“All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void“. The preceding statement by Lord Macnaghten in the 1894 decision of Thorsten Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company, Limited¹(1894) AC 535 (Nordenfelt). remains representative of the law’s general disinclination towards restrictive covenants. Over a century later, the legal position remains similar, albeit with nuances in how various jurisdictions approach the issue from a regulatory perspective.

This article explores the current state of Singapore law with respect to restrictive covenants in an employment context,²Restrictive covenants may apply in non-employment contexts (e.g., in the context of a sale of business). That said, this article’s scope is confined to restrictive covenants in the employment context, where the courts in Singapore scrutinise such covenants more strictly. and briefly discusses the upcoming guidelines regarding restrictive covenants to be developed and issued by the Singapore Tripartite Partners.³The Tripartite Partners consist of the Ministry of Manpower, National Trades Union Congress and Singapore National Employers Federation. In anticipation of these guidelines, this article provides some guiding questions which employers and employees can consider vis-à-vis restrictive covenants that might be part of their relevant employment contracts.

Introduction

Under Singapore law, restrictive covenants which are a restraint of trade are prima facie void and unenforceable, particularly in an employment context, unless an employer shows that they protect legitimate business interests and are reasonable for the protection of such interests.

The Singapore Courts have reasoned that this gives effect to the public policy that frowns upon attempts to unreasonably proscribe freedom or trade.⁴Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David (2008) 1 SLR(R) 663 (Man Financial) at (45). However, as a rigid rule prohibiting restrictive covenants could “seriously interfere with transactions of every-day occurrence”,⁵In Lord Mcnaghten’s words in Nordenfelt at 564, “(t)raders could hardly venture to let their shops out of their own hands; the purchaser of a business was at the mercy of the seller; every apprentice was a possible rival”, if the law did not permit exceptions to the general rule that restrictive covenants in restraint of trade were void. these covenants will be upheld if:

1. they protect a legitimate proprietary interest. A restrictive covenant cannot simply be a bare restriction of one’s freedom to trade;⁶Man Financial at (79). That said, the payment of substantial post-employment benefits may be relevant to the question of whether the restrictive covenant is reasonable (see Man Financial at (140)).
2. they fulfil the twin aspects of reasonableness, namely, that the restrictions are reasonable in the interests of the parties and in the interests of the public.

Singapore Compared to the Rest of the World

The test in Singapore for whether a restrictive covenant in restraint of trade is enforceable is thus formulated as a two-stage test:⁷Shopee Singapore Pte Ltd v Lim Teck Yong (2024) SGHC 29 (Shopee) at (18).

1. the Court will first consider whether the restrictive covenant protects a legitimate interest of the employer;
2. if the answer to (a) is “yes”, the restrictive covenant will be enforceable if it is in addition: (i) reasonable in the interests of the parties; and (ii) reasonable in the public interest.

The position under English law is similar to that in Singapore. In a recent decision, the English High Court summarised the test in England as a three-stage test, namely: (1) whether the former employer has a legitimate business interest in need of protection; (2) what the covenant means when properly construed; (3) whether the employer has shown that the restriction or restrictions are no wider than is reasonably necessary for the protection of its legitimate business interests.⁸Sparta Global Limited & Anor v Ben Hayes & Anor (2024) EWHC 100 (KB) at (21).

While the courts in some countries take the lead in shaping the enforceability and legal effect of restrictive covenants, other countries have sought to regulate them through legislation and other forms of regulations. In Malaysia, for example, section 28 of the Contracts Act 1950 provides that any agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.

Recently, in the United States of America, on 23 April 2024, the Federal Trade Commission (FTC) voted 3-2 to issue its final rule on non-compete clauses, imposing a near-total ban on all employer-employee non-compete clauses in the U.S. (with only a few exceptions) (the Rule). The Rule will prohibit most employee non-competition clauses with retroactive effect, except existing non-competition clauses of “senior executives.”⁹The Rule defines “senior executives” to include either: (1) a business entity’s president, Chief Executive Officer or the equivalent, or (2) an officer with “policy-making position”, meaning any individual who earns more than USD 151,164 annually and has final authority to make controlling policy decisions on significant aspects of a business. However, the Rule has been challenged in the U.S. courts, and the Rule’s effective date could be impacted while the courts consider whether to stay the Rule while challenges are pending.¹⁰On 3 July 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction preventing the enforcement of the Rule going into effect, but only with respect to the plaintiffs in the action and not to all employers. The court indicated it intended to make a final ruling on the merits of the challenge to the Rule by 30 August 2024.

Meanwhile, in Australia, the government released an Employment White Paper in 2023 which identified non‑compete and related clauses as potentially hampering job mobility, innovation and wages growth in industries where they are prevalent.¹¹”Working Future: The Australian Government’s White Paper on Jobs and Opportunities”, Australian Government: The Treasury, retrieved from: https://treasury.gov.au/employment-whitepaper/final-report The Australian government has indicated that it is exploring whether reform may be needed. ¹²”Non-compete clauses and other restraints”, Australian Government: The Treasury, retrieved from: https://treasury.gov.au/review/competition-review-2023/non-compete-clauses

Singapore in Focus

Turning to Singapore specifically, it is instructive to examine recent cases which have dealt with the enforcement of restrictive covenants. In two recent cases, the Singapore Court has closely scrutinised the restrictive covenants sought to be enforced by employers, and required the employers to produce cogent evidence in support of their position.

In Shopee Singapore Pte Ltd v Lim Teck Yong¹³(2024) SGHC 29. (Shopee), the defendant was formerly a senior employee of the claimant employer. The defendant’s employment contract with the claimant contained a non-competition clause which prohibited the defendant from accepting employment from a competitor within 12 months of the last day of employment in certain “Restricted Territories”. Two weeks after the defendant left the claimant’s employ, the defendant joined a new company. The claimant accordingly sought to enforce the non-competition clause by applying for an injunction to restrain the defendant from joining the new company. The claimant argued that the non-competition clause protected its confidential information, its trade connections and its interest in maintaining a stable, trained workforce. The claimant further argued that the non-competition clause was reasonable as between the parties, and in the interests of the public.

The Court refused to grant an injunction to enforce the non-competition clause. In the Court’s view, the non-competition clause did not protect a legitimate proprietary interest:

1. The Court noted that the Court of Appeal in Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David (Man Financial)¹⁴(2008) 1 SLR(R) 663. established that where the protection of confidential information or trade secrets is already covered by another clause in the contract, the claimant will need to demonstrate that the restrictive covenant covers a legitimate proprietary interest over and above the protection of confidential information or trade secrets.¹⁵(2008) 1 SLR(R) 663 at (92). In Shopee, the employment contract contained a confidentiality clause, such that the facts fell squarely within the Court of Appeal’s holding.
2. Insofar as the claimant’s contention was that the non-competition clause protected confidential information by virtue of the definition of “Restricted Territories” which covered countries which the defendant was privy to confidential information regarding the claimant, the non-competition clause did not protect trade connections or the maintenance of a stable, trained workforce.

The Court also disagreed that the non-competition clause was reasonable, as the geographical restraint of the non-competition clause extended to markets in relation to which the defendant did not have any duties or have any specific information about. In particular, the Court expressed serious doubts as to the claimant’s contention that the non-competition clause applied in view of the defendant being privy to confidential information over all of the claimant’s markets as a result of his participation in regional operations meetings.¹⁶Shopee at (71).

In MoneySmart Singapore Pte Ltd v Artem Musienko¹⁷(2024) SGHC 94. (MoneySmart), the defendant was employed by the claimant as the Head of Technology at MoneySmart’s (MS) Bubblegum division. The employment contract contained a non-competition clause which prohibited the defendant from engaging with any business or organisation in South-East Asia or any other country where MS (or its associated companies) operates which provides “online financial product comparison services” and thereby engages in competition with MS or MS’s holding companies or subsidiaries. The defendant later resigned from the claimant. Three days after the defendant’s last day of employment with the claimant, the defendant joined a new company. The claimant thus applied to the Court for an interim injunction to restrain the defendant from working for the new company. The Court initially granted the interim injunctions on an ex parte basis, with the caveat that the injunctions were not to be enforced until the inter partes hearing. At the hearing, the claimant argued that the non-competition clause was valid and enforceable because it protected the claimant’s legitimate proprietary interests, namely, confidential information and trade secrets as well as the maintenance of a stable, trained workforce.

The Court ultimately decided to set aside the interim injunctions. The Court noted that the employment contract contained a confidentiality clause, and in that connection, the non-competition clause did not protect any interest above and beyond the protection of confidential information or trade secrets. The Court further rejected the claimant’s contention that the maintenance of a stable, trained workforce was a legitimate proprietary interest protected by the non-competition clause. While the claimant argued that such interest was engaged on the basis that the claimant operated in a small and highly consolidated industry, the Court found that the relevant industry was the digital insurance industry which Bubblegum operated in, which is not small in size or number of market participants. The Court further found that the claimant had not demonstrated that it had invested much time and resources by providing the defendant with specialised training. On that basis, the Court held that the claimant had not made out its case for a legitimate proprietary interest of maintaining a stable, trained workforce. The Court also found in obiter that the non-competition clause was unreasonable since it prohibited the defendant’s participation in online financial product comparison services, which only had a tenuous connection to the work done by the defendant while employed by the claimant.¹⁸MoneySmart Singapore Pte Ltd v Artem Musienko (2024) SGHC 94 at (45).

The Court in Shopee and MoneySmart has reinforced the need for employers to carefully consider the issue of the type of legitimate interests sought to be protected by the restrictive covenants imposed. In both cases, the Court was particularly concerned with ensuring that the claimant employers could pinpoint the legitimate proprietary interest which the restrictive covenant protected and that the covenant did not overreach to protect interests which were already protected. To the extent that the claimant asserted that the relevant interest being protected was confidential information and trade secrets, the fact that the contract already contains a confidentiality clause put the onus on the claimant to show other interests that the restrictive covenant protected.

