Can an Arbitration be Administered by One Institution Under Another's Rules? The Insigma Technology Case Study

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

Party autonomy is a foundational principle in international arbitration, granting businesses considerable freedom to tailor dispute resolution mechanisms to their specific needs. This includes choosing the procedural rules that will govern the arbitration and, often, an institution to administer it. But what happens when parties, in their quest for a bespoke process, craft an arbitration clause that appears to mix and match these elements—for example, by stipulating that one institution's rules should be applied, but the arbitration itself should be administered by a different institution? Such "hybrid" clauses can give rise to significant jurisdictional and procedural challenges. The Singapore Court of Appeal's decision in Insigma Technology Co. Ltd v. Alstom Technology Ltd ([2009] SGCA 24), issued on June 2, 2009, provides a crucial judicial examination of the validity and enforceability of such an unconventional arrangement.

I. The Unconventional Arbitration Clause in Insigma

The dispute arose from a Technology License Agreement dated December 8, 2004, between Alstom Technology Ltd (the licensor) and Insigma Technology Co. Ltd (the licensee) concerning royalty calculations. The arbitration clause at the heart of the controversy stipulated:

"Any and all such disputes shall be finally resolved by arbitration before the Singapore International Arbitration Centre [SIAC] in accordance with the Rules of Arbitration of the International Chamber of Commerce [ICC] then in effect and the proceedings shall take place in Singapore and the official language shall be English. The tribunal shall consist of three arbitrator(s) to be appointed in accordance with the Rules which are hereby incorporated by reference into this clause. The arbitration award shall be final and binding on both Parties..."

This clause presented an immediate interpretative challenge: it named SIAC as the apparent administering authority ("before the Singapore International Arbitration Centre") but simultaneously mandated the use of the ICC Arbitration Rules.

II. A Tale of Two Institutions: The Procedural Journey

The ambiguity in the clause quickly led to procedural complications:

  1. Initial ICC Filing: Alstom first initiated arbitration against Insigma with the ICC on August 1, 2006.
  2. Insigma's Jurisdictional Challenge at ICC: Insigma contested the ICC's jurisdiction, arguing that the arbitration clause required SIAC to administer any arbitration, albeit under ICC Rules.
  3. Alstom's Inquiry with SIAC: On November 13, 2006, Alstom sought clarification from SIAC regarding its willingness and ability to administer an arbitration under the ICC Rules. SIAC responded affirmatively on November 17, 2006, outlining a practical approach: the SIAC Registrar and Chairman would perform functions analogous to those of the ICC Secretary General and ICC Court, respectively; the SIAC Secretariat would handle administrative tasks; and arbitrator fees would be determined using a model similar to the ICC's (based on the amount in dispute).
  4. Withdrawal from ICC and Commencement at SIAC: Following SIAC's response, Alstom formally withdrew its Request for Arbitration from the ICC on December 11, 2006 (the ICC proceedings were terminated by consent on February 2, 2007). Concurrently, on November 23, 2006, Alstom initiated arbitration proceedings against Insigma with SIAC, referencing the hybrid clause.
  5. Arbitrator Appointment at SIAC: The parties proceeded to nominate arbitrators. Each party nominated one arbitrator, and these two party-appointed arbitrators subsequently agreed on the presiding arbitrator. SIAC confirmed these appointments, referencing its own SIAC Rules in the confirmation process.
  6. Insigma's Jurisdictional Challenge at SIAC: In a notable change of position, Insigma then challenged SIAC's jurisdiction. It argued that the hybrid arbitration clause was void for uncertainty because the ICC Rules were intrinsically linked to the ICC's unique institutional structure (particularly the ICC International Court of Arbitration and its role in scrutinizing awards) and could not be properly administered by any other body like SIAC.

The SIAC-constituted arbitral tribunal heard arguments on jurisdiction and, in a decision dated December 10, 2007, rejected Insigma's challenge. The tribunal emphasized the strong international public policy in favor of upholding arbitration agreements. It found that the concepts of arbitral rules and institutional administration were separable, that the clause was not void for uncertainty, and that SIAC was capable of administering an arbitration under the ICC Rules by adapting its own institutional roles to mirror those of the ICC.

III. The Singapore Courts' Approach: Upholding Party Autonomy

Insigma sought to set aside the arbitral tribunal's positive ruling on jurisdiction before the Singapore High Court.

