Legal Updates for October 2023Contractual Clauses that Seek to Mitigate the Costs, Expenses or Liabilities of COVID-19 and Other Contagious Outbreaks: A Matter to Pay Heed to
Since the outbreak of COVID-19, commercial parties in the shipping industry have increasingly incorporated clauses dealing with infectious diseases into their contracts. In the chartering context where such clauses are commonplace, they are primarily designed to deal with and allocate the risks (as between owner and charterer) of the vessel calling at a place where there is a risk of infection to the crew and vessel. However, parties have been known to incorporate modified versions and, in certain cases, wholly bespoke infectious diseases clauses. Unsurprisingly, infectious diseases clauses have given rise to a trend of disputes surrounding the application and interpretation of such clauses.
It will thus be prudent for parties to conscientiously review the ambit and scope of such clauses prior to contract, to mitigate against the risk of unwittingly bearing responsibility for infectious diseases related costs, expenses or liabilities. In this Update, we look at the scope of infectious diseases clauses and the key considerations when negotiating such clauses.
MAS Consults on Proposed Transition Planning Guidelines for Banks, Insurers, Asset Managers
To facilitate transition planning processes, the Monetary Authority of Singapore ("MAS") issued a set of three Consultation Papers proposing guidelines on transition planning ("TP Guidelines") respectively for banks, insurers and asset managers as they build climate resilience and enable robust climate mitigation and adaptation by customers and (where relevant) asset managers and investee companies. Transition planning refers to the internal strategic planning and risk management processes undertaken to prepare for both risks and potential changes in business models associated with the transition.
Key aspects of the respective TP Guidelines follow similar broad themes under MAS' Guidelines on Environmental Risk Management, which include governance and strategy, risk and portfolio management, the use of data and metrics (including the setting of decarbonisation targets), implementation strategy, as well as disclosure. The TP Guidelines for insurers also address underwriting and investment aspects. The TP Guidelines for asset managers also address engagement and stewardship. In terms of implementation, MAS proposes a transition period of 12 months after the relevant TP Guidelines are issued for the FIs to assess and implement the TP Guidelines as appropriate. Comments to the Consultation Papers must be submitted to MAS by 18 December 2023.
This Update outlines the salient aspects of the proposed TP Guidelines for banks, insurers, and asset managers, along with our comments.
Regional Competition Bites Q3 2023
In this issue of the 3rd Regional Competition Bites for 2023, we see mergers continue to take centre stage in Southeast Asia. Southeast Asia is no longer a nascent region insofar as competition laws and merger control is concerned. It is active with regulators making their mark. As merger control activity and regulatory scrutiny in the region increases, businesses must keep abreast of developments here to avoid violating competition laws when engaging in business activities or undertaking mergers and acquisitions. At a ground level, competition law concerns are also focussed on tackling rising inflation and cost of living. The common denominator amongst regulators in the region is ensuring that anti-competitive conduct and unfair practices that could result in detriment to consumers are prevented. Also, regulators remain active in monitoring the market for competition law violations.
The Rajah & Tann Asia Competition & Antitrust team remains engaged and up to date with the ever-evolving landscape of competition law in the region. Please reach out to us if you wish to further discuss these developments.
Bill Passed to Enhance Oversight of Goods Passing through Free Trade Zones
On 4 October 2023, the Free Trade Zones (Amendment) Bill 2023 ("Bill") was passed in Parliament. The Bill amends the Free Trade Zones Act 1966 and makes consequential amendments to the Customs Act 1960.
The Bill seeks to update and strengthen the free trade zone ("FTZ") regime by enabling better oversight of goods flowing through FTZs while still ensuring the efficient movement of goods, and incorporates relevant feedback received during the public consultation exercise conducted by the Ministry of Finance ("MOF") on the draft Free Trade Zones (Amendment) Bill.
This Update provides a summary of the key feedback received during the public consultation and MOF’s response. It also briefly highlights the key changes that the Bill will introduce.
New CMFAS Examination Requirements for Appointed Representatives under SFA and FAA Commence on 1 April 2024
Representatives appointed by capital markets intermediaries and financial advisers to conduct regulated activities under the Securities and Futures Act and Financial Advisers Act ("Appointed Representatives") are required to meet minimum academic qualifications and pass the relevant modules under the Capital Markets and Financial Advisory Services Examination ("CMFAS Examination").
On 1 April 2024, the CMFAS Examination requirements will be revised to:
- raise the competency of and build a culture of high ethical standards among Appointed Representatives; and
- provide more flexibility to Appointed Representatives to customise the modules under the CMFAS Examination to suit their roles.
