Most of standard conditions of contract for construction works include an arbitration clause. This clause sets out the scope of arbitration agreement between the parties such as types of disputes that shall be referred to arbitration, any condition precedents prior to commencement of arbitration, arbitration rules applicable to the proceedings, arbitration law governing the relationship between state court and the arbitral tribunal etc. This article compares the arbitration agreement included in Public Sector Standard Conditions of Contract (PSSCOC) published in 2020 and Singapore Institute of Architects (SIA) Building Contract published in 2016. This article is Part 12 of an article series comparing these two contract forms that are widely used in Singapore. As a matter of background and context, there is a related article published in this website entitled ‘Basics Of Arbitration Clause And How Can It Be Reviewed Commercially?’ available for reference. 

As pointed out in Part 11 of this article series relating to comparison of dispute resolution provisions, arbitration is  often deemed as the ‘last resort’ in that its outcome is final and binding between the parties. There are various preceding dispute resolution avenues available to the parties that are either optional or mandatory, each with its advantages and limitations. Parties who are astute in utilising these prior dispute resolution avenues would typically have an inkling of the merit of their claims if and when they decide to proceed with arbitration. By way of example, if a contractor’s application for extension of time was rejected by the independent certifier, the contractor is likely to be aware of the rationale behind such rejection and have an informed opinion on whether it should pursue further legal action. Therefore the utility of an arbitration agreement should always be viewed within the larger dispute resolution landscape.

The differences in the arbitration agreement included in PSSCOC and SIA form are rather significant. These differences involve the timing in which arbitration may commence, how certain breaches of contract conditions could limit future arbitral tribunal’s scope of authority in reviewing relevant disputes, how the arbitral proceedings may be conducted based on the different institutional rules, who may assist in constituting the tribunal in the event of parties’ disagreement etc. The differences in approach between PSSCOC and SIA form is very wide ranging in that these relate to ‘when’, ‘how’, ‘what’ and ‘who’ in respect of the arbitration agreement. It is critical that parties to an arbitration agreement are aware of these differences because one’s ability to secure a favourable arbitral outcome may be impacted by some of these differences. 

One of the reasons behind such significant difference between SIA and PSSCOC could be attributed to the doctrine of ‘party autonomy’ in respect of arbitration. In this regard, whilst parties do not have absolute freedom, they have significant latitude in shaping the features of their arbitration agreement including authority of tribunal, procedural rules governing the conduct of arbitration etc. However it should also be noted that one’s ability to take advantage of such latitude is primarily dictated by its knowledge of arbitration. Such freedom could end up being a burden if there is any disparity in level of knowledge between parties. Therefore this article may be helpful to parties that are interested in forming arbitration agreement that are specific to their needs.

Institutional Arbitration Rules

Under Clause 37(1)(f) of the SIA form, the arbitration proceedings shall be conducted in accordance with the Arbitration Rules of the SIA for the time being in force which rules shall be deemed incorporated by reference of this clause. Arbitral proceedings are managed by the tribunal based on parties’ agreed set of arbitration rules. Most prominent arbitration institutions such as ICC, SIAC, HKIAC, LCIA etc have its own set of rules. When parties adopt a set of arbitration rules from certain arbitration institution, such institution generally administers the parties’ arbitration. By way of illustration prior to the formation of the arbitral tribunal, the arbitration institution may play an important role in assisting to constitute the tribunal as well as hearing on prima facie basis any challenge to reference to arbitration. As SIA is primarily a professional organisation in Singapore that represents the architectural profession rather than an arbitration institution, the SIA arbitration rules are noticeably less prescriptive than other institutional arbitration rules. By way of illustration, the SIA arbitration rules of December 2016 consist of 20 Articles across 27 pages whereas the SIAC rules comprises 65 Rules over 63 pages. Anecdotally the arbitral tribunal has a greater latitude under SIA arbitration rules in defining how the arbitration should be conducted. 

The PSSCOC’s arbitration agreement is fairly unique because it does not have express reference to any specific arbitration rules. Notwithstanding that under Clause 35.2 of the PSSCOC, the Chairman of the Singapore International Arbitration Centre (SIAC) shall nominate the arbitrator, if the parties fail to agree on the arbitrator and either party proceeds with an application to the SIAC for such nomination. In other words, the SIAC plays a limited role as an arbitration institution and that the involvement of the SIAC in nomination of arbitrator does not necessarily mean the adoption of the prevailing SIAC arbitration rules in its entirety. It should also be noted that where the SIAC is involved in nominating the arbitrator, its arbitration rules in so far as it relates to nomination of tribunal should logically apply. By way of example, Section IV of the 7th Edition of SIAC Rules dated 1 January 2025 deals with the ‘Constitution of the Tribunal’. Under this Section IV, Rule 19 – Rules On Appointment stipulates that it is the President of the SIAC that shall appoint any arbitrator, as opposed to the ‘Chairman’. In fact Rule 19 include various sub-rules that are relevant to the nomination of arbitrator that are presumably applicable to the PSSCOC’s arbitration agreement. By way of example, Rule 19.5 of the SIAC requires the President to take into account the qualifications and impartiality in appointing an arbitrator. Rule19.8 requires the Registrar of the SIAC to consider the views of the parties in its decision on whether to extend any timelines for arbitrator appointment. Rule 19.13 states that any decision by the President or the Registrar on appointment shall be final and not be subject to appeal. 

