Opening Remarks by Second Minister for Law Edwin Tong SC, at SICC INSOL seminar
22 September 2022 Posted in [Speeches]
Ladies and Gentlemen,
1. Good afternoon, thank you very much for having me here today. I think it is a wonderful collaboration between SICC and INSOL Asia. Significant synergies could be generated from that, so I’ll share some thoughts on what it means for debt restructuring in the Asia Pacific, the role of the SICC, and how we see restructuring taking place in Singapore within the SICC, and also outside of the SICC.
2. At the Singapore Insolvency Conference just last October, I mentioned that we were working on several plans to enhance Singapore as a forum of choice in international restructuring and insolvency proceedings, and also for the Singapore International Commercial Court (“SICC”) to hear cross-border restructuring and insolvency matters.
3. Very glad to say that we have now made this a reality. Just yesterday, we gazetted the Commencement Notifications and subsidiary legislation to make this happen. I am very glad to say that these changes will take effect from 1 October 2022.
4. This marks an important step in the development of the restructuring and insolvency landscape, both in Singapore as well as beyond our shores, providing businesses in the Asia-Pacific with a reliable and competent forum, to be able to resolve international restructuring and insolvency issues, which are increasingly cross border and also increasingly complex
5. Today, I will share perspectives on the seeds of this development, its significance through the lens of the government, and what we hope to achieve through this, and also offer some insight as to some of the thinking behind the current legislation.
II. An Overview of the SICC and Insolvency Ecosystem
A. The SICC
6. In line with the vision for Singapore to become the leading dispute resolution hub for the region, the SICC was established in 2015 to deal with transnational commercial matters.
The SICC leverages on Singapore’s reputation for:
a. good governance,
b. low corruption,
d. rule of law,
f. a trusted legal system, and
g. a first class judiciary.
8. The design and structure of the SICC is unique. It harnesses a diversity of views and experiences of counsel and judges from different jurisdictions, and even different legal systems, all of whom have deep commercial experience and expertise, enabling the SICC to be both innovative and responsive to commercial realities, as well as reactive to current trending developments around the world.
9. Since its establishment, there has been a steady increase in cases commenced in the SICC, as well as cases transferred from the General Division of the High Court. To give you some numbers, in 2021 alone, there were 4 fresh filings. the cases transferred to the SICC stand at 89 cases1. Cases before the SICC have involved parties coming from 44 different countries, 44 different nationalities, with claims ranging from S$4.3 million per case to S$1 billion per case.
B. Insolvency Efforts
10. In particular, on the insolvency front, the SICC was identified. In 2016, by the Committee to Strengthen Singapore as an International Centre for Debt Restructuring, as a conducive forum to hear matters with international dimensions elements and also deal with multi-jurisdictional issues.
11. This, it was felt, would anchor Singapore as a restructuring and insolvency hub.
12. In fact, it complements our other work, such as our own reforms over the last few years, which ensures that our laws are progressive and modern, whilst at the same time balancing the interests of debtors, creditors and other stakeholders — all of whose views are important and relevant in the context of a successful restructuring. The amendments and the key milestones made include:
i. The Companies (Amendment) Act 2017 which enhanced Singapore’s restructuring frameworks, through engrafting of US Chapter 11 features. We enacted legislation based on the UNCITRAL Model Law on Cross-Border Insolvency.
ii. The omnibus Insolvency Restructuring and Dissolution Act (“**IRDA**”) that consolidated and harmonised the approaches across personal and corporate regimes; and continued the enhancement of the corporate restructuring and insolvency tools.
13. We have, quite happily, seen the growing use of the framework, from around 70 to 80 applications each year in 2017, 2018 and 2019, to more than 100 applications in the last two years, in 2020 and 2021.
14. With each application, this regime is stress tested, developed and better refined. These include decisions such as:
a. DSG Asia Holdings: A decision on the standards of disclosure in a pre-packaged scheme; and the classification of creditors, who are concurrently also potential investors. Classification is one of those things that we commonly come across, and in many ways, it is a vexed question, because it is situational and circumstantial, and it also revolves around the inter-relationship between different types of creditors.
b. Design Studio: The High Court approved a “roll-up” rescue financing package.
c. Alan Tantleff and just 2 weeks ago, Rams Challenge Shipping: The High Court provided guidance on key aspects of the Model Law, such as its scope of application to certain corporate entities; refinement of factors in determining a company’s centre of main interests (COMI),
15. Significantly, the Court also viewed that the Model Law empowers the Singapore courts to consider if the relevant stakeholders are adequately protected, and also be able to recognise and enforce foreign orders and judgments.