The approach of the Court in Shopee and MoneySmart follows from the fact that the Court in Shopee and MoneySmart are bound to follow the Court of Appeal’s decision in Man Financial.

However, conceptually, why should the fact that a contract contains a confidentiality clause have the effect of requiring the claimant to show that the non-competition clause protects another interest above and beyond the protection of confidential information and trade secrets? The confidentiality clause and the non-competition clause are simply different mechanisms for the protection of confidential information amongst other legitimate interests. The key advantage of a restrictive covenant clause is its effectiveness in ensuring that legitimate interests are not exploited; the public policy reasons against such clauses would have been addressed by the stringent tests which they are subject to for enforceability.

In Man Financial, the Court of Appeal cited its previous decision in Stratech Systems Ltd v Nyam Chiu Shin¹⁹(2005) 2 SLR(R) 579. (Stratech) as authority for the proposition that where the protection of confidential information is already covered by another clause in the contract, the covenantee will have to demonstrate that the restraint of trade clause in question covers a legitimate proprietary interest over and above the protection of confidential information and trade secrets. A closer examination of Stratech reveals that the premise of the Court of Appeal’s holding was that if other clauses existed to protect the same interest, the restraint of trade clause would exist simply to “inhibit competition in business”.²⁰Stratech Sysems Ltd v Nyam Chiu Shin (2005) 2 SLR(R) 579 at (46).

This holding in Man Financial and Stratech has been considered by the Court in a few subsequent cases.

In Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter (CCL),²¹(2013) 2 SLR 193. Woo Bih Li J (as he then was) pointed out that it was “illogical” that an employer who does not have the benefit of a confidentiality provision in its employee’s contract of employment has a better chance of establishing confidential information as a legitimate interest to protect under a non-competition clause than an employer who has sought to protect its confidential information by the use of dual provisions (i.e., one specifically to preclude disclosure of such information post-employment and the other to restrict the employee from engaging in a competitive business for a certain duration and within a certain geographical scope). Indeed, Woo J also noted previous English decisions which suggested that in view of the difficulty of policing one’s compliance with confidentiality clauses, a non-competition clause may be a satisfactory form of restraint. ²²Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter (2013) 2 SLR 193 at (89)-(91).

Subsequently, in Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd (Humming Flowers),²³(2014) 3 SLR 27. Vinodh Coomaraswamy J considered Woo J’s earlier observations in CCL and stated he had “sympathy for the concerns expressed by Woo J”.²⁴Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd (2014) 3 SLR 27 at (71). In that case, however, Coomaraswamy J considered that he was bound by Stratech, such that it was not possible for the defendant employer in Humming Flowers to point to the protection of confidential information as a legitimate interest to justify the relevant non-competition and non-solicitation clauses there. In any event, Coomaraswamy J found that the defendant employer had a legitimate interest in protecting its trade connection with its customers. Notwithstanding Coomaraswamy J’s decision, His Honour explained that it was partly in light of the concerns expressed regarding the proposition in Man Financial and Stratech that he granted the defendant leave to appeal to the Court of Appeal.²⁵For completeness, there does not appear to be a reported decision regarding the defendant’s appeal (assuming such appeal was eventually lodged).

Given the ubiquity of confidentiality clauses in employment contracts and the ease by which confidential information can be disseminated or transferred now, it is submitted that it may be useful for the Court of Appeal to revisit the proposition in Man Financial. In particular, further thought should be given to whether the existence of other clauses protecting a legitimate interest in and of itself shows that the restraint of trade clause is a covenant in gross, i.e., a bare restriction on the freedom of trade, even if the restraint of trade clause protects no other interest (as suggested in Stratech). As alluded to above, there are sound reasons for parties to seek to rely on more than one clause to protect the same legitimate proprietary interest, including but not limited to difficulties with policing the covenantee’s compliance through only one clause. A more open-textured analysis of whether a restraint of trade clause is truly a covenant in gross would arguably be fairer, insofar as that will give courts the discretion to examine all the facts and circumstances and not simply apply a bright-line rule to determine if a restraint of trade clause should be struck down.

Tripartite Partners’ Guidelines on Restrictive Covenants

While the U.S. FTC’s move to prohibit non-competition clauses is unlikely to be replicated in Singapore in the near future, the Singapore Ministry of Manpower has indicated that there will be guidelines issued on the use of non-competition clauses in employment contracts in Singapore.

In February 2024, it was announced that the Ministry of Manpower and its Tripartite Partners were developing guidelines that would help shape norms and provide employers with further guidance on the inclusion of restrictive clauses in employment contracts.²⁶”Written Answer to PQ on Regulating Non-Compete Clauses in Employment Contracts”, Ministry of Manpower, 5 February 2024, retrieved from: https://www.mom.gov.sg/newsroom/parliament-questions-and-replies/2024/0205-written-answer-to-pq-on-regulating-non-compete-clauses-in-employment-contracts The Minister for Manpower, Dr. Tan See Leng, explained that the government understood that “overly restrictive restraint of trade clauses can disadvantage retrenched employees and create difficulties in finding employment”, and the guidelines would “provide guidance on the reasonable use of such clauses”.²⁷Singapore Parliamentary Debates, Official Report, 6 February 2024, vol 95. It is expected that these guidelines will be released in the second half of 2024.²⁸Supra at note 26.

The scope of the Tripartite Partners’ guidelines remains to be seen. That said, some areas which the guidelines may attempt to cover include guidance on when these covenants should be used and the various parameters which employers should take into account when drafting such clauses. These include, for example, geographical, temporal and activity scopes that a restrictive covenant should address. The guidelines may also attempt to provide some guidance as to how employers may calibrate the length of any such restraints, by reference to whether the employee is a senior, mid-level, or junior employee. Although these guidelines are not likely to have the force of law, they will indubitably serve as an important signpost as to what constitutes a “reasonable” restraint of trade.

Navigating the Road Ahead

How then should employers and employees approach the issue of restrictive covenants? While the upcoming guidelines to be released by the Tripartite Partners will be instructive, in the meantime, employers and employees can consider the following guiding questions when considering if and the extent to which employees should be subject to restrictive covenants:

1. What does the clause seek to protect? If the clause does not seek to prevent abuse by the employee of a genuine business interest of the employer which the employee had access to during employment, the clause may be a bare attempt to restrain trade and is likely to be unenforceable.
2. How senior is the employee to whom the clause applies? It may be less reasonable to bind junior employees who have relatively less access to important company information or trade connections to onerous post-termination obligations.
3. How long are the clauses meant to apply, both going forward and in terms of the “look-back” period? The longer the time periods which the clause is expressed to cover, the greater the risk that the clause may be considered an unreasonable restraint of trade.
4. Is the clause drafted specifically to the job scope undertaken by the employee, or cast generally without reference to the employee’s scope of work? A generally worded clause that is not specific to the employee’s function or level of access is less likely to be reasonable.
5. What are the geographical areas which the clause purports to cover? A worldwide restraint of trade is less likely to be reasonable as a restraint of trade, unless it can be shown that the restraint must apply to such an extent to protect the employer’s interest.

Ultimately, it is important to recognise that in a dynamic, globalised labour market, restrictive covenants still play a significant role in balancing the interests of employers and employees alike. The policy challenge of allowing market forces to shape industry practice without impinging on employees’ ability to contribute to the labour market is an age-old one, and the guidelines will serve as an important point of reference for all stakeholders in the employment landscape in Singapore.

The post Restrictive Covenants in the Employment Context – Eroding Utility appeared first on The Singapore Law Gazette.

So, you’ve just returned from your call break, and have been called to the Bar. Congratulations! You are now an Advocate and Solicitor of the Supreme Court of Singapore!

But now it’s back to work – at the firm you trained at, or at a new workplace. And on your very first day at work, you are faced with the sociopolitical issue of how to navigate the hybrid workplace.

How can young lawyers manage this landscape, in a manner that allows them to successfully reap the benefits of hybrid working while minimising the downsides? I offer some suggestions.

Can You Even Work from Outside the office?

Before we consider the dos and don’ts, the first question is: does your workplace allow hybrid work? Because if your workplace does not, but you nevertheless want to do so, consider whether you want to start off your career by picking this battle. And if this is not the hill you are prepared to die on, but hybrid work is that important to you, consider whether it makes more sense to find another workplace.

But Really, Can You Even Work from Outside the Office?

Let’s assume your workplace does have a hybrid work policy. But the policy is not the be-all and end-all. The working practices of the team leaders or seniors you work directly with are more relevant.

If your workplace has a hybrid work policy, but your team leaders or seniors prefer to interface in person five days a week, the unfortunate reality is that the team’s practice will trump the organisation’s policy. Yes, you could choose to swim against the tide, and insist on your right to work from outside the office in accordance with the policy. But doing so won’t endear you to your team. Consider whether you want to begin your work relationships on this footing.

It may well be that some of your team leaders, or even seniors, expect you to spend more time in the workplace than them. But regardless whether there is a good rationale for this, or whether this makes them a bunch of hypocrites,¹Bear in mind also that they may well spend significant amounts of time outside the office on marketing or business development, or have commitments with young children or aged parents that take up time during office hours and which they make up for after office hours. the point remains – you are not in a particularly strong position, at this nascent stage in your career, to override their expectations.

So if you find yourself in a team whose practice differs from the organisation’s policy, and this is not something you can live with … well, see the section above.

The Case for Coming into the Office

That being said, there are some benefits to coming into the office.

Some of you are probably rolling your eyes. Let me clarify. I am not saying that coming into the office is a panacea, or that the benefits unambiguously outweigh the detriments. But I do suggest that some value can be extracted from coming into the office.

First, for some, the office provides a more conducive working environment. Some require a psychological or physical distance from their beds to do good work. Others have a less-than-ideal home office setup. Yet others value being in the proximity of their firm’s library or hardcopy bundles. If increased productivity means that tasks can be completed quicker and require fewer subsequent rounds of review, this advantage may well outweigh the downsides of actually coming into the office.