The broader question that parties should consider is exact extent to which these SIAC rules on appointment of arbitrator shall be applicable to the parties under PSSCOC. Also, whether the SIAC’s role is merely to ‘nominate’ the arbitrator or is it to ‘constitute’ the tribunal? As regards the former, the mere nomination of an individual may not be sufficient if one of the parties continues to contest such nomination for various reasons. If it is the latter, then arguably a broader set of arbitration rules under SIAC may be applicable to the parties since the SIAC Court may be required to hear any challenge to the choice of arbitrator and make a prima facie decision. Clearly, under a literal interpretation, the PSSCOC arbitration agreement does not stipulate SIAC’s role in constitution of arbitral tribunal as it merely refers to nomination of arbitrator. However, under purposive interpretation of the PSSCOC arbitration clause, there is no such position as ‘Chairman’ of SIAC and that the nomination of arbitrator instead involves the President and Registrar of SIAC. There is therefore a strong suggestion that for the PSSCOC’s arbitration clause to make sense by fulfilment of its fundamental objective, the SIAC’s role may extend beyond just nomination of arbitrator to that of constituting the tribunal to enable the parties to commence with the proceedings in proper. Parties that prefer clarity and certainty to arbitration agreement under the PSSCOC should take note of the observations above and to negotiate accordingly. Any ambiguity in arbitration clause may eventually be  unnecessarily costly to the parties. 

Arbitration In The Event Of Termination

The SIA form and PSSCOC differs significantly as regards the application of arbitration agreement if there is any event of termination. Under non termination related events, all disputes under PSSCOC shall first be referred to the Superintending Officer as part of the multi-tiered dispute resolution provision found under its Clause 35.1. However, Clause 35.3 of the PSSCOC changes this requirement. If any dispute or difference concerns the termination of the employment of the contractor, or the repudiation or abandonment of the contract by either party, such dispute shall not be referred to the Superintending Officer for decision. Such dispute shall instead be referred to an arbitrator directly. Therefore the reduction in the Superintending Officer’s role as an interim arbiter of dispute corresponds with an increase in the scope of arbitration agreement. On the other hand, since the SIA form does not have any multi-tiered dispute resolution provision, all disputes under SIA can be referred to arbitration directly without any prior conditions pursuant to its Clause 37(1).

Admittedly since termination related disputes can now be directly referred to arbitration due to Clause 35.3 of the PSSCOC much like the SIA form, these two contract forms are more similar for arbitration in the event of termination. This is true if and only if disputes can easily be differentiated between termination related disputes and non termination related disputes. In reality these two categories of disputes may not be easily compartmentalised because the timing of abandonment or point of termination can often be debatable. This is notwithstanding the fact that usually the Employer issues a notice of termination to the contractor to effect the termination of the contractor’s employment under the contract. The reason is because the Employer could either exercise its termination right found under the contract or to exercise common law termination. There are various differences under these two avenues but notice of termination is usually required if the party is exercising its contract termination rights. Under PSSCOC, it is important to clearly identify termination related disputes because the contractor is required to refer any termination related disputes to arbitration within 60 days of the notice of termination or act of repudiation or abandonment. This is required under Clause 35.3 of the PSSCOC. If the contractor fails to do so, it shall be barred from pursuing such dispute in any arbitration or court proceedings as the case may be. Likewise, if the contractor refers a termination dispute directly to the arbitrator only to be determined that the dispute in hand is not termination related and ought to have been referred to the Superintending Officer at the first instance, the arbitral award may be liable for setting aside. Any breach of multi-tiered dispute resolution provision may jeopardise the jurisdiction of the arbitrator as well as scope of arbitration. Therefore the need to clearly identify termination related dispute is not an academic matter but rather an essential part of dispute crystallisation. On the other hand, the arbitration agreement under the SIA form is not confronted by these difficulties.

