Mr Edward Buckland T.E.P, Chairman, STEP Worldwide,
Ms Linda Wong, Chairperson, STEP Singapore,
Ladies and gentlemen,
First, thank you very much for inviting me to be your keynote speaker. I am delighted to have this opportunity to address this gathering of STEP members and practitioners, and I would like, in particular, to welcome our overseas guests. The important work that STEP members do in helping families to plan for their future, such as the management of assets and the protection of vulnerable family members, is widely acknowledged. Supporting families and protecting vulnerable members of our society are also important issues which are close to my heart. Today, I would like to share some insights about the framework and infrastructure in Singapore that will support this kind of work.
Wealth Management in Singapore
First, let me touch on wealth management in Singapore. According to the 2015 Capgemini-RBC Wealth Management World Wealth Report, wealth in Asia-Pacific, or “APAC”, has registered stronger growth than the global average in recent years, and this is set to continue. It is estimated that APAC wealth will grow at an annualised rate of 10% through 2017, compared to the global average of 8%. These projections paint an optimistic outlook for Singapore. As one of the leading wealth management centres in the world, we are in good stead to ride on the region’s strong growth.
Our leading position in wealth management can be attributed to several factors. First, we have a pro-business operating environment, having been ranked the easiest place to do business in the world ten years in a row.
Second, there is political and economic stability. We don’t tolerate corruption or any form of financial wrongdoing, and I think that that gives some assurance to people who put their money here, that their funds will be protected and dealt with in a proper framework.
Third, there is a high degree of trust in the efficiency of our legal system and the rule of law, and that has been exemplified by Singapore’s top ranking for efficiency of contract enforcement in the World Bank’s Doing Business 2016 Report.
And then there’s also Singapore’s rigorous and progressive legislative and regulatory framework, which is also one of the key factors for our success. But specifically, family and mental capacity laws play a key part in facilitating and supporting the growth of wealth management in Singapore.
So let me now share some insights into these areas and what we have been doing in these two spheres.
There are actually two parts to it: I think one is purely the commercial part, so those of you who are in the business of setting up trusts and various financial structures to manage wealth – some of it would be purely commercial. Then there’s the family part of it, and there’s often an overlap, obviously, as families get wealthier, and try to do long-term planning with their wealth. And with the growth in Asia, I think that is an area that is going to continue to expand. In Singapore, what we’ve done in the last couple of years are as follows.
First, when I become Senior Minister of State, I co-chaired a committee with then Justice of Appeal V K Rajah (who is now Attorney-General) for the reform of family law, and one of the most important recommendations when we finally produced our report was to actually set up a dedicated family court. Prior to that, family matters have been heard in the then Subordinate Courts (now called the State Courts), and then they go up to the Court of Appeal as appeals from the Subordinate Courts.
But with this recommendation, we’ve actually set up a dedicated family court. The Presiding Judge sits in the High Court, and the judge can hear matters at first instance. Many of the cases will be heard at first instance in the State Courts before going up on appeal, unless they are above a certain amount. For most of you, I think the amounts involved will result in the matter going directly to the High Court.
But the whole purpose for having a dedicated Division is so that we will have judicial expertise in dealing with a wide range of family matters. Family is not just about divorce obviously and ancillaries such as custody. It’s more than that. It also involves inheritance, which need not necessarily be part of a divorce, it will involve guardianship of infants, so the whole gamut of family practice – and with the setting up of a specialist court, the hope is that we will have in Youth Courts relevant jurisprudence, specialist judges and specialist practitioners.
We are also setting up our third law school, and that is going to be a specialist law school with a focus on family and criminal law, so family law will be one of its specialties. So you can see that, on a macro basis, where the law is concerned, we are shaping it such that we have a specialist court system and specialist practitioners. This university at UNISIM is also meant to be an adult learning university, meaning that the courses can be taken in modular form, which means that non-lawyers, for example, who wish to get better acquainted with family law or family law modules can apply and take certain modules.
So with that first step towards greater specialisation, we hope to grow a better ecosystem for the practice of family law, which I think will have some impact on wealth management, particularly when it comes to inheritance, succession planning and sometimes, disputes.
On disputes, we have done something else, which is really what I would call a tripartite approach to dispute resolution. We have had arbitration for some time under the Singapore International Arbitration Centre (“SIAC”). We’ve recently set up the Singapore International Commercial Court (“SICC”) and the Singapore International Mediation Centre (“SIMC”). Let me explain their relevance to the work that you do as wealth managers, as trustees, and people who basically manage wealth.
As you’ll know, inevitably, where there is wealth, there will be disputes. But the question is how do you manage this, and how do you deal with it, and which are the right jurisdictions and forums to address these kinds of disputes. For us, this triptych of arbitration, international litigation and mediation is intended to address that, and we are shaping Singapore to be a dispute resolution hub. Wealth-related disputes would form an important part of that.