A. High Court Decision (Justice Judith Prakash, August 14, 2008)

Justice Prakash dismissed Insigma's application ([2008] SGHC 134), affirming the arbitral tribunal's jurisdiction. The High Court's key findings were:

  • Interpretation of the Clause: The court interpreted the clause not as an agreement for institutional arbitration by the ICC, nor as a standard institutional arbitration by SIAC under SIAC Rules, but rather as an agreement for an ad hoc arbitration to be administered by SIAC, utilizing the ICC Rules as the chosen procedural framework. This was termed a "hybrid ad hoc" arbitration.
  • Party Autonomy Prevails: The court stressed that party autonomy is a guiding principle. If parties agree to such a hybrid arrangement, and the designated administering body (SIAC) is willing and practically able to undertake the administration, courts should strive to give effect to that agreement. The fact that such an arrangement might be less efficient than standard institutional arbitration was not, in itself, a reason to invalidate it if it reflected the parties' intent.
  • Separability of Rules and Administration: The court endorsed the view that procedural rules (like the ICC Rules) are, in principle, capable of being detached from their originating institution and applied in an arbitration administered by another body.
  • Estoppel and Curing of Uncertainty: Even if the clause had initially suffered from some uncertainty, Insigma's own prior conduct—specifically, its initial insistence that SIAC, not the ICC, should administer the arbitration—had effectively cured any such uncertainty. Insigma was estopped from subsequently arguing that SIAC lacked jurisdiction or that the clause was unworkable.

B. Court of Appeal Decision (June 2, 2009)

Insigma appealed to the Singapore Court of Appeal, which, in a judgment delivered by Chief Justice Chan Sek Keong, unanimously dismissed the appeal and fully endorsed the High Court's reasoning and conclusions ([2009] SGCA 24).

The Court of Appeal reinforced several key principles:

  • Pro-Arbitration Interpretation: Arbitration agreements, like other commercial contracts, should be construed to give effect to the parties' intentions. Where parties have clearly expressed an intention to resolve their disputes by arbitration, courts should make every effort to uphold that agreement, even if certain aspects of the clause are ambiguous, inconsistent, or incomplete, provided that giving effect to the agreement does not prejudice the rights of the parties and the result is not fundamentally different from what they intended.
  • Rejection of "Pathological Clause" Argument: The Court of Appeal did not accept Insigma's contention that the hybrid clause was so "pathological" (defective) as to be void for uncertainty or impossibility of performance. It noted that the only real impediment would have been if SIAC had refused to administer the arbitration under the ICC Rules, which it had not.
  • Consistency with Singapore's Pro-Arbitration Policy: The court observed that Singapore's International Arbitration Act (specifically Section 15, which gives broad effect to party-chosen arbitration rules) supported the enforcement of such hybrid arbitral arrangements, provided they do not conflict with mandatory provisions of Singapore law.
  • Dismissal of "Quality of Arbitration" Concerns: Insigma's argument that an SIAC-administered arbitration under ICC Rules would be of inferior quality to a true ICC-administered arbitration was given short shrift. The Court of Appeal pointed out that Insigma had initially argued for SIAC administration, thereby implicitly accepting whatever perceived differences in "quality" that might entail.

The Insigma decisions, from the tribunal through to the Court of Appeal, highlight several important legal principles pertinent to the interpretation and enforcement of unconventional arbitration clauses:

  1. Party Autonomy as a Paramount Consideration: The Singapore courts demonstrated a strong commitment to upholding the parties' freedom to agree on their preferred mode of dispute resolution, even if that choice resulted in an unusual or complex procedural hybrid.
  2. The Conceptual Separability of Arbitral Rules and Institutional Administration: The decisions implicitly (High Court) and explicitly (tribunal) support the notion that a set of procedural rules (like the ICC Rules) can, in principle, be administered by an institution other than the one that promulgated them, provided that administering institution agrees and is practically capable of doing so.
  3. Judicial Reluctance to Invalidate for Defects (Pro-Arbitration Stance): Consistent with a broadly pro-arbitration policy, the courts were unwilling to nullify the arbitration agreement merely because it was unconventional or presented administrative challenges, so long as a workable interpretation that honored the fundamental intent to arbitrate could be found.
  4. The Role of Estoppel and Good Faith: A party's conduct and prior representations can have significant legal consequences. Insigma's initial insistence on SIAC administration was a key factor in the courts' rejection of its later jurisdictional challenge based on the unsuitability of that very arrangement.

