Renewables Arbitration - a perspective from Singapore

Clyde & Co’s Young Arbitration Group provides a unique insight into international arbitration issues through the lens of young international arbitration practitioners working across different jurisdictions. In this series with Daily Jus, Clyde & Co explores the role of arbitration in renewable energy disputes. Leon Alexander, Hannah Chua and Elizabeth Teo provide a perspective from Singapore in this article.

There are two different aspects to renewable energy disputes in Singapore: the renewables landscape within Singapore itself, and Singapore’s status as a regional financial hub and international arbitral centre.  

The Renewables Landscape in Singapore

In 2021, Singapore launched its key environmental strategy, the Singapore Green Plan 2030, in which it announced its commitment to achieve its long-term net-zero emissions aspiration by 2050, including by establishing a robust legal framework to tackle environmental and climate change issues. 

As part of Singapore’s Green Plan 2030, Singapore is the first country in Southeast Asia to introduce a carbon tax on greenhouse gas emissions. This carbon tax aims to incentivise emissions reductions across all sectors and facilitate the transition to a low-carbon economy.

There are also additional climate disclosure requirements for SGX-listed companies in Singapore, which will be imposed in a phased approach:

• From FY2025: All listed companies in Singapore must begin reporting on Scope 1 and 2 emissions.
• From FY2026: Listed companies will need to disclose Scope 3 emissions in addition to the existing requirements.
• From FY2027: Large non-listed companies with an annual revenue of at least SGD1 billion and total assets of at least SGD500 million must report on Scope 1 and Scope 2 emissions (excluding Scope 3). External assurance on these emissions will also be required for listed companies starting from this year.
• Tentatively from FY2029: large non-listed companies will need to report on Scope 3 emissions and undergo external assurance on their Scope 1 and Scope 2 emissions.

Singapore’s use of Renewable Energy – Green Marine Fuel

One of the key aspects of the renewable energy landscape in Singapore is in relation to marine fuel or “bunkering”. Singapore is the largest bunkering hub in the world and is at the forefront of exploring the use of renewable energy as bunker fuel. In particular, the Singapore Marine Port Authority (“MPA”) advocates for the supply of biofuel to vessels within the Singapore port. Its efforts include the development of a provisional national standard on the specifications of marine biofuel to supplement international standards.

Apart from biofuel, the MPA has also been actively developing initiatives on the use of ammonia as a viable marine fuel alternative. Indeed, the world’s first use of ammonia as marine fuel was successfully piloted in Singapore, where the Fortescue Green Pioneer was reported to have loaded liquid ammonia during a fuel trial. It received flag approval and the “Gas Fuelled Ammonia” notation by its classification society.  

In April 2024, the Singapore-Rotterdam Green and Digital Shipping Corridor (“GDSC”) commenced the implementation phase, with the GDSC partners set to implement various first-mover pilot projects to accelerate the uptake of zero and near-zero emission fuels, including ammonia. 

At a press conference in June 2024, Singapore’s Transport Minister also highlighted the shipping industry’s transition towards green fuels such as ammonia and methanol.

Singapore’s positioning as a frontrunner in the development of green marine fuel is bolstered by its status as a leading arbitration hub.

Singapore as an Arbitral Seat

Singapore has established itself as a premier forum for resolving disputes in the APAC region, whether through litigation or arbitration. In addition to Singapore’s strategic geographical position in the APAC region, its economy is consistently ranked as one of the most open and least corrupt in the world and it is generally seen as a neutral jurisdiction making it an attractive place to resolve multi-jurisdictional disputes. Furthermore, its status as a key hub for international trade uniquely positions Singapore to facilitate the resolution of energy and renewables disputes. 

Singapore’s popularity as an arbitral seat is reflected by its ranking in 2022 as the second most popular seat after London for energy-related international commercial arbitrations, ahead of Paris, Hong Kong, Dubai and New York. (See Queen Mary University of London and Pinsent Masons, ‘Future of International Energy Arbitration Survey Report’, 20 January 2023). 

In Singapore, domestic arbitrations are governed by the Arbitration Act, while international arbitrations fall under the purview of the International Arbitration Act. Singapore’s International Arbitration Act closely follows the UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (2006) (“UNCITRAL Model Law”), making it familiar to parties from various jurisdictions. 

As a signatory to both the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“New York Convention”) and the United Nations Convention on International Settlement Agreements Resulting from Mediation (2019) (“Singapore Convention on Mediation”), Singapore also ensures that arbitral awards and commercial mediated settlement agreements are recognized and enforceable across borders.

Key Arbitral Institutions in Singapore

Singapore is home to two main arbitration centres: the Singapore International Arbitration Centre (SIAC) and the Singapore Chamber of Maritime Arbitration (SCMA). Each institution operates its own set of rules. 

Energy-related disputes with no connection to the marine industry are typically administered by the SIAC, whereas maritime disputes are commonly referred to the SCMA.

Special Arbitration Rules for Supply of Marine Fuel 

Notably, the SCMA has a special set of procedures for claims relating to the supply of marine fuel, known as the Singapore Bunker Claims Procedure (SBC Terms). 

This set of terms has been designed specifically to service the bunker industry, with a view to resolving bunker disputes expeditiously by having a “fit-for-purpose” procedure.  

As the SBC Terms are applicable regardless of the composition of the marine fuel, bunker suppliers will remain able to benefit from using the SBC Terms to resolve their disputes in Singapore arbitration even as they transition towards the supply of marine fuel of renewable sources. 

Renewable Projects in the Asia Pacific Region

As mentioned, Singapore acts as a regional financial hub for the APAC region and is the headquarters for the 21 member states of APEC (Asia-Pacific Economic Cooperation). 

The APAC region is expected to grow exponentially in the field of renewables as countries transition to clean energy towards the goal of net-zero emissions. 

In 2021, the APAC region achieved a decarbonisation rate of 1.2% on average in comparison to 0.5% globally. The International Energy Agency’s Announced Pledges Scenario (updated in August 2023) anticipates that APAC renewables investments made from 2022 through 2030 will hit $286 billion.

Several notable projects and initiatives include:

• Ubol Ratana Dam Hydro-Floating Solar Hybrid Project in Thailand. Thailand’s government is working to develop 16 floating solar farms, including the world’s largest floating hydro-solar farm, with a combined capacity of more than 2.7GW by 2037; and
• The Greater Changhua 1 and 2a offshore wind farms in Taiwan. This project was connected to the grid earlier this year and has doubled Taiwan’s offshore wind capacity by adding an estimated 900 MW of power.

Conclusion

In 2022, the Singapore Government launched the longest sovereign green bond on the market, featuring a 50-year tenor green bond designed to fund renewables and energy efficient projects. The bond attracted strong demand from institutional investors, with the order book being over-subscribed by 2.3 times for an issuance size of S$2.35 billion. The bond was subsequently issued again in 2023 and 2024. Singapore is committed to green energy and its elite status in the international arbitration world make renewables arbitration in Singapore an increasing area of expertise.

The series continues next week with a perspective from Poland. 

This article was originally published on Daily Jus on Thursday 10th September, with thanks to Jus Mundi & Jus Connect, and is available here: https://dailyjus.com/world/2024/10/renewables-arbitration-series-a-perspective-from-singapore