So why is the distinction of termination disputes from other disputes can be vague and challenging? It is worth noting that the wordings in Clause 35.3 of PSSCOC is quite wide where the difference ‘concerns’ the termination of the employment of the contractor or abandonment of contract by either party. By way of illustration, let us assume a scenario where the contractor’s works were rejected by the Employer for alleged non compliance with specification. The contractor complied with the directions issued by the Employer’s agents to ‘rectify’ the non compliant works under protest and considers these extra over works entitle additional payment and extension of time. Notwithstanding that the Employer continues to be dissatisfied with the remedial works and engaged a replacement third party contractor to carry out the works in issue. The contractor in issue was never paid for the disputed works and was made liable for liquidated damages due to the ensuing schedule overrun. As no notice of termination was ever issued, there is a question of whether the contractor’s employment was ever terminated and if so when did the termination actually take effect. There is also a question of whether the works in dispute is ‘connected’ with the alleged termination and if so whether it should be first referred to the Superintending Officer? Based on the simple yet common hypothetical scenario above, what is clear is that what constitute termination dispute is not quite evident particularly at the outset. The issues in dispute will usually become clearer when parties commence legal action and their respective lawyers decide on the most strategic way to plead their respective cases. By the time the actual issue in contention is precisely framed, the contractor would have exceeded the 60 days time frame stipulated under Clause 35.3 of the PSSCOC, and may be barred from pursuing the dispute. Termination disputes do not necessarily occur after the point of termination, as events leading to the termination may well concern or even caused the termination.  

Arbitration Prior To Substantial Or Practical Completion

According to Clause 35.2 of PSSCOC, any reference to arbitration shall not be initiated by the contractor before the Date of Substantial Completion of the Works (or the latest of any phase completion if applicable) or alleged Date of Substantial Completion of the Works. This restriction may be waived by the Employer in writing. This can be contrasted quite starkly with Clause 37(1)(a) of the SIA form which states that both the Employer and the contractor shall refer any dispute between them to arbitration with a sole arbitrator ‘at any time’ notwithstanding that the Works shall not have been completed. 

As pointed out in Part 11 of this article series relating to comparison of dispute resolution provisions between SIA form and PSSCOC, arbitration is generally a more time consuming mode of dispute resolution since the arbitral outcome is permanent and binding between the parties. The duration of an arbitral proceeding could take many months or even years. Therefore parties may favour a quicker resolution that may provide an interim but binding dispute outcome e.g. adjudication, reference to Superintending Officer etc. Further, arbitration is likely to be irreversibly disruptive to the parties’ working relationship. These factors could possibly explain the rationale behind the PSSCOC’s approach of not allowing the contractor to initiate an arbitration in the midst of construction works. On the other hand, some may prefer the SIA form’s approach by providing flexibility and freedom to both parties to decide on the best course of action for dispute resolution without any restrictions or prior conditions. Those in favour of SIA’s approach may take the position that the party making any claims in the midst of construction is likely to be the contractor. Therefore it is up to the contractor to make an assessment of whether a binding but more time consuming dispute resolution avenue would serve its interest. The Employer should not be in the position of obstructing the contractor’s freedom of choice. 

Apart from the restriction imposed on the contractor to initiate arbitration prior to substantial completion, the other difficulty that may arise under Clause 35.2 of the PSSCOC is that the timing in which the project is substantially completed may not be immediately clear until much later. This is because Clause 35.2 of PSSCOC expressly refers to Date of Substantial Completion or alleged Date of Substantial Completion of the Works as the timeline prior to which arbitration shall not be initiated. What is noticeably absent from this clause is reference to Certificate of Substantial Completion issued by the Superintending Officer pursuant to Clause 17.1(1) of the PSSCOC. As the date included in a Certificate of Substantial Completion is a tangible and factual reference point, one would ordinarily imagine that utilising this document as the basis of establishing arbitration initiation timeline may offer more certainty and clarity. This is particularly so when the Superintending Officer is required under Clause 17.1(1) of PSSCOC to respond within 21 days on whether or not to certify the works as being substantially completed when notified by the contractor for request for works inspection. However referencing to Date of Substantial Completion or alleged Date of Substantial Completion offers certain contractual reprieve to the contractor. This is because the contractor is not unfairly prevented from having access to arbitration where parties are in dispute over delay issues which may complicate identifying the actual date of completion. As soon as the contractor takes a position on the completion date i.e. when the alleged Date of Substantial Completion is established, the contractor could commence arbitration. This flexibility afforded to the contractor would not be available if the arbitration initiation timeline refers to the date included in Certificate of Substantial Completion.