16. Additionally, it is also encouraging to see the framework facilitate successful outcomes. To give some examples:
a. Pacific International Lines: The restructuring of PIL, the world’s 12th largest liner company and South-East Asia’s largest carrier, was completed “_swiftly and with minimal fanfare_” through a pre-packaged scheme. The US$3.3 billion restructuring involved a US$1.1 billion scheme and an out-of-court restructuring of its remaining debt. Both of which were completed in under four months.
b. Pacific Radiance: Just last month, the court sanctioned schemes for companies in the Singapore-listed offshore oil services group. This tied in with a wider consensual restructuring negotiated earlier this year.
17. These of course, are promising initial first fruits for the amendments that were made seven years ago – particularly encouraged by the strong uptake of the schemes of arrangement and the stakeholders gravitating around this framework. More importantly, using all of these features benefit companies and stakeholders.
C. Review of Judicial Management
18. Even as we are looking at the first fruits of these revisions, we are looking at the next bound of enhancements. One area that I would like to just touch on, is that of judicial management (“JM”).
19. The JM regime was introduced in 1987, following the very high profile Pan-Electric crisis where Pan Electric Industries Limited, a public listed company at that time, collapsed, and led to the closure of the Singapore stock exchange for an unprecedented three days.
20. At the Second Reading of the Bill which introduced the JM regime, then-Minister for Finance, Dr Richard Hu explained the JM regime as such “provides a legal framework that would, in a suitable case, enable the rescue of a potentially viable business and thus prevent a premature liquidation.” He went on to say that JMs “must not be used as delaying tactics to avoid an inevitable liquidation of a company that is hopelessly insolvent… [and the] provisions are not a panacea for beleaguered companies that are incapable of being rescued and are destined for liquidation.”
21. That raison d’etre of the JM regime, more than 35 years ago, continues today. It is important as a corporate rescue tool, side by side with the other tools that we have in place, as it can and should cater to different situations and also possesses different features from schemes of arrangement. In particular, JM provides for the office of a judicial manager, an external insolvency practitioner, who is also an officer of the court, appointed to manage the affairs, business and property of the company.
22. This is useful where there is a need for an independent third-party, such as , perhaps where there may be misgivings over the ability of a company’s management to oversee the restructuring, in a scenario which makes the debtor possession not possible or not feasible; or if there are allegations of fraud concerning or revolving around the current management.
23. The JM regime seeks to provide an alternative to liquidation, in appropriate situations, where one or more of three statutory purposes may be achieved:
a. the survival of the company, or the whole or part of its undertaking, as a going concern;
b. the approval of a scheme; or
c. a more advantageous realisation of the company’s assets or property than on a winding up.
24. There were some recent JM cases, which – perhaps with the benefit of hindsight – might have been more appropriately resolved under one or more of the other mechanisms available.
25. In this vein, we intend to look at the JM regime again, strengthen it as a corporate rescue tool – ensuring that it is not used as an inevitable precursor to winding up. We have made some changes over the years, such as creating entry into JM by way of creditors’ resolution, and introducing rescue financing. But to unlock its full potential and to realise the raison d’etre behind the judicial management regime, we will undertake a root-and-branch study, including looking at the type of applicants that are suitable for JM – funnelling into JM, viable companies with reasonable prospects of rehabilitation; and tailoring the judicial manager’s expertise and domain knowledge to the specific debtor, particularly where the debtor operates a specialised business, or operates in a highly specialised industry.
26. The entire schema of the JM regime must be predisposed towards achieving rehabilitation of one of the three statutory purposes, and we will consider the appropriate amendments to drive towards this outcome. We intend for the JM to complement the schemes of arrangement, providing a more complete suite of robust tools for different circumstances available for restructuring.