The Institute of Banking and Finance and the Singapore College of Insurance, which administer the CMFAS Examination, will start registrations for the new CMFAS Examination and make available the new study guides at least two months before the new CMFAS Examinations commence on 1 April 2024. Grandfathering arrangements will be put in place for certain existing Appointed Representatives as of 1 April 2024.
This Update discusses some key features of the new CMFAS Examination regime and the grandfathering arrangements for existing Appointed Representatives.
Prescribed Criteria for International Carbon Credits under Singapore's Carbon Tax Regime
On 4 October 2023, the Ministry of Sustainability and the Environment and the National Environment Agency shared a set of criteria for international carbon credits ("ICCs") under the ICC Framework. The ICC Framework will allow carbon tax-liable companies to use eligible ICCs to offset up to 5% of their taxable emissions commencing 1 January 2024. The criteria detailed in the Carbon Pricing Act 2018 – Carbon Pricing (Carbon Tax and Carbon Credits Registry) (Amendment) Regulations 2023 (which amends the Carbon Pricing (Carbon Tax and Carbon Credits Registry) Regulations 2020) ("Prescribed Criteria") takes effect on 1 January 2024. The Prescribed Criteria aims to ensure that ICCs are of "high environmental integrity" that companies may use to offset taxable emissions.
This Update outlines key aspects regarding the use of eligible ICCs to pay carbon tax as well as the Prescribed Criteria under Singapore's legislation and ICC Framework, along with our comments.
CaseTrust Accreditation Scheme for E-businesses
On 13 October 2023, the Consumers Association of Singapore ("CASE") launched the CaseTrust Accreditation Scheme for E-businesses ("e-CaseTrust scheme") to address common issues and complaints of consumers when they shop online. The e-CaseTrust scheme incorporates CaseTrust’s general accreditation requirements (such as ethical advertising, price transparency, good sales and after-sales service and business integrity), as well as relevant industry guidelines for retail consumer-facing e-businesses. This Update outlines salient aspects of the accreditation assessment criteria for e-businesses as well as the application and assessment process, along with our comments.
United Nations Convention on the International Effects of Judicial Sales of Ships and What It Means for Singapore
An owner who has purchased a ship through commercial channels at arm's length does not typically face challenges to its title when calling at different ports. However, the same cannot be said about a purchaser who obtains clean title to a ship through a judicial sale process. Much will depend on where the ship was judicially sold, and which jurisdictions are called upon to recognise the sale.
In this Update, we take a look at the issues that arise from the failure to recognise clean titles conferred by foreign judicial sales and their effect on purchasers and the maritime industry as a whole. We also examine the United Nations Convention on the International Effects of Judicial Sales of Ships, which Singapore signed in September 2023, and how far it may go in addressing these issues.
Towards Regional Digital Integration – Exploring the ASEAN Digital Economy Framework Agreement
The core principle of the digital economy is connectivity, finding its form in the digital links between people, organisations and countries. While the framework of legislation and operational structures surrounding the digital economy is still in a developmental stage, the harmonisation of such frameworks and how they interact is now the focus of international attention.
In this regard, ASEAN has made a major step forward in regional digital integration in the form of the ASEAN Digital Economy Framework Agreement ("DEFA"). At the 23rd ASEAN Economic Community Council Meeting, the ASEAN Economic Ministers launched the negotiations on the ASEAN DEFA. Targeted for conclusion by 2025, it is estimated that a high-quality ASEAN DEFA is projected to double the regional digital economy from US$1 trillion to US$2 trillion by 2030. In this Update, we look at the scope of the ASEAN DEFA and the opportunities it presents.
Launch of New Global Innovation Alliance Node in New York to Assist Singapore Tech Startups in Expanding to US
Over the years, Singapore's investments in startups, research and innovation have transformed it into a technology and startup hub not just for Singapore, but for the entire Southeast Asian region. In 2022, Singapore tech startups raised close to US$11 billion, representing about 64% of the deal value across Southeast Asia.
A pillar of this transformation is the Global Innovation Alliance ("GIA"), a technology- and innovation-focused network of Singapore and overseas partners in key demand markets and major innovation hubs. Led by Enterprise Singapore, the GIA helps Singapore companies venture beyond the domestic market to access global markets. Since 2019, nearly 500 Singapore companies have been supported to tap into market opportunities in key innovation hubs and scale globally.
On 10 October 2023, Deputy Prime Minister and Minister for Finance Lawrence Wong launched a new GIA node in New York City ("NYC") as part of his working trip to the US. The new NYC node will offer Singapore tech startups opportunities for innovation collaboration and to connect with business partners to co-develop, testbed and commercialise their solutions in the US. With the addition of the NYC node, the GIA network now operates across 18 cities globally, extending beyond the US to China, Indonesia, Japan, Philippines, Thailand and Vietnam, among others.