Second, coming into the office helps to build interpersonal relationships. Clichéd, but true. All things being equal, a young associate who is in the office more than another associate will have more opportunities to build relationships with seniors, such as by (a) being perceived as available to assist with tasks;²And all the more so if the firm or department is structured with a pool system. I accept that in a perfect world, seniors should not take face-time into account when forming impressions of whether associates are available to assist. But alas, we do not live in a perfect world. (b) being around to join in banter; or (c) asking (or being asked) to grab coffee or lunch.

Is it possible to build good relationships remotely? Of course. But is it harder to do so? Probably.

You may now be thinking: “Well, but what’s the point of workplace relationships? I just want to turn up (whether in person or remotely), do good work and collect my salary. And surely the quality and timeliness of work product will speak for itself!”

A confession: when I first started practice, I used to think this way.

But now, with the benefit of hindsight, I suggest that the quality of your workplace relationships affects, among other things: (a) how forgiving of your mistakes your seniors will be; (b) your seniors’ willingness to mentor and guide you; (c) your chances of being put on interesting and horizon-expanding assignments; and (d) the quality of the references you will get should you choose to leave one day.

And it’s not just about your relationships with your seniors. Your relationships with compatriots and support staff will also have a direct impact on (a) whether you will be able to find cover when you are away; (b) the amount and quality of help you receive when you find yourself in a tight spot;³And believe me – there will be many, many, tight spots. and (c) whether, in the future, your colleagues and ex-colleagues are prepared to make helpful introductions or even refer matters to you.

Like it or not, building good relationships does impact your career.

Third, coming into the office creates more opportunities to learn from your surroundings. Apart from learning from books and doing the work, being in the office also allows you to learn by osmosis. How do your colleagues speak (whether in person or over the telephone) with their clients, opposing counsel, or even court staff? Can you observe good practices to be adopted, or bad practices to be avoided? Can you drop in on a colleague who doesn’t look too busy to get a quick sanity check on an unorthodox argument that you are thinking of running? Maybe your colleague has just come out of a hearing and shares excitedly about an interesting manoeuvre, which you file away in the recesses of your mind until the idea arises, unbidden, at exactly the right moment years later.

I suggest that young lawyers should be sponges who are hungry for knowledge, eager to learn and grow, and on the lookout for opportunities to convert unknown unknowns to, at the very least, known unknowns. Completely cutting out in-person interactions is akin to losing one or two of your five senses while travelling across a new country. Yes, you will still absorb and grow from the experience, but you end up missing out on so much.

That being said, I end this section with a caveat. The second and third benefits are only relevant if there actually are people in the office. But if nobody is ever in the office because your workplace is fully remote, then this article would be of limited value to you anyway. And as for how to ensure that there are actually people in the office when you come in, read on.

How to Make the Most of Your Time in the Office

Let’s assume that I’ve managed to convince you that there is value to coming into the office.⁴Or perhaps I have not, but you have resigned yourself to having to come into the office in order to comply with your firm’s policy or your team’s practice, at least for the time being. How, then, can you extract more returns from actually being in the office?

After all, there is a price to be paid for coming into the office. There’s the need to (a) wake up earlier; (b) change into at least half-decent clothes instead of just working in your pyjamas; (c) spend time, energy and money on the commute to-and-fro; (d) expend energy on social interactions;⁵Especially for the introverts amongst us. (e) spend more on coffee, lunch and perhaps dinner in the CBD … the list goes on.

So if you’re going to be paying this price anyway, why not get more value for the same price paid? I therefore make some suggestions for how to get more out of the time spent in the office.

First, choose to be sociable.⁶Yes, I can hear the cry of dismay from those who identify as introverts. But hear me out.

If you take the trouble to come into the office, but then spend the entire day plugged into your headphones, typing away furiously while staring intensely at your screen, looking up only to glower at whoever walks by as if daring them to disturb you, and lunching by yourself … you end up paying the price for coming into the office, but without reaping much of the potential benefits.

I am not saying that we have to be social butterflies, be someone that we’re not or spend all day pestering our colleagues.⁷And realistically, that’s not what our colleagues want as well. But I am saying that we should be present and connected, make lunch appointments (whether impromptu or scheduled), run ideas by our colleagues (when they don’t appear to be rushing to meet a deadline), ask our neighbours if they need coffee when we get up to recharge, ask to sit in on calls or meetings as learning opportunities … the list goes on.

My suggestion is to make a conscious effort to be, on balance, a net positive to the folks around us in the office. It may not be possible to live by this rule every single day.⁸After all, some days simply wring every drop out of us, such that we have nothing else left to give to those around us. But hopefully, you’re not in a workplace where this is every day. But it is worth a shot. And even if you’re looking at this exercise purely from a self-interested perspective, this is how relationships are seeded, nurtured and deepened. And there is a value to relationships, as discussed above.

Second, choose the right days to be in the office.

Ask your team leaders and seniors if there are any specific days of the week they expect you to be in the office. If yes, stick to that, even if that is not your personal preference.⁹Sure, you may prefer to spend Fridays out of the office. But if you are expected to be in every Friday, you don’t have much of a choice. If they have no preference, ask which days of the week they are likely to be in the office, and aim to come in on those days. After all, if part of the rationale for being in the office is to build relationships and to learn via exposure, what is the point of being in on the days when nobody else is around?¹⁰And if your team leaders and seniors are rarely in the office, but still prefer you to be in the office a certain number of days in order to comply with the firm policy, try to be in on the days that there are likely to be more colleagues around. For example, some firms serve breakfast on specific days of the week, have lunchtime talks, or organise regular evening drinks. That’s as good a reason as any to come in on those days – and chances are, there will be more colleagues around to interact with, build relationships with, and learn from.

For those doing disputes work, ask your team leaders and seniors beforehand if they want to attend a remote hearing together from the office. Don’t take it for granted that you can offer sufficient support by dialling in separately from home.¹¹And this is especially so if they are used to working with hardcopy bundles. And for those doing transactional work, ask your team leaders and seniors if they would like you to be in the office for specific milestones, negotiations or on days when key deliverables are due.

Third, choose the right tasks for the days you are in the office.

Suppose you are looking at your to-do list at the beginning of a week. You will be in the office on Monday, Thursday, and Friday. You have a particularly heavy piece of work due on Wednesday. Should you start work on it while in the office on Monday?

Trick question! The answer depends on the nature of the work. For example, if it is a piece of research for which you will need to look up textbook authorities in the firm library, of course you should start on Monday while you are in the office. And while in the office, you might as well ask if anyone has, by any chance, looked up that particular point of law before, and if so, whether they have anything useful to share.

On the other hand, if the piece of work is (for example) a set of written submissions for which the research has already been done and the evidence is all in, and accessible from outside the office, then it may make more sense to start work on Tuesday, when you have a better chance of doing a deep dive and be relatively uninterrupted while you crank out a first draft.

These are just examples, and the answer would also differ depending on whether you consider the office or home to be a more conducive environment for deep work. So while there is no one-size-fits-all answer to this question, when and where we start on each task is a question worth considering deliberately, and should not simply be a matter of which task happens to come up next on your to-do list.

Conclusion

Being able to work outside the office is fantastic. But please be smart about it,¹²And you are smart. You graduated from law school and passed the Bar examinations. and don’t take it for granted.¹³After all, your seniors have spent years or even decades at workplaces where there was no such thing as remote or hybrid work. They survived. Some even thrived. As such, do forgive them if they wonder whether the right to work remotely is truly a non-negotiable entitlement. Find a way to make it work for you and the people around you, and be conscious about striking the right balance.

The post Thriving in the Hybrid Workplace: Thoughts and Tips appeared first on The Singapore Law Gazette.

A pioneering lawyer in each of these fast-rising practices talks about the scope of these fields and how to jumpstart a career in them.

Artificial Intelligence Law

By Lim Seng Siew, Director, OTP Law Corporation

Seng Siew is a civil and commercial lawyer who focuses on technology-related matters. He is an expert on AI-use both inside and outside the legal fraternity and also an accredited specialist in data and digital economy law.

As newly qualified lawyers embark on their careers, many are curious about the future areas of law they will be practising in. Artificial Intelligence law or “Al law” is often cited as a field with promising growth potential. But what exactly is AI law, and how does it differ from so called traditional areas of legal practice?

At its core, AI refers to innovative technology capable of performing tasks traditionally requiring human intelligence, such as decision-making, visual perception and voice recognition. While AI has not yet reached the stage of “artificial general intelligence” where machines can truly think like humans, the field continues to evolve rapidly. This evolution raises important questions about governance, regulation and ethical considerations surrounding the use of AI technologies.

Governance frameworks such as the Model AI Governance Framework for Generative AI recently released by Singapore in May 2024 and similar initiatives in countries like the UAE, China, Australia and Brazil highlight the global interest in regulating AI. The European Union’s Artificial Intelligence Act, passed in March 2024, is a significant legislative effort aimed at addressing the ethical and legal challenges posed by AI.

One of the key characteristics that sets AI law apart from traditional legal fields is its dynamic nature. AI technologies evolve swiftly, requiring lawyers who want to practise in this area to stay abreast of the latest developments in both AI technology and AI law. Moreover, the global nature of AI necessitates an understanding of the laws and regulations across different jurisdictions.

AI law also intersects with established laws such as contracts, intellectual property, insurance, criminal law and tort law. For instance, in the case of autonomous vehicles, questions about liability, intellectual property rights, and contractual obligations arise, underscoring the complexity of AI’s interaction with such traditional areas of law. The numerous parties (such as the vehicle “driver”, the passengers, the vehicle manufacturer, the AI developer, the insurers, the other drivers, the pedestrians, and traffic police) involved in the use of autonomous vehicles on public roads requires consideration of each party’s obligations and the allocation of risk among the parties.

A successful AI lawyer must navigate this complex landscape by combining specialised expertise in AI law with a broad understanding of these established areas of law. This requires a deep dive into the intricacies of AI technology, legal frameworks and policy considerations that underpin AI applications and creatively apply established legal principles to them.

