Legal abroad: Doing business in Singapore

As construction projects around the world face multitudinous covid-related hurdles centred around labour, supply chain, financing and regulatory issues, Singapore’s methodical approach to the pandemic has allowed it to recover more quickly than most. This has created local and regional opportunities for UK construction businesses.

In the early stages of the outbreak, infections were well controlled in local communities, but when the virus spread to the foreign worker dormitories the numbers spiralled and the Singapore government had to step in by imposing a nationwide circuit-breaker and other measures. Within months, it had successfully contained the spread.

The industry, which last year suffered heavy losses as a result of low activity and demand, is now gradually recovering. Construction works, halted during the circuit-breaker, have resumed under the Singapore Building and Construction Authority’s Covid-Safe Restart programme, which imposes stringent requirements on construction companies in relation to worker accommodation, transport and safety at the worksite. Local and international construction companies and consultancies have adopted a combination of safe-working measures for the office and work-from-home practices.

A notable feature of Singapore’s response to covid-19 in relation to construction is the enactment of the Covid-19 (Temporary Measures) Act in April 2020. Among other things, this provides temporary relief for a party’s inability to perform under construction and supply contracts, insofar as this is materially caused by or connected to covid-19. The act has been updated periodically; in particular, in September 2020, it was amended to include relief in respect of additional plant and material rentals arising from covid-related delay.

The restrictions put in place by this legislation include that: an employer cannot call on a performance bond or equivalent less than seven days before its expiry; liquidated damages resulting from a covid-19 event cannot be imposed for delays after 1 February 2020; and a party due to supply goods or services on or after 1 February 2020 may be excused from a breach of contract if its inability to perform such obligation was caused to a material extent by a covid-19 event. These reliefs were provisionally in place until 31 March 2021, and have now been extended to 19 April 2022.

To determine whether a contracting party qualifies for relief under the legislation, the Singapore government has implemented a dispute resolution scheme whereby an assessor will be appointed to decide such issues

To manage covid-related disputes, the Singapore government has put in place a statutory moratorium: from 1 February 2020 to 31 March 2021, which has since been extended to 19 April 2022, no court actions, domestic arbitral proceedings (under Singapore’s Arbitration Act) or insolvency-related proceedings may be commenced or continued against contracting parties that are affected by the pandemic, as defined under the Covid-19 (Temporary Measures) Act. Further, no court judgments, arbitration awards or adjudication determinations may be enforced during this period.

To determine whether a contracting party qualifies for relief under the legislation, the Singapore government has implemented a dispute resolution scheme whereby an assessor will be appointed to decide such issues. The proceedings before the assessor are designed to be efficient and inexpensive and parties are not allowed to be represented by any external lawyers.

Mediation also continues to be promoted as an alternative means to resolve covid-19 (and other) disputes. The Singapore Convention on Meditation was signed in August 2019 and came into force in September 2020. A total of 53 states are now signatories to the convention. With the convention, businesses seeking enforcement of a mediated settlement agreement across borders can do so with ease, by applying directly to the national courts of member states that have signed the treaty.

With the rollout of vaccinations, there is confidence that the construction industry will be able to pick up the pace quickly and that Singapore will once again be abuzz with fresh development opportunities and innovation. The government has been actively promoting project finance and, in particular, green financing opportunities for the construction sector. In 2019, Sunseap Group sealed a green loan of S$50m (£27.44m) for the construction of its rooftop solar projects, the first of its kind in the ASEAN region.

The Garden City’s green bond market stands at more than S$6bn (£3.29bn) today, and the state is well positioned to enable more green financing. Earlier this year, the ministries of finance and national development introduced a core suite of partially standardised project finance loan documents, with the objective of accelerating infrastructure project financing in Asia and closing the investment gap between supply and demand in the region.

Singapore continues in its longstanding role as the business, financial and legal hub for South-east Asia. It signed a free trade agreement with the UK in early December 2020, and this came into effect at the turn of the new year. This will no doubt benefit the automobile, chemical, textile, machinery, pharmaceutical and petrochemical industries, and should encourage a flow of investment into projects and procurement opportunities in both countries. With all of these measures, Singapore looks well-positioned to emerge from covid-19.

Paul Teo is a partner and Natalie Wong an associate in the Singapore office of Mayer Brown