"International Arbitration Concerns" That Cannot Be Ignored in Singapore's Web3 "Carnival"

Author: Xiao Sa lawyer

This article uses the "Singapore International Arbitration Center Arbitration Rules" of the Singapore International Arbitration Center as an example to give you a brief analysis to understand how an arbitration clause should be written.

In the fierce global competition for Web3, Singapore has begun to play an increasingly important role as it actively participates in Web3 technology innovation and encryption compliance processes. As early as November 2021, the Singapore Fintech Festival (SFF) with the theme of Web3.0 brought together global experts to discuss how Web3.0 and key technological advancements will drive the future of financial services. In June this year, the Monetary Authority of Singapore (MAS) released the "Purpose Bound Money Technical Whitepaper" (Purpose Bound Money Technical Whitepaper), which is the first digital currency-related document after the consultation document on digital asset supervision and stablecoin development. guidance document. After the issuance of a series of official policies and documents, Singapore has recently held frequent Web3 activities, such as the first Metaverse and Web 3.0 Summit Meta EraSummit, which just concluded on September 12, and the Singapore Token2049 Week, which is being held today. 2023.

Under the influence of these signals, many Web3 crypto asset project developers have moved to Singapore or Hong Kong, trying to promote the Web3 process abroad and realize their ambitions. In these places, considering that Web3's service targets usually come from all over the world (of course, there are also a large number of mainland users), therefore, compared to litigation, everyone is more willing to choose international arbitration to handle related disputes. As a result, a batch of agreements emerged that used arbitration clauses to deal with conflicts with C-end users. These agreements without exception chose international arbitration institutions in Hong Kong or Singapore as the jurisdiction. Many bosses feel comfortable since then. Although arbitration is expensive, its confidentiality and efficiency can often save entrepreneurs a lot of costs. However, Sister Sa’s team is here to remind everyone that even if it is an international arbitration, there are still many pitfalls that need to be understood in advance. This article uses the Singapore International Arbitration Center’s "Singapore International Arbitration Center Arbitration Rules" (Sixth Edition, 2016) August 1, 2018) (hereinafter referred to as the "SIAC Rules") will give you a brief analysis as an example to understand how the arbitration clause should be written.

01. The contract is invalid ≠ the arbitration clause is invalid

‍‍‍‍****Since many Web3 crypto asset projects in my country have certain criminal legal risks, and there are indeed many cases in which civil lawsuits have been suspended due to suspected criminal offenses. , many friends may have a misunderstanding about the validity of the arbitration clause in the agreement, that is, there is a high probability that their contract will be deemed invalid due to suspicion of crime, and if the contract is deemed invalid, then the arbitration The clause will also be found to be invalid, and there is no harm in stipulating where the arbitration will be conducted and what law will be the governing law.

But in fact, there are two errors in the above cognition.

First, suspected crime is not a reason for the invalidation of a contract. Generally speaking, the most likely consequence of a suspected crime in our country is the suspension of the civil litigation process. However, suspension does not mean a negative evaluation of the civil contract itself. That is, suspension does not mean it is invalid. It just means that because there is a criminal case , so the civil litigation process needs to be put back and let the criminal cases be resolved first and then the civil cases. In fact, the fundamental reason why the contract is invalid, whether in our country or abroad, is that the key clauses in the contract involve matters prohibited by laws and regulations. Therefore, it is based on the provisions of relevant laws (such as the Civil Code) resulting in the contract being invalid. Therefore, being suspected of committing a crime is not the reason, but violating relevant mandatory regulations is.

Secondly, there is no correlation between the invalidity of the contract and the invalidity of the arbitration clause. Whether an arbitration clause is invalid or not is a matter for independent judgment. According to Article 28.2 of the SIAC Rules, “an arbitration agreement that forms part of a contract shall be treated as a separate agreement independent of other clauses in the contract. The arbitral tribunal determines that the contract is invalid. It does not invalidate the arbitration agreement in law, and the arbitral tribunal cannot lose jurisdiction over the case because the parties claim that the contract does not exist or is invalid." This means that as long as the arbitration clause itself is clear and accurate, the arbitration clause will be effective independently of the contract itself and will not be changed by the validity of the contract itself. This is the independence of arbitration clauses, which is usually adopted and recognized by the arbitration rules of other arbitration institutions and even national laws and regulations.