In this Update, we provide an overview of the GIA and the support it provides Singapore-based tech startups and small-medium enterprises (SMEs). The leading partners of Rajah & Tann Singapore are well-placed to assist your business in its journey from incorporation to overseas expansion, with our own Rajah & Tann Asia network across the ten jurisdictions of Singapore, Cambodia, China, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Thailand, and Vietnam, as well as regional desks in Brunei, Japan and South Asia. The Rajah & Tann Asia network is also geared towards providing integrated solutions with expertise across various practices so as to address the multi-disciplinary issues you may encounter throughout your expansion journey.
Can Confirming Banks Rely on a Sanctions Clause in a Confirmation to Refuse to Honour a Complying Presentation?
The commercial purpose of a confirmed documentary letter of credit is to provide assurance to the beneficiary that it will receive payment against presentation of complying documents. The addition of the confirming bank in the letter of credit transaction is often due to the beneficiary's discomfort with the issuing bank, whether for reasons of creditworthiness or otherwise. Where a confirming bank seeks to rely on a sanctions clause to refuse to honour a complying presentation, what is the standard of proof it must meet in order to discharge its burden to invoke such a clause? The recent Singapore Court of Appeal ("CA") in Kuvera Resources Pte Ltd v JPMorgan Chase Bank, N.A. [2023] SGCA 28 ("Kuvera") sheds light on this important issue.
In Kuvera, the confirming bank relied on a sanctions clause in its confirmations to refuse to honour an otherwise complying presentation on the basis that the goods had been shipped onboard a vessel which was allegedly subject to US sanctions laws. Before the High Court, the bank successfully argued that it was entitled to rely on the sanctions clause by applying a risk-based approach, which on the facts of Kuvera meant that it would suffice for the confirming bank to establish inter alia that the relevant authority (in this instance, the US Office of Foreign Assets Control "OFAC")) would have found the bank to be in breach of the relevant US sanctions had it made payment to the beneficiary under the letters of credit.
On appeal, however, the CA found that the confirming bank could not bring itself within the operation of the sanctions clause. The CA emphasised that the issue of whether the vessel was subject to sanctions was to be determined objectively, rather than by reference to speculative elements under the bank's risk-based approach, for instance a determination by a third party such as OFAC.
Below, we cover the background of the dispute, the key points made by the High Court and the CA, and the implications Kuvera has for banks and beneficiaries of confirmed letters of credit.
Postponing Limitation Periods for Fraud: Singapore High Court Clarifies Contours of Fraud Exceptions in Sections 29(1)(a) and (b) of the Limitation Act 1959
Under Singapore law, claimants are required to bring certain types of actions within six years of the accrual of their cause of action, failing which they are time-barred from doing so. To mitigate the potential harshness of this rule, the Limitation Act 1959 ("LA") allows time to be postponed in some exceptional circumstances.
Of particular note are the fraud exceptions in section 29(1)(a) and (b) of the LA, the precise contours of which have been the subject of recent debate. In SW Trustees Pte Ltd v Teodros Ashenafi Tesemma and others [2023] SGHC 273, the Singapore High Court clarifies two thorny questions on how the fraud exceptions apply in Singapore where conspiracy is alleged. In particular:
- For section 29(1)(a), the High Court has clarified for the first time that limitation periods can be postponed only if fraud is an essential element of the cause of action; and
- For section 29(1)(b), any fraudulent concealment must have been committed by the specific defendant against whom time is sought to be postponed.
Wilson Zhu, Lye Yu Min and Naomi Lim of Rajah & Tann Singapore LLP's Restructuring & Insolvency Practice acted for the successful Appellant in this case.
SGX Group Shares Views on Addressing Concerns about Sustainability-linked Bonds with Enhanced Targets and Structure
The Singapore Exchange ("SGX Group") identifies green, social and sustainability ("GSS") bonds listed on the SGX-ST that meet recognised standards as Sustainable Fixed Income instruments. However, SGX Group has not recognised a different class of sustainable debt, namely sustainability-linked bonds ("SLBs"), and this initiative is under review. SLBs are a relatively new fund-raising instrument for issuers. The issuer of an SLB ("SLB issuer") is required to set certain sustainability performance targets ("SPTs") which in turn affect the characteristics of the bond such as the coupon rate. The SLB issuer, in return, has unfettered use of the funds raised, unlike in the case of GSS bonds which proceeds can only be used for eligible green projects. In its media release on "Addressing concern about sustainability-linked bonds with enhanced targets and structure", SGX Group addressed two key aspects for the broader adoption of SLBs: (1) credibility of the SPTs; and (2) the product structure. This Update outlines SGX Group's views on these two aspects, along with our comments.
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