The SIAC has been around for some time, but the number of cases has been growing over the years. Clearly, trust-related matters lend itself to arbitration because of the confidentiality aspects. There is a great deal of flexibility in the SIAC because you can choose your own arbitrators, and you can make sure that the people representing you would be well-versed in the area of trusts as well as family practice, and you have the assurance of confidentiality. I think most people are familiar with arbitration, so I need not dwell on that for too long. Let me speak a bit more about this new feature which we have introduced, which is the Singapore International Commercial Court.
This took some inspiration from the UK commercial court, but it is not exactly the same. We looked at the region, and we realised that there are disputes in the region. But at the same time, Singapore, as a forum, is seen as a place where people feel they can get neutral justice, where there is high quality of the jurisprudence, and you have good practitioners – both foreign as well as local firms – and we thought that there would be market for international litigation.
Right now, prior to the setting of the SICC, litigation would take place in the High Court, and jurisdiction would really depend on the Singapore Court of Judicature Act, and to a large extent, there would have to be a linkage of some sort to Singapore. The SICC, however, is a bit different. What it requires is that the case has to be commercial and international in nature. So long as the parties consent, it can be heard in the SICC. The structure of the SICC is such that there will be at least a judge from our High Court sitting there, but we do have international judges who can sit as associate judges. What this means effectively is, if you have a trust that is set up under The Bahamas law, for example, and it is international in nature, you could have it heard in the SICC. We have also made provision - if it is something which has no linkage to Singapore and it is purely international in nature, and if it goes under The Bahamas law, a Bahamas lawyer could apply to appear in the SICC if it was purely a matter of Bahamas law.
At the moment, we have foreign associate judges from the UK, US, China, and Australia as well, if I’m not mistaken. More information can be found on the SICC website. But the idea was that we should be able to draw on international judicial expertise and then facilitate on the basis where matters of foreign law involved, and we would allow foreign lawyers to appear if it involves matters of foreign law. The way we see it played out is that because the venue is Singapore and the procedural rules are Singapore rules, I suspect that we would have a combination of either Singapore lawyers appearing together with the foreign lawyers, or Singaporean lawyers advising in part on the procedural aspects. But if the substantive part is foreign law, the foreign lawyer can apply to appear in court. The other difference is that, in the appropriate case, you would not need to actually prove the foreign law, as you would in the normal situation (the normal situation is that you would have to lead evidence on the foreign law). If let’s say it is a UK matter, and you have a UK associate judge and a UK lawyer, you do not have to prove UK law.
The idea of that was to attract international cases here, and to give the clients the flexibility of having their foreign counsel appear in the appropriate cases. If it has the Singapore connection, then obviously you would have to be represented by Singapore counsel. In terms what this means for yourselves, as trust companies and as people who may be involved in trust litigation, it means that there is an additional option because the advantages that you have would be the fact that you could have an international judge, as well as a local judge. You could have your own lawyers here, but it also means that it is a jurisdiction that you feel comfortable with, and where you are assured of the quality of the jurisprudence, as well as the quality of the legal services provided.
The Singapore International Mediation Centre was set up to complement the other two. The other two, arbitration and litigation, really deal with the slugging it out, as it were, of the disputes. But as everybody knows, the longer and the more protracted the dispute is, the more expensive it is. So there is clearly room to try and find a way to resolve the dispute amicably, and we felt that there is also a market for international mediation.
That was set up last year with international mediators on the panel. I think that mediation lends itself particularly well to family-related wealth disputes. In a commercial matter, it is really just about the money and you can take a clear-cut commercial decision. In family matters, however, it is often complicated by family relationships, sibling rivalries, difficulties in the family that may have very deep-seated attitudes and feelings that go back a long way. Those complicate the decision-making because obviously, it is not a clear-cut rational commercial decision. There is often the emotional part that you have to address. Sometimes, that is not ideally best dealt with in a purely litigious forum; sometimes that needs people to sit down and talk out things which are not necessarily legal in nature, but you really have to address the underlying concerns. So, international mediation is a complement to the other two, and something that we would encourage especially if people have disputes involving large amounts with complex legal issues, as well as familial disputes which require a different sort of solution.
So as you can see, we have set out the structures – the Singapore International Arbitration Centre, Singapore International Commercial Court and Singapore International Mediation Centre – in order to promote the resolution of disputes. I think these structures would lend themselves particularly well to the resolution of wealth management, family-related disputes.
The other thing that we hope to do is to grow the ecosystem, because it is not just about having the lawyers or the wealth management companies. It is really a whole ecosystem where you have got the companies, you have got the practitioners, you have got the accountants, you have got the lawyers, you have got the judges and you have got the financial institutions. All with the relevant degree of expertise and you become a centre, if you’d like, for thought leadership. Where you can really take steps to advance knowledge and practice in this area. This is what we are positioning Singapore to be, and which is why it is extremely encouraging to see all of you here today, because we hope that you will take advantage of the opportunity to learn more about these structures. The networking sessions at this conference would enable you to make the right contacts. I hope that you will, in time to come, see Singapore as a viable alternative both for the setting up and the planning of wealth management, as well as addressing and dealing with the disputes, as and when they arise.