Furthermore, an AI lawyer also can shape the future of AI law. This involves engaging in policy discussions, participation in seminars, conferences and discussions with peers and experts. Participation in such matters will help the policy makers decide on the direction AI law should take. Using the autonomous vehicle example, if risk is only allocated to the vehicle manufacturer and the AI developer, it can stifle innovation. On the other hand, if risk is allocated to the insurers, it can drive up insurance premiums and drive up the cost of doing business for those who rely on road transportation for their business.

Ultimately, AI law presents a compelling opportunity for young lawyers to contribute to the development of the law that governs the use of AI responsibly and ethically. By embracing the multidisciplinary nature of AI law and actively shaping policy decisions, young and creative lawyers can play a pivotal role in advancing this dynamic field.

Internet and Digital Media Law

By Fong Wei Li, Managing Director, Forward Legal LLC

Wei Li has a deep interest in internet and digital media law. His practice services multiple stakeholders in this area, from media and e-commerce companies to content creators and news sites.

From TikTok and LinkedIn to Netflix and Lazada, digital media is now integral to our personal and professional lives. They shape how we communicate, socialise and do business. Correspondingly, internet and digital media law is rapidly growing as a practice area.

This evolving field tackles legal issues arising from the use of the internet and digital technologies, spanning data privacy, cybersecurity, online content regulation, intellectual property and digital transactions.

In data privacy, for example, a lawyer might work with a healthcare provider to develop a new patient management system. The lawyer ensures compliance with relevant data protection and privacy laws and helps draft privacy policies and data protection agreements to manage patient information securely.

In cybersecurity, lawyers often advise clients on how to protect against and respond to cyber threats. A financial institution facing a ransomware attack might seek legal counsel to understand compliance obligations, handle the breach and mitigate further risks. The lawyer guides the institution through notifying affected customers, coordinating with cybersecurity experts and liaising with regulatory bodies.

Online content regulation is another critical area. Lawyers help companies navigate what can and cannot be published online. Content creators and social media platforms might engage a lawyer to review their content and policies to ensure compliance with laws against defamation, hate speech and other harmful content. Lawyers also act for victims of online harms, such as cyberbullying and defamation, in complaints and court cases, helping them obtain protection or restore their reputations. On the policy front, lawyers may help shape laws and regulations to curb threats posed by emerging technologies like deepfakes and AI.

Digital transactions also demand legal expertise. Lawyers might work with e-commerce businesses to draft and review contracts related to online sales and advise on compliance with consumer protection laws. Contemporary issues such as scams, fraud and money laundering are also prevalent. An e-commerce platform facing fraudulent transactions or scams might need legal assistance to develop fraud prevention policies and implement security measures. Lawyers can draft terms and conditions outlining the company’s fraud and scam policies, providing a legal framework to handle such incidents effectively. In fraud cases, lawyers represent the company to resolve disputes and recover assets.

To excel in this area, lawyers need both technical knowledge and legal expertise. Technical proficiency is essential. Lawyers must understand how digital platforms and technologies work in order to provide accurate advice. For instance, advising on e-commerce requires familiarity with payment systems and their security protocols. Specialising in data protection means understanding various data safeguarding technologies. Knowledge of social media platforms and how content is shared and transmitted is crucial for advising on content regulation.

Regulatory knowledge is equally important. Lawyers must stay updated on local and international laws affecting digital activities. As technologies evolve and new regulations are constantly enacted, it is crucial for lawyers to keep up with the changing regulatory landscape. Singapore, for example, has recently introduced several laws targeting content regulation, with more to come. Awareness of international regulatory regimes is also vital since the internet cuts across borders, often requiring international harmonisation.

Young lawyers interested in this field can take several practical steps to build a successful career. Finding a mentor or joining a firm with an active practice in internet and digital media law is a good start. Reading widely beyond the law, especially on developments in media, internet and digital technologies, is essential. Regularly following industry news, subscribing to relevant journals and engaging with online resources can keep you informed. Networking with companies and professionals through conferences, seminars and online forums helps build a robust professional network and provides learning opportunities.

It is also crucial to have an open mind and be curious and creative. Embrace continuous learning, ask questions and explore innovative solutions to legal issues. By staying adaptable and proactive, young lawyers can significantly contribute to the growing field of internet and digital media law.

Environmental, Social and Governance Law

By Kelly Ho, Managing Director, KEL LLC

Kelly manages a practice that advises businesses in energy, construction, engineering, tech and retail. She is a leading lawyer in ESG law, having helped clients respond to and address legal concerns in this field.

Having served as in-house counsel for a major retailer, I navigated the complex waters of environmental, social and governance (ESG) issues first-hand. Engaging with NGOs, I witnessed the growing scrutiny from various stakeholders demanding greater corporate responsibility. Transitioning into private practice, I have advised clients in the construction and carbon emissions industries, reflecting the ever-expanding scope of ESG.

The legal landscape is swiftly evolving to accommodate the rising importance of ESG considerations. As lawyers, our role is pivotal in guiding clients through these uncharted territories.

Here are three key areas where we can make a significant impact:

1. Regulatory Compliance and Risk Management

The regulatory environment around ESG is becoming increasingly stringent. Governments worldwide are enacting laws aimed at curbing carbon emissions, protecting human rights and promoting ethical governance. For instance, the European Union’s Corporate Sustainability Reporting Directive (CSRD) imposes detailed sustainability reporting requirements. Large companies, as well as listed SMEs, will be required to report on sustainability, including non-EU companies generating over EUR 150 million in the EU market.

In Singapore, ESG regulations are also on the rise. The Monetary Authority of Singapore (MAS) has implemented guidelines on environmental risk management for banks, insurers and asset managers. Additionally, for listed companies with financial years commencing between 1 January and 31 December 2024, the Singapore Exchange (SGX) mandates climate reporting for the financial, agriculture, food and forest products, energy, materials and buildings, and transportation industries. For other listed companies, climate reporting is on a “comply or explain” basis.

Lawyers can assist clients by:

• Ensuring compliance with existing and upcoming regulations.
• Conducting thorough ESG audits to identify and mitigate risks.
• Advising on best practices to meet regulatory expectations and avoid potential penalties.

By staying abreast of legislative developments and guiding clients in implementing robust ESG policies, lawyers can help businesses navigate regulatory complexities effectively.

2. Strategic Integration of ESG in Business Models

Beyond compliance, integrating ESG into the core business strategy is crucial for long-term sustainability and competitive advantage. This integration requires a deep understanding of how ESG factors impact the business and its stakeholders.

Lawyers can provide value by:

• Advising on the incorporation of ESG criteria into corporate governance frameworks.
• Assisting in the development of sustainability initiatives that align with the company’s goals.
• Facilitating stakeholder engagement to ensure that ESG strategies resonate with investors, customers and employees.

By fostering a holistic approach to ESG, lawyers can help companies build resilient and responsible business models.

3. Navigating Carbon Markets and Emission Trading

The carbon emissions space is a critical aspect of the global effort to combat climate change. Carbon markets and emission trading schemes offer businesses a way to offset their carbon footprint while incentivising reductions in greenhouse gas emissions.

Lawyers can play a crucial role by:

• Advising on participation in carbon markets and compliance with emission trading schemes.
• Structuring carbon offset projects and ensuring they meet relevant standards.
• Negotiating and drafting contracts related to carbon credits and renewable energy certificates.

With expertise in environmental law and market mechanisms, lawyers can guide clients through the complexities of carbon trading and help them achieve their sustainability targets.

The ESG landscape is dynamic and increasingly integral to corporate success. There is ample opportunity for lawyers to step into advisory roles, ensuring that businesses not only comply with regulations but also embrace ESG as a strategic asset. As we move forward, the demand for legal expertise in ESG will only grow, opening up exciting avenues for practice and making a positive impact on society and the environment.

Lawyers are well-positioned to be at the forefront of this transformative journey, guiding clients towards sustainable and ethical practices that benefit all stakeholders. The ESG space is not just a regulatory challenge; it is an opportunity for lawyers to contribute to a more sustainable future.

The post Emerging Legal Practices: AI, Digital Media and ESG appeared first on The Singapore Law Gazette.

There are many good articles and videos online – and you will also hear from your seniors who have gone there before – on how to start and then grow in your legal career.

But how to “succeed” is more than following a list of 10 things (and many tips are easier in theory than in practice). What “success” is differs from person to person; this article offers views from seven lawyers in practice, who come from various backgrounds and seniorities. We’ve all been there before, as a newly-qualified lawyer on the first day of the job, and we are happy to share what we’ve learnt over the years (and what we wish we knew as a first-year associate).

1. Surround yourself with people you can talk to

“You are at the check-in line for this next journey. Your time is no longer measured by semesters, and summer vacations. You will no longer be graded on a published rubric, or on a curve. Your success is measured by yourself, milestones you set, assessments you choose to undertake. Your happiness and satisfaction has always been yours to pursue, now more than ever. Surround yourself with people you can talk to. Talk about the stress you are feeling, the workload, the pressures, the criticism, the failures. Talking helps you to confront the negatives head-on, learn from them, and move forward and onward. I have been blessed in my career to have been taught and mentored by the good, the principled, the thoughtful. Find those gems around you, and be guided by what is right, not what is easy.  And remember, no matter how bad it gets, you are never alone. Someone is always there to listen.”

– Lim Lei Theng, Partner (Head of Knowledge Management, Head of Pro Bono), Allen & Gledhill LLP

Lei Theng was my professor in NUS, where she coached me for negotiation competitions. We also worked together on many pro bono initiatives. I’ve always admired how she can balance everything – family, career, and so many pro bono and coaching projects on the side, so just before I graduated (in 2012), I asked her how she did it all. The advice she gave me I remember to this day because it was so honest and practical – she was supported by two helpers and her mother (and it was not the case of sleeping only three hours a night!). It also helped to have a husband who is not the fifth child. Having a community to support you (and openly acknowledging the support of that community) will be what carries you through your career.

2. Find role models – and you can have different role models for different aspects of your career

“A senior lawyer once told me early on in my career that, while it would be important to seek out a good mentor to guide me on my journey through legal practice, it would be equally important to seek out role models.

