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International Herald Tribue
10 May 06
From the manicured tropical gardens to the litter-free streets and glistening shopping malls, there appears to be something fundamentally clean and decent about Singapore. And if the island republic’s physical appearance is burnished to a high shine, so is its reputation as a place to do business.
It regularly comes near the top of international surveys as an efficient and corruption-free place to invest. Hence, many multinational companies choose Singapore as a sanitary refuge to establish headquarters operations amid the pollution and administrative chaos of many of its Asian neighbors.
One of the cornerstones of Singapore’s appeal to multinational investors has been the soundness of its justice system, at least in commercial cases.
But that reputation for reliability in arbitrating commercial disputes is under increasing scrutiny. It is an issue that analysts say could have far-reaching implications for all foreign investors who have sought out Singapore as a haven and for the important role the city-state has played as a reliable legal jurisdiction in Asia.
A court of appeal in Canada is being asked for the first time to determine whether legal decisions made in Singapore are sufficiently fair and impartial to meet the standards of justice of other developed countries.
In documents tendered to the appeals court in the province of Ontario, Singapore’s judicial reputation has been subject to scathing attack. Lawyers have alleged in court documents that the Singapore legal system is an “utterly politicized component of executive rule” in which there is no guarantee of fairness even in commercial cases. The Singaporean Ministry of Law rejects these claims.
The case, now before the Ontario Court of Appeal, has also become a forum for some critics of Singapore’s political and justice system and served to resurrect grievances about old legal cases brought against opponents of the People’s Action Party, which has been in power since 1959.
“Whichever way this case goes, it is, and it is going to continue to be, quite damaging for Singapore because it’s highlighted a lot of apparent or perceived problems with the Singapore judiciary,” said Michael Backman, a consultant based in London and author of several books on doing business in Asia.
The case centers on a dispute between EnerNorth Industries, an Ontario-based oil and natural gas company, and a Singaporean company, Oakwell Engineering. In 1997, the two companies entered a joint venture to build and operate two barge-mounted electricity generating plants in India.
When the project ran into trouble a year later, EnerNorth bought out Oakwell’s stake in the venture in a deal that included promises to pay $2.79 million and royalties once financing was obtained and the project was operational. A settlement agreement provided for any further disputes to be settled in the Singapore courts. EnerNorth, based in Toronto, subsequently failed to raise the financing for the project and, in 2000, sold out to an Indian company. In 2002, Oakwell sued EnerNorth in Singapore for failure to pay the $2.79 million and royalties. The Singaporean High Court, and later the Singaporean Court of Appeal, which is the final appellate court in Singapore, awarded Oakwell the disputed amounts, full costs and interest amounting to about $5.4 million.
As EnerNorth had no assets in Singapore, Oakwell applied to the Ontario Superior Court to have the award enforced in Canada. Last Aug. 2, the superior court ruled in Oakwell’s favor.
But EnerNorth’s lawyers have appealed. At the heart of their case is a fierce attack on the integrity of the Singapore justice system. In a submission to the appeals court, David Wingfield, EnerNorth’s lawyer, argued that foreign legal systems had to meet Canadian constitutional standards for their rulings to be upheld in Canada.
“What EnerNorth is faced with, however, is having its assets seized under Canadian law to pay a judgment that was granted by a corrupt legal system before biased judges in a jurisdiction that operates outside the rule of law,” he said in a submission to the court. He added: “The uncontradicted evidence in this case, from leading international experts, reveals that Singapore is ruled by a small oligarchy who control all facets of the Singapore state, including the judiciary, which is utterly politicized.”
In large part, Wingfield based his allegations on the record of prosecutions of political critics of the People’s Action Party, including Joshua Benjamin Jeyaretnam, a lawyer of Sri Lankan descent, who for a time was Singapore’s sole opposition member of Parliament. Jeyaretnam was convicted of fraud in a series of trials in Singapore in the 1980s in connection with donations made to his Workers’ Party. He later managed to appeal to the judicial committee of the Privy Council in London over a decision to have him struck off the Singapore Law Society’s rolls. The Privy Council, which was then the final court of appeal for such professional disciplinary actions, decided to review the initial conviction against Jeyaretnam. In a celebrated judgment in October 1988, it expressed “deep disquiet that by a series of misjudgments,” Jeyaretnam and a co-defendant had suffered “a grievous injustice.”