In this respect, I would like to say that it is particularly important to have practitioners who really understand and know the regulatory framework, and act in accordance with the parameters of the law. Anybody who has done trust work will know that there are many plain vanilla, straightforward trusts. But many times, trusts are set up for other reasons. Sometimes, when there is a divorce, it is set up to try to protect the assets from divorce proceedings. I had seen, in my time in practice, cases where trusts are set up for tax-related purposes, some of which were perfectly legitimate, but some obviously not.
So when a matter comes up for dispute, the big challenge is to try and understand what was the real intention behind setting up that trust. Obviously, the documents don’t tell you the whole story. So you have to dig and you have to go further, and you have got to see what were the surrounding circumstances at the time when the trust was set up, and to extrapolate from there what was the real intention of the settlor of the trust.
The point I am making is that if you have a good professional ecosystem, people who set up the trust would hopefully do so properly and in accordance with the law, and give effect to the intention of the settlor. This should also be done in such a way that the intention can be carried out within the parameters of the regulatory framework, because, trust me, when it does come to a dispute and it does get examined in court, it will be like pulling out a little bit of the string, and if you pull the string hard enough, it will start to unravel. So if you set up a trust with intention of doing it for a different purpose, and on the face of it, it looks like another creature, and if somebody looks hard enough, it will unravel. So the point that I am really making is that a high degree of professionalism is something that is required. Good governance, and of course, obviously, when it comes to disputes, a good way of examining how the trust structure was set up, what it was intended to achieve, and whether it can stand up to scrutiny.
I would say that no wealth management plan is complete, however, without due consideration of the issue of what happens when one loses mental capacity. This brings me to our mental capacity laws and how they help ensure that the personal welfare of vulnerable Singaporeans is taken care of.
Mental Capacity Laws
Like many developed countries, Singapore faces the challenge of an ageing population. The number of citizens aged 65 and above has doubled from 220,000 in 2000 to 440,000 in 2015, and is expected to increase to 900,000 by 2030. As our society ages, we expect a corresponding rise in cases of people being incapable of managing their personal welfare and financial matters due to a loss of mental capacity because of, for example, dementia.
In the past, our laws only allowed the court to appoint a Committee of Person or Estate to manage the personal welfare and financial matters of persons after they had lost their mental capacity. This is unsatisfactory as this means that one could not plan in advance for such a situation.
To resolve this issue, we enacted the Mental Capacity Act in 2008. It empowers Singaporeans to plan in advance for a time when they may lack the capacity to make decisions for themselves in personal welfare and financial matters by appointing proxy decision makers, known as donees, to make those decisions on their behalf.
Individuals who wish to make advance plans for themselves and appoint a donee, can do so through a statutory document known as the Lasting Power of Attorney or the LPA. The donee will then be able to act or make decisions on the person’s behalf for matters relating to personal welfare and finances. So I would personally like to encourage Singaporeans to make advance plans for themselves using the LPA. To facilitate these applications, a simplified LPA Form has been introduced, and the registration fee of $50 for that Form is also currently waived for all Singaporean citizens. I hope that STEP members and practitioners will also assist to spread this message to your clients and the wider local community.
I should highlight that even if one is unable, for whatever reason, to elect a proxy decision maker in advance, that person’s personal welfare can still be taken care of. The Court can appoint a deputy to make decisions on that person’s behalf when he loses his capacity.
To protect the interests of persons who lack capacity, we have also provided safeguards against abuse by their proxy decision makers. For example, a donee or deputy who ill-treats or wilfully neglects the person who lacks capacity can be imprisoned, fined or both.
As the Act has been in operation for 5 years now, the Ministry of Social and Family Development has conducted a review and intends to refine some of its provisions to better serve and protect the interests of individuals who lack mental capacity. The Ministry will launch a public consultation soon to seek views on a draft amendment Bill, so please feel free to give your feedback or comments so that it will help them to better refine the legislation.
The Government has also since formed a Panel of Deputies to meet the proxy decision-making needs of mentally incapacitated individuals who have modest assets, but do not have any relatives or friends willing or able to be their deputy. The Panel comprises a group of public-spirited individuals from various professions, such as law, medicine, accounting, and social work, who are willing to apply to court and act as deputies for such individuals on a pro bono basis.
In conclusion, let me just say. We have been setting up our structures to promote an ecosystem for wealth management for family-related matters, and I hope that you will take the opportunity to find out more about them. Information is available on the Ministry of Law website, and I am sure that the Ministry of Law will be more than happy to assist in providing you with additional information should you so require.
Thank you very much.