Always be on the lookout for lawyers whose qualities you would like to emulate. Watch, learn and absorb what you can from those who have a few extra years of experience under their belts and slightly more grey hair. Pick and choose different role models for different aspects of your career – for example, you may want to model yourself on a lawyer who has great client management or technical skills, or you may wish to be more like that lawyer who is an amazing team manager, or who somehow manages to balance his/her family life with work.

Remember that while most may only have a few mentors over the course of their careers, you can choose as many role models you want (and this is entirely up to you!). Congratulations on getting called and welcome to the profession!”

– Gary Beh, Corporate Counsel, Linklaters

Gary is my senior in law school; we knew each other through the NUS Pro Bono Group. I’ve known him to be a very happy individual who always has a reason to smile. Gary surfaced on my LinkedIn feed where he was speaking on a panel about “Thriving vs. Surviving in Legal Practice” for pre-qualified lawyers earlier in June, and I thought he would be perfect for this article. I reached out and I’m so happy he said YES to sharing his experiences. The takeaway is that you’ll reconnect with friends at various points of your life/career, so don’t be afraid to reach out and make a connection.

3. Recognise that you are in the service industry

“Every client comes to you to pay you for a service. They are not here to be impressed by your vast knowledge of the law/procedures or your outstanding experiences. They want you to resolve the legal issue they are facing, whether it is a dispute, corporate deal or something else. That is fundamental.

So simply having a good grasp of the law and being able to tell the client what the law is, is unfortunately, not adequate. You must first need to fully understand the client’s issues, including the nuances and intricacies of the matter. You then need to curate your advice to the client according to their specific circumstances. You must also carefully manage the client’s expectations from the beginning till the end of the brief. Remember, you are here to serve your client’s legal needs relating to the matter they had approached you/your firm. Ideally, at the end of the matter, the client must walk away feeling that in return for whatever they paid, they were more than adequately served with proficient legal services.”

– Nakoorsha Abdul Kadir, Managing Director, Nakoorsha Law Corporation

Nakoorsha and I were formerly Deputy Public Prosecutors in the Attorney-General’s Chambers, and back in 2013 I used to sit at the workstation diagonally in front of his. Because he had many years of experience with criminal matters (and I had just started), I would often approach him with questions, and I appreciated that no matter how busy he was, he would always make time to help me. No matter how urgent the matter (or I) was, he’d always start with “Ms Seah, chill, what is the issue?” before we’d work through identifying the areas to focus on. The takeaway is that when you learn from your seniors, don’t just pick up the law from them, but also their attitude towards solving problems and their demeanour. I still hear that reminder to “chill” in my head to this day!

4. It is challenging at the beginning but it will get easier with time

“If you’re reading this, you’re likely at the start of your journey as a new associate. Congratulations on making it this far!  

Concerns about managing your first year are inevitable, so I would like to give you a long-time partner’s perspective on the job and some words of advice. 

I would like to begin with the words of wisdom my mother once imparted to me. I expressed to her how anxious I was about my first day and she replied with characteristic curt candour, “Aiyah, you already made it through law school, 99% of people cannot even get into law school, you know?” The advice was brusque, invaluable and holds true for all of you incoming associates. If you have gotten to associateship, you can get through associateship.

Regardless, nobody is immune to stress and pressure and this job is full of it. No matter how prepared you are, the job will take a toll on you. However, I can guarantee you that it does get easier and all you need to do is push through the first two or three years. The learning curve is steep but once you’re past it, practice becomes second nature and you will have become all the better and wiser for it. Yes, the initial climb will be tough, but it’s well worth it for the glorious views at the top of that mountain. 

So, embrace the challenges, respect your capabilities, and never lose sight of the fact that you are making a real difference in people’s lives. It won’t always be easy, but I promise you, it will be worth it.”

– Carrie Gill, Partner (Co-Head, Family and Divorce), Harry Elias Partnership

Carrie is a friend I got to know when I started playing darts for the Law Society back in 2018. She’s shown me how you can take work seriously, but never lose your zest for life (for example, she has broken out into a spontaneous dance in front of an audience – that included our Chief Justice – during our yearly darts competition with the Malaysian Bench & Bar). I admire her frankness where she tells it like it is without sugarcoating things, so she is someone I turn to for advice (and a dose of ‘tough love’), when I need a sounding board about a situation I encounter in the course of work. The takeaway is that you will make new friends through activities you enjoy doing, and when your friends are at a different stage of their careers, there is so much to learn from them as they will give you tips on how to handle a situation, having gone through it before.

5. Lawyers aren’t robots – it’s okay to have emotions. Give yourself the time and grace to process a situation, and then keep moving forward!

“One thing I’ve come to notice about people in the legal profession is that they tend to sigh, and quite a lot. I too have been called out by friends and colleagues (and called them out myself) for letting out sighs subconsciously throughout the course of the day. Soon, you may find yourself doing the same. Whether it’s because you’re working on a very tight deadline or because you’ve been scolded for making a mistake in your draft advice, there will be many occasions in practice that you will find yourself unable to do anything except let out an exasperated sigh.

Personally, I have come to understand it as a sigh of catharsis and resignation, that there is little I can do but to carry on after a brief pause. However, I have realised that to otherwise dwell on such moments in practice will only make myself wonder why I chose this profession in the first place. So, my advice for you to succeed in your first year as an associate is to not be disheartened and to take these moments lightly. They may happen more often than you hope but there is much more to each day in practice than these brief, fleeting moments.

And if you ever feel alone, don’t forget that the legal profession is filled with fellow sighers who have been where you are and are ready to commiserate with you!”

– Julian Liaw, Associate, Drew & Napier LLC

Julian is the first trainee I’ve worked with, and I’m very grateful he’s agreed to share a piece of advice for newly-called lawyers. He is one who is truly willing to go the extra mile with the work he does, with quick turnarounds and original ideas. I admire how frank he is about being in the legal profession – and I feel the same way too. There will be days where you feel that everything is going perfectly and you’re on top of the world, and the next day where everything crashes around you, but remember that the bad days will pass, and there is absolutely nothing that cannot be fixed by sitting down for a solid block of three hours with Google and legal resources (e.g. textbooks, Lawnet, etc.), or with a pen and paper to come up with a plan.

6. Always ask yourself “how can I add value to the team or file that I am working on”?

“I have learnt that you will not have everything figured out in your first year of practice. Oftentimes, you will find yourself consulting multiple resources, particularly when confronted with an unfamiliar area of law. One thing that has helped me to speed up the learning process is approaching a colleague who has worked on a similar application or matter previously. If you are going down this route, always keep your questions focused and precise. The last thing you want to be doing is to approach a senior associate or partner with broad, open-ended questions expecting them to give you a crash course on a particular area of law. As a rule of thumb, be sure to check the textbooks, case law, rules and practice directions to narrow down on what it is that you are unsure about before approaching your seniors. That said, do not be afraid to voice your questions but always do so with a clear purpose.

To remain focused in practice, I find myself going back to this question which has now become a mantra: How can I add value to the team or file that I am working on? A good way to help the team out is to stay on top of running timelines and to organise the stream of documents and information coming in from your clients.

Without sounding too cliché, embrace the unknown and get ready for the intellectual challenge. It can be difficult at times but I have found it rewarding.”

– Arya Gerard, Associate, Drew & Napier LLC

Arya and I got to know each other this year through our membership in the Law Society’s IT Committee, as we were in different firms then. I’m wowed by her commitment to the teams she is on – she volunteered to be the committee secretary to take notes at meetings, and followed through with proposals when asked to flesh out an idea she proposed – and I’m so happy she’s agreed to share her “mindset” with newly-qualified lawyers.

7. Practice is a marathon, not a sprint

“In my decade-long legal career, I have had the benefit of receiving many pearls of wisdom. One such pearl that stuck with me is this piece of advice that a senior told me shortly after I joined private practice – “practice is a marathon, not a sprint”. It still holds true to me today – in career and in life. There is no escaping the fact that life as a lawyer is often frantic, relentless and all consuming. At the same time, life goes on. Balancing life and career can be difficult and frustrating – particularly if things don’t go your way or if your friends and peers appear to have things figured out or are progressing ahead of you. In such times, I find it helpful to take a step back to remind myself that life and practice is a marathon and not a sprint, so I can pick myself up and trundle on. If all else fails, a nice bottle of red and a good steak helps numb the pain.”

– Jeremy Lua, Senior Associate, Norton Rose Fulbright (Asia) LLP

Jeremy and I were colleagues in the legal service, before he moved into the private sector, where he has been active in the cybersecurity and privacy investigations space. I appreciate that in his advice to young lawyers, he is very real about the fact that you will end up comparing yourself to others. But remember: you have a choice, and you can choose to help each other instead of competing. I admire Jeremy’s attitude where he is generous with his time and resources, where he supports friends’ posts on LinkedIn, and also introduces them to people whom they would be interested to know at networking sessions.

The takeaway is that how you succeed in your legal career is more than you – you are the sum of many parts. The friends and mentors you will meet at various stages of your career, from law school, to colleagues at work, to people you reconnect with at various points in your life … these will be the people who you turn to for advice, to share the good times and the bad times, or emulate a trait of theirs you admire. There is something to learn from each one, and you will be a better lawyer for having known each of them.

Congratulations on getting called to the Bar! We wish you joy, wisdom and endurance in your career ahead!

The views expressed in this article are the personal views of the authors and contributors and do not represent the views of their firms.

The post How to Succeed in Your First Year as an Associate appeared first on The Singapore Law Gazette.

Singapore has passed legislative amendments to enhance its anti-money laundering and countering the financing of terrorism (AML/CFT) regime. Such changes will, amongst other things, enable more effective prosecution of money laundering offences, enhance the enforcement and supervisory efforts of AML/CFT regulators, and align the city-state’s AML/CFT framework with international standards.

Introduction

The Anti-Money Laundering and Other Matters Bill (Bill), which was introduced for First Reading on 2 July 2024, was passed by Parliament on 6 August 2024 and assented to by the President on 26 August 2024. The Anti-Money Laundering and Other Matters Act 2024 (AML Act) will come into operation on a date that the Minister will appoint by notification in the Gazette.