III. SICC: Conducive Forum for Insolvency Matters
27. Next, let me touch on the SICC as a conducive forum for insolvency matters and why I believe that that is the case. As we move ahead, the SICC is going to be an increasingly important piece in the broader efforts to enhance Singapore as a forum of choice. The SICC will provide a conducive forum for cross-border restructuring and insolvency matters; and attract parties who might not have otherwise come into Singapore, to have their matters resolved, have their restructurings done, in or from Singapore.
28. These matters typically often involve multi-jurisdiction, transnational, complex and also highly inter-connected and inter-dependent issues with a mix of foreign and local law; and a mix of fact and law, as well.
29. In such cases, there are typically different laws at play. For instance:
a. The parties’ chosen governing law applying to relevant contracts;
b. the insolvency law where the proceedings are opened; and
c. other insolvency laws where the debtor has assets in or connections to.
30. There are likely to be situations where these laws and their application to the facts, do not align perfectly. In fact, sometimes, they may outright conflict with one another.
31. Resolving this in an efficient and commercially sensitive manner, necessitates careful and expert treatment. Naturally, this will benefit from the expertise and insight of judges and practitioners from the local and foreign jurisdictions.
32. It is in this regard, that I believe the SICC can be a strong, natural, convenient, conducive forum, for these reasons.
33. First, the cases are able to draw on the vast expertise and the deep experience of the SICC’s bench. This includes International Judges, many of whom were leading commercial judges from civil and common law traditions. Judge Christopher Sontchi, whom many here would be familiar with, was recently appointed as an International Judge. Prior to his appointment as International Judge, Judge Sontchi was sitting in the US Bankruptcy Court for the District of Delaware since 2006, and served as its Chief Judge from July 2018 to June 2021.
34. Second, the SICC is uniquely positioned to deal with foreign law issues, which commonly arise in cross-border matters. In fact, large scale restructurings now typically, more often than not, involve cross-border issues. Therefore, this engages different types of law, and very often also, different laws from different systems of law. The SICC’s robust framework for international dispute resolution reinforces Singapore’s ability to serve as a nodal jurisdiction for international restructurings and insolvencies.
35. A key aspect behind this and why people choose a forum, is of course, enforceability: SICC judgments are judgments of the General Division of the High Court and there is increasing recognition of Singapore proceedings by foreign courts. To take a few examples:
a. The United Kingdom – where the restructuring moratorium was recognised in H&C S Holdings;
b. Brazil – in respect of proceedings relating to Norwegian entity Prosafe and its Singaporean subsidiary Prosafe Rigs;
c. China – where the Xiamen Maritime Court in August 2021, based on the principle of reciprocity, recognised a judicial manager in Xihe Holdings.
36. This provides assurance and confidence to parties that the restructuring efforts in Singapore will be effectively recognised overseas.
37. Third, proceedings in the SICC can also benefit from its fair and practical processes, which are responsive to the needs and realities of international commerce, and reflective of international best practices.
38. Specifically, the latest amendments to the SICC Rules and other subsidiary legislation, provide tailored processes. For instance, the new Order 23A of the SICC Rules, which provides rules for multi-party international restructuring and insolvency proceedings.
39. Fourth, foreign lawyers may, after permission is granted by the court, make submissions before the SICC on matters of foreign law and factual matters relating to the proceedings. This removes the need for the foreign lawyer to go through the process of proving the foreign law as an issue of fact. This framework is designed for use in conjunction with Singapore counsel, who will make submissions on matters of Singapore law. Such a structure seeks to enable a more robust and holistic examination of issues of fact and law, than would otherwise have been possible.
40. Finally, lawyers representing clients in certain insolvency cases before the SICC will be able to enter into conditional fee agreements (“CFAs”) with their clients – provided the insolvency proceeding is commenced in the SICC.
41. Our framework in the Legal Profession Act and the Legal Profession (Conditional Fee Agreement) Regulations 2022, supports the use of CFAs in proceedings commenced in the SICC, while those proceedings remain in the SICC, and appeals arising from those proceedings.
42. For insolvency proceedings in the SICC, this is a notable and positive evolution. It will provide an additional funding option for debtors – on top of the existing avenues for third party funding that is currently available. It also levels the playing field for Singapore lawyers vis-à-vis their foreign counterparts by allowing them to also offer CFAs.