To sum up, as long as our arbitration clause is clearly stipulated, even if the contract itself is defective or even invalid, or may be suspected of illegal crimes, it will not invalidate the arbitration clause. The parties can still initiate arbitration in the corresponding arbitration institution based on the arbitration clause.

02. Who can represent an enterprise in arbitration?

Therefore, after confirming the validity of the arbitration clause, a key question is who has the right to represent the companies in arbitration. Here, Sister Sa’s team learned that many Web3 companies have been deceived and said that only famous barristers have the right to participate in arbitration as agents. This makes the already poor life even worse. Arbitration is already expensive. , if you bring in another barrister, the cost will only rise sharply.

But in fact this is not the case. A barrister is not necessarily needed to represent the client’s company. According to Article 23.1 of the SIAC Rules, "A practicing lawyer or any other authorized person may participate in the arbitration on behalf of the parties. The Registrar and/or the arbitral tribunal may require the party representatives to submit proof of authorization given by the parties." Obviously, according to this provision, in addition to local practicing lawyers who can represent the parties in arbitration, anyone can participate in arbitration proceedings on behalf of the company as long as the companies are formally authorized. Of course, necessary and complete proof of authorization is essential. Therefore, a barrister is not necessarily required. Anyone with experience in arbitration can be the choice of old friends.

03, other tips

‍**** (1) Prepare mainland expert witnesses in advance**

Since our crypto-asset projects often have certain technicalities, there may be matters that the arbitrator cannot understand. In this case, the appearance of expert witnesses is actually required. According to Article 25.1 of the SIAC Rules, “Before the hearing, the arbitral tribunal has the right to require the parties to explain by notice the identity of the witnesses (including expert witnesses) the parties intend to arrange to appear, the matters to be testified and their relevance. relevance of the issues at issue.” Therefore, in order to deal with possible disputes, the project party can prepare expert witnesses in this area in advance to nip problems in the bud. Of course, expert witnesses also need to be prepared to testify in court, otherwise the probative value of their testimony may be affected if they are asked to appear in court by the arbitral tribunal or if they fail to testify in court after the other party requests it and the arbitral tribunal agrees. In this regard, Article 25.4 of the CIAC Rules clearly states that “if a witness fails to appear in court, the arbitral tribunal may freely determine the probative value of his or her written testimony and may not consider or completely exclude his or her written testimony.”

(2) Clearly agree on the place of arbitration, arbitration language and applicable law in advance

For arbitration clauses, the most important ones are the place of arbitration, arbitration language and applicable law. Determining these three items in advance can greatly reduce the burden on the enterprise and provide certain advantages for the enterprise during the arbitration process. . Otherwise, if there is no clear agreement in advance, the direction of the subsequent arbitration proceedings may cause certain obstacles for enterprises to participate in arbitration.

If the arbitration clause does not stipulate the place of arbitration, then according to Articles 21.1 and 21.2 of the SIAC Rules, the arbitral tribunal has the right to choose the place of arbitration and is not subject to the control of the enterprise. If the arbitration clause does not stipulate the language to be used for the arbitration proceedings, then according to Articles 22.1 and 22.2 of the SIAC Rules, the language will be determined by the arbitral tribunal. At the same time, if the documents submitted by the parties use one of the determined languages If the application is in a language other than the original language, the Registrar or the arbitral tribunal has the right to require the parties to provide translations, which will increase costs to a certain extent. And if the enterprise does not specify the applicable law, then according to Article 31.1 of the SIAC Rules, the right of choice is also given to the arbitral tribunal, which may cause the arbitral tribunal to choose a law that is unfavorable to one of the parties as the applicable law.

Therefore, how to set up the place of arbitration, arbitration language and applicable law is also a subject worthy of consideration.

04. Write at the end

As crypto asset project parties continue to expand their business overseas, international arbitration will also become the mainstream method of handling disputes. The Sajie team sincerely hopes that all old friends in the crypto asset circle will treat arbitration agreements with caution, reduce disputes, and bring more disputes to the world. Put more energy into building a more complete institutional system to build a better future.