Significantly, amendments introduced by the AML Act will facilitate more effective prosecution of money laundering offences, enhance inter-agency cooperation, and improve processes relating to seized or restrained properties which are linked to suspected criminal activities.

Key Aspects of the Amendments

The AML Act will, amongst other things, enhance the ability of law enforcement agencies in Singapore to pursue and prosecute money laundering offences as well as enable cross-agency data sharing to augment the detection of money laundering, terrorism financing and proliferation financing.

Prosecution of Money Laundering Offences

Under the current law, the Prosecution is required to show that monies allegedly laundered in Singapore are proceeds directly linked to specific criminal conduct. Such proof is challenging to obtain where the criminal proceeds flowed through different jurisdictions before entering Singapore; it is often the case that tainted funds are routed through many bank accounts and intermediaries in other jurisdictions, so as to obfuscate the origin of the proceeds. The AML Act will amend the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (CDSA) such that the Prosecution need not show a direct link between the criminal conduct and the monies laundered, and need instead prove only that the offender knew or had reasonable grounds to believe that he was dealing with criminal proceeds.

This will be effected by way of amendments to section 56 of the CDSA, which sets out the standards of proof and knowledge required for the prosecution of money laundering offences. When the amendments come into effect, the new section 56(8) of the CDSA, for example, will state as follows in respect of the offence of money laundering in section 54 of the CDSA:

“For the purpose of proving an offence under section 54(1), (2), (3) or (3A) against a person for any act mentioned in those provisions involving property that relates to the benefits from criminal conduct, it is not necessary for the prosecution to prove as a physical element of that offence that the property is in fact the benefits from criminal conduct [emphasis added].”¹Section 11 of the AML Act.

Such amendments have been explained by the Ministry of Home Affairs in its press release of 2 July 2024 as being intended to “facilitate the prosecution of money mules in cases where the monies laundered had passed through bank accounts and intermediaries in foreign jurisdictions, before entering Singapore”.²Press release by the Singapore Ministry of Home Affairs published on 2 July 2024, accessible at https://www.mha.gov.sg/mediaroom/press-releases/anti-money-laundering-and-other-matters-bill/ <last accessed 31 August 2024>.

In a similar vein, it bears mention that the CDSA was also recently amended³Such amendments were introduced by way of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) (Amendment) Act 2023, which came into operation on 8 February 2024. to introduce significant new offences of rash and negligent money laundering with effect from 8 February 2024. These new offences require proof of a lower level of culpability – instead of having to prove that a money mule (i.e., someone who assists with the transfer of illicit funds on behalf of others) had knowledge or reasonable grounds to believe that the monies transacted through his payment account were linked to criminal activity, a money mule may now be prosecuted for being rash or negligent in this regard; the latter, in particular, only requires proof that the money mule had omitted to do an act which a reasonable person would do, or that he had performed an act which a reasonable person would not do.

Coupled with the amendments introduced by the AML Act, Singapore has taken significant steps to enhance the ability of the Prosecution and law enforcement agencies to take action against those who are involved in or otherwise facilitate money laundering.

Inter-agency Cooperation and Data Sharing

The AML Act will introduce amendments to various existing legislation to allow government agencies such as the Inland Revenue Authority of Singapore and Singapore Customs to share tax data and trade data respectively with the Suspicious Transaction Reporting Office (STRO) of the Commercial Affairs Department, which is Singapore’s Financial Intelligence Unit. Amendments will also be made to the CDSA to allow anti-money laundering and countering the financing of terrorism (AML/CFT) regulators such as the Accounting and Corporate Regulatory Authority and the Council for Estate Agencies to have access to suspicious transaction reports filed by their regulated entities, such as corporate service providers and property agencies.

Such sharing of data will lead to richer financial intelligence, allowing the authorities to carry out more effective investigations and take appropriate AML/CFT enforcement or supervisory action as appropriate. Safeguards for such data sharing will be implemented to protect data confidentiality.

It is noteworthy that these amendments follow the launch of Singapore’s first centralised digital information-sharing platform earlier this year. The platform, known as COSMIC (which stands for “Collaborative Sharing of Money Laundering/Terrorism Financing Information & Cases”), was launched by the Monetary Authority of Singapore (MAS) on 1 April 2024. It seeks to facilitate the sharing of customer information amongst prescribed financial institutions (FIs) to combat money laundering, terrorism financing and proliferation financing, by addressing the information asymmetry between banks which is often exploited by criminal actors. Prescribed FIs may share customer information with other prescribed FIs via the platform if the customer’s profile or behaviour displays certain objectively-defined indicators of suspicion or “red flags”.

There are six FIs in the initial phase of COSMIC’s launch as well as a focus on three key financial crime risks – the misuse of legal persons, misuse of trade finance for illicit purposes, and proliferation financing. MAS plans to expand COSMIC’s coverage to more focus areas and FIs in subsequent phases. Participant FIs are required to comply with various requirements in respect of the risk information shared through COSMIC, including the need to implement safeguards to protect such information from unauthorised use or disclosure.

Significantly, the STRO will also have access to information shared on COSMIC. Viewed holistically with the abovementioned amendments introduced by the AML Act, there is undoubtedly a clear focus on ensuring that relevant data and information is shared with the authorities to bolster Singapore’s AML/CFT efforts.

Alignment of Singapore’s AML/CFT Framework with FATF Standards

Through the AML Act, Singapore will align its AML/CFT framework with the standards of the Financial Action Task Force (FATF) to prevent and detect money laundering more effectively.

To this end, the Casino Control Act 2006 will be amended to tighten customer due diligence checks conducted by casino operators, with the threshold for such checks being lowered from the current threshold of single cash transactions involving S$10,000 or more or deposits into a deposit account involving S$5,000 or more, to cover single cash transactions or deposits involving S$4,000 or more. 

Designation of Serious Foreign Environmental Crimes as Predicate Offences

The AML Act will also introduce a Third Schedule to the CDSA designating serious foreign environmental crimes as money laundering predicate offences. Such crimes include illegal mining, illegal wildlife trade, illegal logging, and illegal waste trafficking. This will allow law enforcement agencies to investigate money laundering offences if it is suspected that the relevant monies in Singapore are derived from such crimes committed overseas.

During the Second Reading of the Bill in Parliament, it was highlighted that environmental crimes are one of the largest contributors to transnational organised criminal activities in the region, and there is a high propensity for illicit proceeds from such crimes to flow into Singapore.⁴Opening Speech by Mrs Josephine Teo, Minister for Digital Development and Information and Second Minister for Home Affairs, Second Reading of the Bill on 6 August 2024, accessible at: https://www.mha.gov.sg/mediaroom/parliamentary/second-reading-of-the-anti-money-laundering-and-other-matters-amlom-bill <last accessed 31 August 2024>. This was similarly noted in Singapore’s Environmental Crimes Money Laundering National Risk Assessment,⁵Singapore’s National Asset Recovery Strategy published on 29 May 2024, accessible at: https://www.mas.gov.sg/publications/monographs-or-information-paper/2024/environmental-crimes-money-laundering-national-risk-assessment <last accessed 31 August 2024>. which was published earlier this year on 29 May 2024.

Processes Relating to Seized or Restrained Properties

The AML Act seeks to improve the processes in place for dealing with seized or restrained properties. Under the current law, enforcement agencies are required to secure the consent of all parties involved if they want to obtain a court order for the sale of the properties. Where such consent is not secured, the enforcement agencies are required to continue to manage and maintain the properties – which poses challenges such as significant maintenance costs being incurred (in the case of, for example, vehicles or vessels) and/or depreciation in value of the properties.

Following the amendments to the law, the Court will be able to order the sale of seized or restrained properties where it is satisfied that (a) the value of the property is likely to depreciate, or retaining custody or maintenance of the property would be dangerous, unduly costly or not reasonably practicable; or (b) the sale would be in the interests of justice. The Court is, however, not to order such sale unless notice of the proceedings concerning the sale has been given to every party known to have a prima facie interest in the property, and the Court is satisfied that the costs of the sale are, or are likely to be, reasonable in the circumstances.

Separately, the AML Act also introduces amendments to clarify processes for dealing with the seizure of property linked to suspected offenders who have absconded. The amendments provide that where law enforcement agencies apply to the Court for continued seizure of the property, the Court must not dispose of the property if it is satisfied that there are ongoing investigations into the absconded person who is reasonably suspected of having committed a relevant offence (in connection with which the property was seized). The Court must also be satisfied that continued seizure will not cause injustice to any person entitled to possession of the property. The amendments further provide that the person who has absconded will be required to personally present himself to the law enforcement agency for investigations before he can make a claim to the seized property.

Conclusion

Singapore has actively sought to enhance its AML/CFT regime in recent years, and has continuously reaffirmed its commitment to combatting money laundering, terrorism financing and proliferation financing across different sectors and industries.

The AML Act is but one example of the latest steps taken to strengthen Singapore’s AML/CFT landscape; it sits amongst a swathe of recent legislative and regulatory changes and developments targeted at tightening the city-state’s AML/CFT laws and controls while, at the same time, not being unduly restrictive towards business. As highlighted by Prime Minister Lawrence Wong (PM Wong) at the FATF Plenary earlier this year in June 2024, Singapore has, in the past few years, “tightened [its] regulations to increase transparency on beneficial ownership; introduced new regulations; and strengthened existing laws to address risks related to virtual assets, as well as precious stones and metals dealers”.⁶Speech by Prime Minister and Minister for Finance Lawrence Wong at the Financial Action Task Force Plenary on 26 June 2024, accessible at: https://www.pmo.gov.sg/Newsroom/PM-Lawrence-Wong-at-the-Financial-Action-Task-Force-Plenary <last accessed 31 August 2024>. PM Wong further highlighted Singapore’s commitment to making asset recovery a priority in its anti-money laundering regime – as set out in the first ever National Asset Recovery Strategy⁷Singapore’s National Asset Recovery Strategy published on 26 June 2024, accessible at: https://www.mas.gov.sg/publications/monographs-or-information-paper/2024/national-asset-recovery-strategy <last accessed 31 August 2024>. published on 26 June 2024.