Wingfield in his submission to the court in Ontario also cited the opinion of the International Commission of Jurists on a more recent case involving Jeyaretnam that “the High Court of Singapore has done little to overcome the Singapore courts’ reputation as improperly compliant to the interests of the country’s ruling People’s Action Party.”
The conduct of legal actions against political figures in Singapore has long been the subject of controversy, but the country’s courts have had a strong reputation for fair and impartial conduct in commercial proceedings.
When Gerald Day, the Ontario Superior Court judge, agreed last year to uphold the award made in Singapore against EnerNorth, he wrote, “Historically, there is no evidence of bias or unfairness by the Singapore court in private commercial proceedings.” He also found that there was no evidence of bias “in this specific case” and “no reason to doubt the impartiality of the judges who heard the case in Singapore.”
Pointing to Day’s statements, the Singaporean Ministry of Law said the Ontario Superior Court had “refused to lend any credence to EnerNorth’s spurious allegation of a biased Singapore judiciary.” In a written response, it said EnerNorth had been represented in Singapore by lawyers of its choice and had not alleged that the Singapore courts or any of its judges were biased against it at the time of the initial court hearings.
The ministry also said the Political and Economic Risk Consultancy, which is based in Hong Kong, had “consistently rated the Singapore judicial system as one of the best in the region, and emphasized that Singapore has one of the most fair and transparent legal systems in the world.” The ministry added, “Singapore prides itself on having an independent and impartial judiciary.”
Still, EnerNorth’s lawyers produced a number of affidavits from its own experts, including Francis Seow, a former Singapore solicitor general and judge turned prominent critic of the government; and Ross Worthington, a professor of governance and World Bank consultant. Both asserted that the People’s Action Party, or PAP, and the executive controlled all aspects of public life, including the judiciary.
Wingfield, the EnerNorth lawyer, also quoted a report in court from the New York City Bar Association that warned American companies to be wary of agreeing to let commercial disputes be settled in Singapore courts as EnerNorth did. The bar association said the Singapore government “had been willing to decimate the rule of law for the benefit of political interests.” But it also warned U.S. companies that in doing business in Singapore, they were “likely to encounter a wide variety of enterprises in which the government has an economic interest.”
“The same forces which have led that judiciary to be sensitive to the PAP government’s political interests would lead it to take account of its economic interests,” the report said.
The basis of EnerNorth’s appeal is that Day, the superior court judge, required EnerNorth lawyers to prove specific bias against the company by the Singaporean courts, which the judge found they had failed to do. Wingfield argued that it was simply sufficient to establish that Singapore’s legal system did not meet Canadian standards.
The Ontario Appeals Court finished hearing the case in April and under an informal six-month rule is likely to announce its decision by the end of the summer, according to lawyers. But both sides have indicated that they will seek to appeal the verdict to the Supreme Court, meaning that the case could drag on and could become a test of recognition of foreign legal jurisdictions.
Lawyers for Oakwell Engineering maintain in their submissions to the courts in Canada that the issue has already been resolved under Canadian law and should not be reopened. They said EnerNorth had chosen to attack the quality of justice only because it had lost the case in Singapore – a jurisdiction it had freely chosen for settlement of any disputes with Oakwell. They said the company had not raised objections during the trial in Singapore and had failed to prove or even establish a “reasonable apprehension” of bias against it.
In its case before the Ontario Court of Appeal, Oakwell’s lawyers said EnerNorth had in fact been represented by a lawyer who witnesses said had strong links to the People’s Action Party, while Oakwell had been represented by Philip Jeyaretnam, the son of the opposition figure.
They said the case had been “heard before the courts of a country built on foreign investment, with an impeccable reputation for fairness to foreign businesses like EnerNorth.”
But Backman, the consultant and author, said the risk for Singapore, regardless of the verdict in Canada, was that foreign companies might become increasingly wary about business transactions in the city-state. If EnerNorth wins, he said by telephone, courts in other countries might also come under pressure not to enforce Singapore legal judgments. “This will only impact on the desire of investors to invest and remain in Singapore,” he said.