Overview of the Legal Environment of Singapore
Contributed by: RSM Chio Lim ( www.RSMChioLim.com.sg)
Ranked by the World Bank's report, "Doing Business 2007: How To Reform" as the most accommodating country to do business in the world, Singapore is a strategic and reliable base for foreign investors to invest in the emerging Asian markets.
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The Republic of Singapore has a legal system largely based on the British Westminster model, where the power to govern and administer the country is divided between the Executive, the Legislature and the Judiciary.
Generally speaking, executive power of the government is vested in the President of the republic and a Cabinet of Ministers comprising a Prime Minister and other appointed Ministers. The power to legislate for the country is vested in Parliament with the President having a role to formally assent to bills and therefore give new pieces of legislation their legal effect. The President also has the role of keeping Parliament in check with regards to laws that may affect the financial resources of the country. The machinery to administer justice is the judiciary, which comprises the Supreme Court and the Subordinate Courts. The Supreme Court consists of the High Court, which exercises both original and appellate civil and criminal jurisdiction and the Court of Appeal, which exercises appellate civil and criminal jurisdiction. Any courts constituted under the Subordinate Courts Act (Chapter 321) and any other tribunal or judicial or quasi-judicial body that has a right of appeal to the Supreme Court are subordinate courts.
There are two major sources of law in Singapore. They are legislation and case law, or common law. Legislation refers to acts enacted by Parliament and subsidiary legislation made by various administrative bodies pursuant to powers given to them by statutes. In contrast, the common law is not embodied in any statutes; they are judgements that courts have delivered. Once a case has been decided, future cases with similar fact scenarios will be bound by the earlier decision if the earlier decision is made by a higher court in the same hierarchy. This ability of judges to make law is an identifying feature of countries like Singapore that follow the "common law" system as opposed to the "civil law" system. In civil law jurisdictions like France, Indonesia and Japan, all laws are codified by the legislature and there is an absence of judge-made law. Singapore's contract law is generally based on the common law of contract in England. Save for some situations where the common law has been specified or modified by legislation, much of the law of contract in Singapore remains in the form of judge-made laws.
Since 1970, Singapore has moved towards creating an autochthonous legal system. 1993 saw the abolishment of appeals to the Judicial Committee of Her Britannic Majesty's Privy Council as the highest court. The Court of Appeal, presided by the Chief Justice and 2 Justices of Appeal became the highest court in Singapore. These changes are largely due to the increasing confidence, recognition and standing of Singapore's legal system and the potential incompatibility of English law given the development of the European Union.
There are several options for resolving civil disputes in Singapore, including:
Litigation
Litigation refers to going to trial at a court of law. The litigation process has its advantages and disadvantages. One of the advantages of litigation is its finality. After a judgement has been passed, the parties must abide by the decision unless they are able to appeal against the decision at a higher court. The main disadvantage is the cost and time involved. Although getting a trial date in Singapore is relatively fast compared to other jurisdictions, there could be other methods of dispute resolution such as mediation, which could be faster.
Mediation
Mediation is a process in which a neutral party known as the mediator assists the parties in negotiating with each other to amicably reach a settlement. Mediation can be conducted by different organisations, but the popular ones are the Singapore Mediation Centre and the Primary Dispute Resolution Centre at the Subordinate Courts. Before mediation can begin, both parties must agree to submit their dispute to mediation. This form of dispute resolution is most ideal if both parties genuinely desire to find a mutually acceptable solution to their dispute.
The main advantages of mediation are as follows:
- It may be relatively faster;
- Parties retain control over the outcome; and
- Privacy is maintained as parties are not exposed to the media and the public.
The main disadvantage of mediation is that it may not be final. If the parties cannot reach a settlement, they may have to resort to other forms of dispute resolution, such as arbitration or litigation.
Arbitration
Arbitration is a consensual process whereby parties submit their dispute to a neutral arbitrator for a binding and final decision. It is less formal than a trial in court. Arbitration need not be conducted in Singapore but if parties choose Singapore as the venue for arbitration, the Singapore International Arbitration Centre can be used for both international and domestic disputes.
The advantages of arbitration include, amongst others, speedier resolution of a dispute than if it goes to trial, lower cost than a litigation and the ability of parties to choose an arbitrator who has the technical knowledge in a particular field.
In theory, parties can agree to go for arbitration before or after the dispute has arisen. However, in practice, most parties only go for arbitration if they have pre-agreed in their contract that they would do so. Thus, if the parties wish to arbitrate in the event of a dispute, they should expressly provide for this in their contract.
The absence of labour unrest in Singapore creates a conducive business environment for investors. Many regulations have set the tone and mood of calmness in this area making it a great pull factor.
The Industrial Relations Act regulates procedures concerning collective bargaining and negotiation. The National Wages Council, which comprises representatives from employer groups, employee unions and the government, sets guidelines for steady wage increases each year.