Singapore’s efforts to ensure that its AML/CFT regime keeps pace with evolving trends, standards and typologies are ongoing and continuous. Relevant stakeholders should therefore actively monitor and be attuned to key developments in this space.

The post Singapore Steps Up its Fight Against Money Laundering with New Legislation appeared first on The Singapore Law Gazette.

With increasingly sophisticated online scams employing artificial learning, machine learning and deepfake technology, financial institutions are under pressure to ensure they have sufficiently robust processes to detect and combat scams. This article explores Singapore’s response to tackling this issue and where the responsibility lies in today’s world where digital payments are ubiquitous and seamlessly embedded.

What’s the Problem?

On 30 August 2024, the Ministry of Home Affairs (MHA) announced it will be introducing the Protection from Scams Bill (Scam Bill) in the coming months. This will empower the Singapore Police Force (SPF) to issue Restriction Orders (RO) to the seven Domestic Systemically Important Banks (D-SIBs) in Singapore to temporarily restrict the banking transactions of targets of ongoing scams who refuse to believe that they are being scammed¹https://www.mha.gov.sg/mediaroom/press-releases/public-consultation-on-protection-from-scams-bill/#:~:text=Proposed%20Protection%20from%20Scams%20Bill&text=The%20proposed%20Bill%20seeks%20to,money%20transfers%20to%20the%20scammer.. This is the latest of several legislative and enforcement efforts in addressing the proliferation of online scams.

When news broke in December 2021 that at least S$8.5 million was lost to phishing scams involving OCBC Bank²https://www.channelnewsasia.com/singapore/ocbc-phishing-sms-scam-do-not-click-bitly-url-link-2407796 (OCBC Phishing Scam), there was intense media scrutiny and over the following few weeks, we saw that amount climb to a total of S$13.7 million with 790 victims³https://www.ocbc.com/group/media/release/2022/media-statement-30-jan-phishing-scam.page. The reported facts were: victims received unsolicited SMSes claiming that there were issues with their bank accounts; they were asked to click on a link to resolve the issue; upon clicking, they would be redirected to fake bank websites and asked to key in their account login details. They later found out that they had been scammed when they received notifications informing them of unauthorised transactions charged to their bank accounts⁴https://www.channelnewsasia.com/singapore/ocbc-phishing-sms-scam-do-not-click-bitly-url-link-2407796. Even though OCBC found in its investigations that these victims had provided their online banking log-in credentials and one-time PIN to phishing websites which enabled scammers to take over their accounts, OCBC made full “goodwill payouts” to the victims. At the time, there was little to go on in terms of hard law that would hold OCBC liable to the victims for the full amount lost in such circumstance specifically, where the victims had shared their log-in credentials and “authorised” these transactions. Without any specific legislation or regulatory requirements, we would look to the bank’s terms and conditions and these would typically shift the responsibility to customers to ensure that they secure their log-in credentials or access codes. The bank could certainly still be held liable where victims can demonstrate negligence on the bank’s part, e.g. a lapse in security measures of the bank making vulnerability to such phishing attacks. It is not clear whether there were any lapses but victims reported waiting a long time to reach OCBC’s hotline and by the time they got through, the scammer had already siphoned much of their funds⁵https://www.straitstimes.com/tech/tech-news/how-sms-phishing-scams-have-affected-ocbc-customers-and-put-text-messaging-security-in-focus. OCBC also noted its “customer service and response fell short” of expectations⁶https://www.ocbc.com/group/media/release/2022/media-statement-30-jan-phishing-scam.page.

Since then, Singapore has rolled out various anti-scam measures but it remains a growing problem. The SPF cited in its Annual Scams and Cybercrime Brief 2023 that “[t]he number of scam and cybercrime cases increased by 49.6% to 50,376 in 2023, compared to 33,669 cases in 2022. Scams (including malware-enabled scams) accounted for 92.4% of the 2023 cases, with the total number of scam cases increasing by 46.8% to 46,563 in 2023, from 31,728 cases in 2022. Job scams, e-commerce scams, fake friend call scams, phishing scams and investment scams also remain the top five scam types of concern in 2023“⁷https://www.police.gov.sg/Media-Room/Police-Life/2024/02/Three-Things-you-Should-Know-About-the-Annual-Scams-and-Cybercrime-Brief-2023#:~:text=The%20number%20of%20scam%20and,from%2031%2C728%20cases%20in%202022. Further, around 13% of scams analysed by the Cyber Security Agency of Singapore (CSA) in 2023 contained AI-assisted/generated content⁸ and there is increasing use of deepfake messaging using AI to mimic public figures or people personally known to scam targets. The US FBI announced in early October 2024 that losses from cryptocurrency-related frauds and scams increased 45% in 2023 from 2022, totalling more than $5.6 billion, as scammers increasingly took advantage of the speed and irreversibility of digital asset transactions⁸https://www.channelnewsasia.com/business/losses-crypto-scams-grew-45-2023-fbi-says-4596876. With advancing technologies and evolving scam typologies, we discuss Singapore’s approach to where the responsibilities lies in these online scam cases.

What Are We Doing About It?

Some of the measures taken to address the issue include:

1. Since 2019, Infocomm Media Development Authority (IMDA) implemented various safeguards against scam calls and SMSes, e,g. blocking calls from scam numbers, spoofed local numbers, robo-calls based on pattern recognition and SMSes containing malicious content and links.
2. In 2022, SPF established the Anti-Scam Command (ASCom) to consolidate expertise and resources combat scams.
3. In May 2022, MHA launched the E-commerce Marketplace Transaction Safety Ratings (TSR) which assigns e-commerce platforms an overall safety rating, indicating the extent to which the platforms have implemented safety features which are critical in combating scams, and the effectiveness of the platforms’ efforts in combating scams.⁹ The recommended user verification measures are reported to be effective, as the platforms which have implemented all the safety features (i.e. Amazon, Lazada and Qoo10) have received a low number of e-commerce scam rewards, and have been awarded the highest ratings under the TSR.⁹
4. Since 2023, it is mandatory to register all alphanumeric SMS sender IDs with the Singapore SMS Sender ID Registry (SSIR), and messages from unregistered IDs are labelled as “Likely-SCAM”. From April 2024, post-paid SIM cards will be limited to 10 per subscriber.
5. Facial recognition is now required for higher risk transactions on Singpass and CPF withdrawals.
6. To tackle money mules who allow scammers to use their accounts or sell their bank accounts or disclose Singpass credentials, the Computer Misuse Act 1993 (CMA) and Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 (CDSA) were amended.

More specifically for FIs that are key in flagging and investigating suspicious transactions and players, as well as restraining the flow of potentially illicit funds, there have been several developments. The Monetary Authority of Singapore (MAS) and Association of Banks in Singapore (ABS) established anti-scam practices for major retail banks in Singapore in 2022, including the following measures:

1. the removal of clickable links in emails or SMSes sent to retail customers;
2. threshold for funds transfer transaction notifications to customers to be set by default at S$100 or lower;
3. delay of at least 12 hours before activation of a new soft token on a mobile device;
4. notification to existing mobile number or email registered with the bank whenever there is a request to change a customer’s mobile number or email address;
5. cooling-off period before implementation of requests for key account changes such as in a customer’s key contact details;
6. default transaction limit for online funds transfers set to S$5,000 or lower;
7. emergency self-service “kill switch” for customers to suspend their accounts quickly if they suspect their bank accounts have been compromised; and
8. facilitating rapid account freezing and fund recovery operations by co-locating bank staff at the SPF Anti-Scam Centre, and enhancing fraud surveillance systems to take into account a broader range of scam scenarios.⁹https://abs.org.sg/docs/library/mas-abs-media-release-on-2-june-2022

The MAS proposes to extend these anti-scam measures to all banks, non-bank credit card issuers, finance companies and relevant payment service providers (responsible FIs) who issue protected accounts¹⁰”protected account” means any payment account that (a) is held in the name of one or more persons, all of whom are either individuals or sole proprietors; (b) is capable of having a balance of more than S$500 (or equivalent amount expressed in any other currency) at any one time, or is a credit facility; (c) is capable of being used for electronic payment transactions; and (d) where issued by a relevant payment service provider is a payment account that stores specified e-money. and not just major retail banks¹¹MAS Consultation Paper on Proposed Enhancements to the E-Payments User Protection Guidelines (October 2023), at para 3.1. It will do so by amending the E-Payments User Protection Guidelines (EUPG) which sets out the MAS’ expectations of responsible FIs.

So Who is Liable?

For many online scams, funds are routed through several accounts to evade detection and once funds are transferred out of Singapore, recovery is challenging. The question then is what recourse do victims have and who should bear the loss?

In the OCBC Phishing Scam, the police reportedly froze 121 local bank accounts and recovered S$2 million lost by victims but many of the scam websites were hosted by webhosting companies based overseas¹²https://www.straitstimes.com/singapore/politics/2m-from-ocbc-scams-recovered-121-local-bank-accounts-frozen-desmond-tan. The MAS took supervisory action against OCBC requiring an independent consultant to review anti-scam systems and processes. The review concluded that there was no cyberattack on its IT systems and the MAS required OCBC to maintain additional regulatory capital amounting to approximately S$330 million in regulatory capital at 31 March 2022¹³https://www.ocbc.com/group/media/release/2022/media-statement-mas-response.page. The MAS also declared that this one-off gesture by the bank was not a general precedent for future cases although it announced the development of a framework to provide clarity on how losses arising from scams should be shared among consumers and financial institutions¹⁴https://www.todayonline.com/singapore/ocbcs-goodwill-payouts-scammed-victims-were-one-gesture-do-not-set-general-precedent-future-cases-mas-1809656. In February 2024, a man linked to the OCBC Phishing Scam was sentenced to 15 months’ jail for being part of a money laundering operation and a member of an organised crime group. He admitted that he and his accomplices had sourced and provided control of bank accounts to various unknown people who were believed to be linked to overseas syndicates and these accounts were used to receive and dissipate funds from multiple victims.