V. Practical Challenges and Institutional Perspectives on Hybrid Clauses

While the Singapore courts in Insigma found a way to validate the hybrid clause, such arrangements are not without significant practical challenges and potential conflicts with institutional policies:

  • Institutional Exclusivity and Identity: Many leading arbitral institutions view their rules and administrative services as an integrated package. They invest heavily in developing and maintaining their rules, training staff, and building a reputation for quality and reliability. For instance, Article 1(2) of the 2012 (and subsequent 2017 and 2021) ICC Rules of Arbitration explicitly states that "The Court [the ICC International Court of Arbitration] is the only body authorized to administer arbitrations under the Rules..." This suggests that, from the ICC's perspective, an arbitration is either an ICC-administered arbitration under its rules, or it is not an ICC arbitration at all. Another institution purporting to "administer an arbitration under ICC Rules" would likely be viewed by the ICC as problematic and not a recognized form of ICC arbitration.
  • Replicating Unique Institutional Functions: Certain institutional rules involve unique functions performed by specific organs of that institution. A prime example is the ICC Court's mandatory scrutiny of draft arbitral awards before they are finalized (Article 34 of the 2021 ICC Rules). It is questionable whether another institution, like SIAC, could genuinely replicate this specialized review process, which is central to the ICC's quality control mechanism. Similarly, appointment processes or challenge procedures often involve decisions by specific institutional bodies whose authority cannot easily be delegated or mimicked.
  • Administrative Fees and Logistics: Fee structures are typically tied to an institution's own rules and administrative services. Administering one institution's rules using another's fee schedule and administrative setup can lead to confusion and disputes over costs.
  • Concerns about "Freeriding" and Brand Dilution: If one institution administers an arbitration using the well-established and reputable rules of another, it could be perceived as "freeriding" on the intellectual capital and brand value built up by the rule-originating institution, without contributing to its development or bearing the associated administrative overheads. This can also dilute the brand and recognized standards of the rule-originating institution.
  • Enforcement Risks: While the Insigma award was upheld in Singapore (the seat), an award emanating from such a hybrid procedure might face greater scrutiny or challenges at the enforcement stage in other jurisdictions less inclined to validate unconventional arbitration agreements, especially if the "rules" institution (e.g., ICC) formally objects or clarifies that it does not endorse such a hybrid.

VI. To Hybridize or Not? Considerations for U.S. Businesses

Parties might be tempted to draft hybrid arbitration clauses for various reasons: a perceived desire to achieve cost savings (though these are often minimal when considering the totality of arbitration expenses, as institutional fees are usually a small percentage), familiarity with one institution's procedural rules but a preference for another institution's geographical location, administrative style, or panel of arbitrators.

However, the risks and complexities associated with such hybrid clauses generally outweigh any perceived benefits:

  • Increased Likelihood of Jurisdictional Challenges: As Insigma itself demonstrated, hybrid clauses are prime targets for jurisdictional challenges, leading to preliminary litigation, increased costs, and significant delays before the merits of the dispute can even be addressed.
  • Procedural Uncertainty: It can be unclear how conflicting provisions between the chosen rules and the administering institution's standard practices will be resolved, or how specific functions unique to the "rules" institution will be handled.
  • Difficulty Securing Institutional Cooperation: While SIAC was willing in Insigma, not all institutions may be prepared to administer arbitrations under another's rules, especially if it involves complex or burdensome adaptations. The originating institution (whose rules are being "borrowed") might also object.
  • Potential Enforcement Hurdles: An award from a uniquely structured arbitration might face a more difficult path to enforcement in courts unfamiliar with or skeptical of such arrangements.

Safer and More Predictable Alternatives for U.S. Businesses:

  1. Standard Institutional Arbitration: Select a single, reputable arbitral institution and explicitly adopt its standard arbitration rules. This is generally the most straightforward and predictable approach.
  2. Modifications Within an Institutional Framework: If specific procedural adaptations are desired, discuss these with the chosen institution. Many institutional rules allow for party agreement to modify certain non-mandatory provisions, and institutions can often accommodate reasonable requests within their established framework.
  3. Ad Hoc Arbitration with Established Rules: If institutional administration is not desired, parties can opt for ad hoc arbitration, typically using a recognized set of non-administered rules like the UNCITRAL Arbitration Rules. Parties can still agree for an institution to provide limited administrative support (e.g., acting as appointing authority) without full case administration.

Conclusion

The Singapore Court of Appeal's decision in Insigma Technology v. Alstom Technology is a significant affirmation of party autonomy, demonstrating a court's willingness to go to considerable lengths to uphold an agreement to arbitrate, even when faced with a highly unconventional, hybrid arbitration clause. The pragmatic approach of SIAC in agreeing to administer the arbitration under such circumstances was also a key factor.

However, the case also serves as a strong cautionary tale. While such a hybrid clause was ultimately found to be legally "possible" and enforceable in the specific pro-arbitration environment of Singapore and with the cooperation of the chosen administering institution, deliberately drafting clauses that attempt to fuse the rules of one institution with the administration of another is generally a high-risk strategy. It invites uncertainty, jurisdictional battles, and potential difficulties down the line. For U.S. businesses and their international counterparts, the pursuit of clarity, predictability, and reliance on well-established institutional frameworks or the robust UNCITRAL Rules for ad hoc proceedings remains the most prudent path to ensuring an efficient, cost-effective, and ultimately enforceable international arbitration process.