Condition Precedents’ Impact On Arbitrator’s Authority

Apart from the restrictions over timing of commencement of arbitral proceedings examined above, the extent to which the arbitrator is authorised to either review or determine certain issues is bound by the contractor’s compliance with relevant condition precedents. In this regard, the arbitrator’s scope of authority is subject to certain restrictions based on the parties’ agreement. Such restrictions can be found in both SIA form and PSSCOC. In general these condition precedents relate to contractor’s claim for extension of time, additional payment etc where the contractor is required to notify the certifier within certain stipulated time frame of the occurrence of events which give rise to contractual entitlement. Failure to do so shall not only extinguish the contractor’s entitlement but also limiting the arbitrator’s authority to determine the merit of such claim. The rationale behind such consequential notification requirement is to allow the Employer an opportunity to be informed in advance of consequences of certain events which it may have caused or contributed so that it could mitigate it as appropriate.

These condition precedents are distributed across several provisions within the PSSCOC including Clauses 14.3(5) and 23.6 which deal with extension of time as well as loss and expense respectively. Clause 14.3(5) of the PSSCOC refers to restrictions imposed on the arbitrator’s authority in case the contractor fails to fulfil certain condition precedents for extension of time. Such condition precedent for extension of time can be separately found under Clause 14.3(1) which stipulates amongst others the need to inform the Superintending Officer within 60 days of occurrence of delaying event, citing the relevant contract references including reasons for delay, duration of delay and extension of time required. Any failure to fulfil such requirements shall have the arbitrator’s authority restricted in four different ways namely (i) the arbitrator can only determine claims where the requirements of Clause 14.3(1) have been complied, (ii) the arbitrator shall not determine a claim from the contractor that is greater than extension of time notified, (iii) the arbitrator shall not determine a claim from contractor that includes new or additional grounds not previously submitted and (iv) the arbitrator in considering the dispute shall only make a decision based on information previously available to the Superintending Officer. Clause 23.6 deals with condition precedents of loss and expense claims by the contractor, which similarly restricts the arbitrator’s from considering information previously not available to the Superintending Officer in the course of making his decision. 

As regards the condition precedents included in the PSSCOC set out above, some may argue that those restrictions found are imposed on the contractor in not being able to advance certain claims rather than restrictions on the arbitrator’s authority. However where the contractor is barred from making reference of certain claims to the arbitrator, then the immediate and direct consequence is such that those affected claims shall not be included in the scope of arbitration. In other words, these claims are effectively outside the arbitrator’s jurisdiction based on party’s autonomy. 

Under Clause 37(4) of the SIA form, the arbitrator is bound by a fairly significant list of events which limit the scope of issues that can be determined. These events are populated under a single provision for ease of reference as opposed to being distributed across multiple provisions. Apart from Clause 37(4)(f) which deals with condition precedent for the contractor to notify the Architect within 28 days of event entitling extension of time, there are other events in this list that are broader in nature. By way of example, the arbitrator is not authorised under Clause 37(4)(g) to review decision made by the Architect as regards the issuance of Certificate of Partial Re-entry, although the contractor is not prevented from recovering associated damages, if any. The same restriction applies to the arbitrator under Clause 37(4)(a) as regards decision made by the SIA President or Vice President pursuant to Articles 3 and 4 in relation to nomination and appointment of replacement Architect and Quantity Surveyor. Whilst the intention is not for this article to exhaustively review the entire list provided for under Clause 37(4), it is worth pointing out that there may be some challenges in the application of Clause 37(4). Although it may be clear that the arbitrator is not authorised to determine claims where its condition precedents had not been fulfilled, the parties may dispute over whether or not the condition precedents had actually been fulfilled. It may not be entirely clear whether the arbitrator is authorised to make a finding of fact of whether the contractor had indeed violated the stipulated condition precedent. Although most of these conditions precedents are worded in such a way where it is the contractor’s responsibility to notify, the ultimate purpose of such notification is to ensure that the event in issue is within the contemplation of the Employer and its agent, at the material time. Whether or not the Employer and/or its agent had been aware of the event in issue or at least ought to have been aware requires a finding of fact much like the question of whether the contractor had duly complied with the notification requirement. Further, there may be a broader principles of law that should be considered by the arbitrator in determining whether it is fair and equitable for the contractor to be denied from having access to certain contractual relief (e.g. additional payment or extension of time) when it was the Employer who had first breached the contract (e.g. by delay in providing site access). Such breach may have prevented the contractor from performing its obligation. Can the condition precedent act as a vehicle to cure the Employer’s breach? There are no simple answers to these substantive issues but at the very least one ought to consider whether should the parties be denied from having these arguments ventilated before the arbitrator.

Conclusion

It is clear that whilst arbitration agreement is the final and binding dispute resolution avenue available to the parties under both SIA form and PSSCOC, the path of access to arbitration can be tricky. As both contract forms are essentially ‘standard conditions’ available for the parties’ consideration, having a good grasp of the essential principles of arbitration agreement goes a long way in facilitating a negotiation. Much of these arbitration details can be financially consequential, perhaps much more so than the commonly negotiated commercial terms.




Koon Tak Hong Consulting Private Limited