31 October 2019
YSIAC Club Event on The “Spirit” of Arbitration
By Chloé Vialard and Artis Straupenieks, Shearman & Sterling LLP

On Halloween, the Singapore international arbitration community had its own encounter with “spirits”, albeit not of a supernatural kind. More than 60 arbitration enthusiasts gathered at a YSIAC Club event to hear a panel of experts from the alcohol beverage industry discuss the legal and dispute resolution trends in the beer, wine and whisky business.

The event was moderated by Daryl Chew (Member, YSIAC Committee; Partner, Shearman & Sterling LLP). The panellists included Amy Seow, (Co-founder, Raison Wines (Former International Disputes Lawyer)), Geraldine Lim (Regional Legal Director, Heineken Asia Pacific, Singapore), James Nicholson (Senior Managing Director, FTI Consulting), Matthew Tan (Associate Legal Director, South East Asia, Pernod Ricard Singapore Pte Ltd) and Angela Yap (Associate Counsel, SIAC).

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Members of the audience Left to right: Angela Yap, Matthew Tan, James Nicholson, Geraldine Lim, Amy Seow, Daryl Chew, Anant Tyagi and Chaitanya Arora

Many insights emerged from the panel discussion. For example, it was reiterated that legal teams are effectively business partners of the business units they support. As one panellist put it, “We don’t always say ‘us and them—commercial’. It’s all us.” Thus, in contrast to “riskaverse” disputes lawyers for whom risk avoidance is “a job hazard”, business owners and inhouse counsel must regularly take, share and bear risks.

The panellists acknowledged that a key challenge faced by the beverage industry in Southeast Asia is legal instability. “Sometimes there are laws, sometimes there are new laws, sometimes the laws change,” said one speaker, concluding that “that’s kind of, in a nutshell, our life in Southeast Asia.” The speaker said that beyond that, there was another layer of difficulties, namely, that laws were sometimes not enforced, while, at other times, they were not enforced in a balanced manner. The speakers also mentioned advertising as a recurring issue, especially in the context of religious rules or the broad discretion accorded to the regulatory authorities.

When the discussion moved to disputes, everyone agreed that the objective was to avoid them, particularly as “the industry is so small and relationships matter so much”. Most disputes that do arise were naturally resolved by negotiation and cooperation.

One might assume that mediation is widely used by the industry, although that did not seem to be the case. The panellists recognised that “mediation is always a good idea”, since disputes are kept “low-key” and resolved informally at management level. However, formal mediations with professional mediators appeared to be uncommon. One speaker underscored the importance of the mediator being familiar with the industry.

The handful of disputes resolved by arbitration typically concerned matters relating to production, distribution or transportation of beverages. These disputes tended to arise from material and high-stakes contracts, as smaller-scale contracts did not typically include arbitration provisions.

Another panellist observed that certain incidences of fraud would necessitate forensic investigation. Recalling one such instance, the panellist recounted his experience about falsification of brewing costs by a smaller entity brewing for a large multinational company under a cost-plus contract.

The panellists then considered ways to keep costs low if a dispute did materialise. The panellists discussed consolidation and the benefit of emergency arbitrator proceedings, for example, in disputes involving perishable beverages.

The discussion was followed by concluding remarks delivered by Chaitanya Arora, Senior Managing Director at FTI Consulting. He shared personal insights and recounted a matter involving allegations of fraud in the context of an international brand’s joint venture with a bottling company in an emerging market. He also noted the critical role of trademarks in the beverage industry, and the prospect for IP related disputes. Finally, he shared a story about the origin of the term “bootleg” (which apparently was coined as a result of smugglers concealing illegal bottles of alcohol in their boots).

Finally, Anant Tyagi, the owner and managing director of French restaurant JAG, delivered a presentation on mixology trends. He focused on sustainability themes and explained that sustainability took many forms, including the shift to non-alcoholic drinks, replacement of plastic straws with corn or metal ones, the increasing popularity of natural wines and, more generally, reducing the carbon footprint of production.

The presentation on mixology trends was followed by the highlight of the evening: a longawaited interactive tasting session. No one needed reminding that the best safeguard against disputes is a strong relationship and connection among stakeholders, and that there was no better opportunity to develop those bonds than over a beverage of choice.
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