43. Ultimately, our vision is for all cases heard in Singapore to be resolved in the most effective, efficient, transparent and fair manner possible – whether before the SICC or before the General Division of the High Court. Where the matter is intricately intertwined across jurisdictions, this would probably be a matter that would benefit from collaboration between local and foreign expertise in the SICC. In all other cases, as the default, the General Division will continue to be the first port of call.
IV. Significance of the SICC Hearing Cross-Border Insolvency Matters
44. This development, in my view, is timely, especially in today’s economic environment.
45. For cross-border businesses whose operations are supported by a web of legal contracts, obligations and liabilities across jurisdictions; financial distress will trigger the search for a particular “nodal jurisdiction”.
46. This is likely to be intensified in the midst of events taking place globally and regionally. We have all seen the stresses around the world, whether it is the socio-political and economic effects of the pandemic, or the Geo-political tensions and developments, such as the conflict between Russia and Ukraine and the ongoing difficult relations between the US and China, and we all feel the repercussions very deeply. There have been disruption of supply chains and reshoring, and digitalisation, whether you call it a bane or a boon, has been very much the centre of our lives post-pandemic.
47. Taken together, the SICC provides a safe and secure harbour for firms facing headwinds – facilitating either orderly liquidation of companies seeking to cease their business; or trying to restructure their debts and seek new investors , in order to achieve potential rehabilitation.
48. Besides providing debtors and their stakeholders an ideal platform to resolve financial distress, the SICC, because of its unique features, can also serve to grow the legal sector by bringing offshore work into Singapore, benefitting all professionals, foreign and local, involved in such cases.
49. SICC can also lead developments and innovations in new areas that cross-cut different jurisdictions and legal traditions. For instance, in the digital asset space, which is growing, and particularly in Asia, it is growing tremendously —we have seen a number of insolvency filings here, such as Zipmex, Vauld and Hodlnaut.
50. Singapore is well-positioned to be the restructuring jurisdiction of choice, especially for emerging areas such as crypto platforms with their increasing presence in Asia. Our attractiveness as a digital asset hub is now turning Singapore into a centre for restructuring troubled cryptocurrency platforms. This could not only translate into more opportunities for the insolvency community, but also facilitate Singapore’s development as a hub for structuring digital asset platforms.
51. To further entrench Singapore’s position as a restructuring and insolvency centre for debtors with cross-border operations, my Ministry is also studying possible refinements to the licensing regime for insolvency practitioners under the IRDA. This includes the potential for parties to appoint foreign insolvency practitioners with the necessary requisite qualifications, experience and professional standing, we do that to allow them to advise and work on cases with significant foreign elements that are heard in the SICC. So we are studying refinements on this, and will consider whether this would be appropriate, and if so, how there may be issues.
52. Finally, as I conclude, let me go back to the point I made earlier about how we are very grateful for the opportunity to be back in-person here, face to face at a location like this. Besides the thought leadership that will be no doubt be shared in the course of this afternoon the exchange of information, know-how, and catching up it’s also important to build deep relations across different jurisdictions. Weare all part of the same insolvency practitioners pool, and the more we are able to build these relations, the smaller the world will be. Despite the fact that your clients have presence across the world in different jurisdictions, you can make the world a much smaller place by having contacts in different parts of the world, even with lawyers from different legal systems.
53. I encourage you to take the opportunity now that we can do this in person to re-establish and rekindle those old contacts and make new ones too.
54. Over the years, Singapore has made it a point to ensure that our laws, not just insolvency or commercial laws, but our laws remain effective for the business community’s needs, to try and catch up every so often, to be able to stay ahead of the curve, to respond very quickly to the industry needs. We could only do this, because we have a good relationship between the government, the bench, the bar, academia, and foreign lawyers as well. All of this feedback from the industry here gives us a very good sense — a very good radar as to what is coming up. And we do that very quickly. We are able to change our position, change our laws to ensure that it is user-centric, and that business users from around the world will see this as a positive development.
55. On this note, let me once again congratulate the organising team for putting this event together, I had a quick look at the programme and I think we will all benefit from the insights from the speakers.
56. So thank you very much once again for having me here, and I wish you all a very good day.
57. Thank you.
1. As at end August 2022.↩
Last updated on 22 September 2022