The Employment Act sets minimum working conditions for employees earning up to S$1,600 per month. Under the Act, the maximum ordinary working hours are 44 hours per week, the minimum annual vacation for employees in their first year of service is seven days and this increases by one day for each subsequent year of service up to a maximum of 14 days a year. (Please refer to chapter on Overview of Singapore Employment Landscape for more details about the Act.).
The Employment Act also specifies that employees who are covered by the Act, but who have served less than three years with the employer are not entitled to receive retrenchment benefits in the event of redundancy. Employment and retrenchment terms for executives are not regulated by the Act.
The Workmen's Compensation Act requires employers to insure against liabilities for employees who are manual workers, regardless of their salary level; and non-manual workers whose average monthly earnings do not exceed S$1,600 per month if they are injured in the course of work.
Central Provident Fund contributions are required to be made by employers and employees at specified rates on the remuneration of employees who are Singaporeans or Singapore permanent residents.
A foreigner who is not a Singapore permanent resident and who wants to engage in any business, profession, occupation or any form of paid employment in Singapore with a minimum monthly income of more than S$2,500 will need an employment pass.
The EntrePass is required for foreigners who wish to start a new business in Singapore and allows registered entrepreneurs and their families to live in Singapore. The pass holder may leave and re-enter Singapore any time and the pass is renewable for as long as the business remains viable.
The Multiple Journey Visa caters for business executives who travel in and out of Singapore frequently either to attend to business matters and investments or to look for business opportunities in Singapore. The visa is valid for 1, 2 or 5 years.
There are two categories of work passes available for foreigners to work in Singapore:
- P passes - available to applicants who hold administrative, professional or managerial jobs; and
- Q passes - available to skilled workers or technicians.
(Please refer to chapter on Working in Singapore for details.)
Once an expatriate who has been issued with a work pass earns more than S$2,000 per month, the spouse and children under 21 years of age may be issued with a dependant's pass for the duration of the expatriate's employment. Spouses may also apply for permission to work in Singapore provided they satisfy the requirements noted above.
Foreigners may also apply to become permanent residents of Singapore in which case no work passes are required.
The Competition Act promotes healthy competitive markets by prohibiting certain business practices that restrict competition in the market. Passed in October 2004, the Act came into force on 1 January 2005. The enforcement takes a 2-step approach with the introduction of provisions involving anticompetitive agreements and abuse of dominant positions in January 2006 and the introduction of M&A provisions in January 2007. The Competition Commission of Singapore (CCS) enforces the Act and regulates all activities under it. Practices not allowed under the Act include:
- Price-fixing;
- Bid-rigging;
- Market-sharing; and
- Abusing market power.
All businesses registered with the Accounting and Corporate Regulatory Authority (ACRA) are required to comply with this Law. Those who do not need to register under ACRA, such as hawkers, taxi drivers, lawyers, and accountants are not exempt from this Law either. These provisions also affect foreign, domestic, government-owned entities and mergers that occur outside of Singapore involving companies with business dealings within the country.
The Law does permit some exclusions. The government and its statutory boards are not liable under any provision to prohibit anti-competitive mergers. Industries that are already regulated and have a structured competition framework in place (a clear example being the telecommunications and media industries in Singapore) are exempted.
The CCS will take action against those who breach the Law. It is important to file a complaint for anti-competitive practices with the CCS if there is any suspected breach. The CCS will then investigate complaints it receives and assess whether they are valid.
Singapore's Free Trade Agreements
Singapore has various Free Trade Agreements (FTAs) with its trading partners, bringing about some changes to the country's legal environment. Many of these changes will be of interest to persons wanting to do business with or invest in Singapore. Singapore-based companies will enjoy exclusive benefits in the following areas:
Trade in Goods (Goods Chapter in an FTA)
- Cost and time savings through tariff elimination, streamlined customs procedures and mutual recognition of standards.
- Singapore-based manufacturers can therefore price more competitively and enjoy shorter product distribution time.
Trade in Services (Services Chapter in an FTA)
- Enhanced access to important service sectors like telecommunications, finance and business services in the various FTA markets.
- Fair and non-discriminatory treatment for Singapore's service suppliers.
Investment Protection & Facilitation
- A great guarantee of fair compensation in the event of expropriation.
- Resolution at international arbitration tribunal through investor-to-state dispute mechanism.
Government Procurement
- Lower threshold values increasing business opportunities with foreign governments.
- Greater transparency in procurement process.
Intellectual Property Rights (IPR) Protection
- Greater IPR protection sets ground for knowledge-based industries.
- World-class IPR regime through IPR ventures and exchange of best practices.
Contributed by: Stamford Law (www.stamfordlaw.com.sg)
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