches such as informal assistance with negotiations and mediations.
  • While traditional dispute boards are typically only able to resolve disputes by issuing determinations in proceedings, which can still be perceived as confrontational and adversarial, SIDP dispute boards can assist parties with negotiations to nip issues in the bud before they turn into actual disputes, or conduct mediations to resolve disputes in a non-confrontational manner that also preserves the parties' relationships. Additionally, SIDP dispute boards can use mediation to help parties achieve a mutually acceptable resolution of the dispute without any "loss of face" – which is of significant importance in Asian culture.
  •  The SIDP and its range of dispute resolution tools therefore appears to be well suited for application in the Asian context.
  •  However, the FIDIC and ICC forms of dispute boards are currently far more recognised in this region. It remains therefore to be seen if the SIDP will prove popular enough with projects based both inside and outside Singapore to displace these incumbent forms of dispute boards.
  •  A copy of the SIDP is accessible at the following link: http://www.mediation.com.sg/assets/downloads/neutral-evaluation-2/SIDP-Protocol-Bklet-A4-221018-C.pdf