Under the EUPG (which is currently in force), a responsible FI is liable for and should credit the customer’s protected account with the total loss arising in from an unauthorised transaction as soon as possible once the responsible FI has completed its investigation and assessed the customer is not liable for any loss arising from the unauthorised transaction unless the customer’s recklessness was the primary cause of the loss (e.g. they failed to protect access codes or failed to report the unauthorised transaction). The EUPG also specifically spells out that not only is the responsible FI liable for the loss resulting from fraud or negligence by the responsible FI, its employee, agent or outsourcing service provided by also any non-compliance by the responsible FI or its employees with any of its MAS regulatory requirements or its duties under the EUPG.

Going back to the facts of the OCBC Phishing Scam, the guidance under the EUPG would appear to support full payouts being provided to all affected customers. Notably, under the EUPG, “unauthorised transaction” is defined in relation to any protected account, as “any payment transaction initiated by any person without the actual or imputed knowledge and implied or express consent of an account user of the protected account” which appears broad enough to cover falling prey to a phishing scam and sharing your access code. That said, the customer would also be expected to have taken certain minimum steps to protect access to the protected account, e.g. updating the device’s browser to the latest version, patching the device’s operating system with regular security updates, etc.

Shared Responsibility Framework – FIs and Telcos

While it makes sense to look to the banks or relevant payment service providers, e.g. Grab or other e-wallet providers, as holders of your funds to block digital transfers, the contact by a scammer is not usually made through your bank or Grab. It is often through a telecommunications network provider (Telco), e.g. via SMS or on a social media platform or online marketplace.

Acknowledging the role of Telcos in tackling scams (e.g. delivering unsolicited SMSes as in the OCBC Phishing Scam), in October 2023, MAS and IMDA issued a consultation paper proposing the Shared Responsibility Framework (SRF) setting out a framework for the sharing of responsibility between responsible FIs (major banks and relevant payment services providers), telecommunications providers which are mobile network operators (Telcos) and consumers for losses arising from unauthorised transactions made through phishing scams. The SRF and EUPG are meant to complement each other with SRF drawing duties from the EUPG.

The SRF utilises a “waterfall” approach where the responsible FI is expected to bear full losses if any of its duties under the SRF are breached. Next, if the responsible FI has fulfilled all its duties but the Telco (and its duties are drawn from some of IMDA’s issued directions to telcos under Singapore’s Telecommunications Act¹⁵MAS Consultation Paper on Proposed Shared Responsibility Framework (October 2023), at para 5.10) is assessed to have breached its duties under the SRF, then the Telco is expected to bear the full losses. Lastly, if both the responsible FI and Telco have fulfilled their duties under the SRF, then the consumer will bear the full losses.¹⁶MAS Consultation Paper on Proposed Shared Responsibility Framework (October 2023), at para 6.1

The SRF has yet to come into force although this is expected by the end of this year. Again, going back to the OCBC Phishing Scam, the SRF certainly addresses learnings from the incident. However, the SRF is designed to cover phishing scams with a digital nexus (where a consumer is deceived into clicking on a phishing link and entering his credentials on a fake digital platform thereby allowing the scammer to steal such credentials) and with a clear Singapore nexus (which means the impersonated entities must either be Singapore-based or based overseas but offer their services to Singapore residents). While phishing scams are one of the top types of scams in 2023, they only account for 12.8% of all scam types reported in 2023,¹⁷https://www.police.gov.sg/-/media/C0363F7D6965423B94454A98A6FB67B6.ashx, at para 8 and do not fall under the top five scam types in terms of amount lost in 2023.¹⁸https://www.police.gov.sg/-/media/C0363F7D6965423B94454A98A6FB67B6.ashx, at para 9 The SRF explicitly excludes scams where victims authorise payments to the scammer (e.g. investment scams and love scams) (authorised scams), scams where victims were deceived into giving away credentials to the scammer directly through text messages or by non-digital means, and unauthorised transaction scam variants that do not involve phishing (e.g. hacking, identity theft, and malware-enabled variants).¹⁹MAS Consultation Paper on Proposed Shared Responsibility Framework (October 2023), at para 4.4 Malware scams are not included either given their evolving nature and the SRF is intended to deal with common and known scam typologies. That said, the MAS noted that Government agencies and banks are working closely to tackle malware scams and banks have announced that they will take more forward-leaning approach towards assessing goodwill payments for customers affected by malware scams.

For scams not in scope, existing avenues for recourse remain open and these include requesting their FIs to assess their case for goodwill payments or filing a dispute with the Financial Industry Disputes Resolution Centre (FIDREC)²⁰MAS Consultation Paper on Proposed Shared Responsibility Framework (October 2023), at para 4.6.

Social Media Platforms

But does the SRF do enough to address the evolving nature of scams facing Singapore?

For authorised scams, where the victims wish to or in some cases, insist on, authorising transfers to scammers even after concern having been raised by their banks, the powers under the proposed Scams Bill for ROs to be issued to stop payments are welcomed. In such cases, we agree FIs and Telcos should not be made to bear the losses of victims – rather the focus should be on education of the public and individual vigilance.

However, with the proliferation of fake videos on social media platforms, e.g. the deepfake video of Senior Minister Lee Hsien Loong promoting investment products, one wonders whether we are missing a vital player in the whole scam chain – the social media platforms and online market places. SPF expressed concern relating to three Meta products – Facebook, WhatsApp and Instagram – which continue to be over-represented amongst the platforms exploited by scammers to contact potential victims and conduct their scams.²¹ Of the scam cases where scammers contacted victims through social media, the cases that involved Facebook and Instagram constitute about 90.2% of all such cases.²¹

Various legislative measures affecting social media platforms and online marketplaces include:

1. A new Online Criminal Harms Act (OCHA) was passed on July 2023 setting out requirements that online platforms must adopt. Effective 1 February 2024, the authorities are empowered to order swift blocking of fraudulent accounts or content on direct online services to prevent suspected scam accounts from interacting with or reaching Singapore users.²¹https://www.mddi.gov.sg/media-centre/press-releases/measures-to-protect-singaporeans-against-online-scams/ New measures to criminalise abuse of SIM cards are also expected.
2. Two new Code of Practices (COP) have been issued under OCHA. From 26 June 2024, failure to comply with these requirements may lead to issuance of a rectification notice. Failing to comply with a rectification notice is a criminal offence which can result in fines of up to S$1 million.²²https://www.straitstimes.com/singapore/new-codes-of-practice-require-carousell-facebook-to-verify-risky-sellers-advertisers-to-curb-scams
   1. Under the COP for Online Communication Services, platforms like Facebook, WhatsApp, Instagram, Telegram and WeChat are required to proactively detect and fake action against suspected scam and malicious cyberactivities by creating a fast-track channel to receive and act on reports from authorities. By end of 2024, they must implement reasonable verification safeguards to root-out fake accounts by scammers or bots for malicious activities and they must submit an annual report to the authorities.
   2. Under the COP for eCommerce Services, Carousell and Facebook Marketplace will need to verify “risky” sellers for a start and if the number of scams reported on Carousell, Facebook Marketplace and Facebook advertisements do not drop significantly, MHA will require the two companies to verify the identities of all sellers and advertisers by early 2025.

However, to date, we are not aware of requirement for these players to compensate victims should their scam detection and prevention measures fall short.

Individual Vigilance and Collective Responsibility

What the EUPG and SRF also make clear is the role and duties of the customer in scam prevention and detection. There is an emphasis on individual vigilance and responsibility to practice proper cyber hygiene as the view is that full restitution without due consideration of culpability is neither fair nor desirable, as it can erode vigilance and personal responsibility, and lull consumers into complacency.²³

Notwithstanding its limited scope, the SRF is a crucial first step in implementing a reimbursement framework which forms one part of the broader scheme of anti-scam efforts across the board. At the time the SRF was proposed, it was the first to include Telcos in the scam reimbursement frameworks. As Australia has recently announced its proposals to include not just Telcos but also social media platforms in its scam reimbursement framework, it would be interesting to see whether Singapore revisits the scope of the SRF given how rapidly scam typologies and anti-scam practices are evolving. We can certainly see benefits with placing responsibility with whole-of-the-scam chain.

“Cooperation is the thorough conviction that nobody can get there unless everybody gets there.” – Virginia Burden Tower.

Tackling online scams is not simply your problem, my problem but our problem.

The post Tackling Online Scams – Your Problem or Mine? appeared first on The Singapore Law Gazette.

Comity is a legal doctrine necessitated by international politics. Without it, private transnational disputes cannot be easily resolved and can even create tensions between countries. Not surprisingly, a number of common law jurisdictions including Singapore have applied comity in one form or another. However, if they exercise comity but are not reciprocated in kind, they could become disadvantaged. More comity given could mean a loss of sovereignty. It is a Prisoner’s Dilemma. While the development of the doctrine of comity must be constitutional and serve justice, the realities of international relations cannot be ignored.

As a retired diplomat embarking on a career in law, I naturally take an interest in how international relations concepts like comity are applied in judicial decision-making. It is clear that judges in many common law jurisdictions including Singapore¹https://www.singaporelawwatch.sg/About-Singapore-Law/Overview/ch-06-the-conflict-of-laws take comity into account where relevant in arriving at their decisions. Considerations of comity come into play when people with different nationalities and their properties interact across national boundaries. In the event of a dispute, the same set of multinational facts could be adjudicated in more than one country. It is not difficult to imagine that courts in different countries, if they do not exercise comity, could end up with opposed decisions, creating an awkward situation not just for the parties, but also between countries.

Comity appears to be a major factor in three main types of disputes. First, parties may fight over their preferred jurisdiction based on natural forum principles, anti-suit injunction, or using transnational issue estoppel. Second, it could be invoked to enforce foreign judgments including insolvency outcomes. Third, it could be called upon to reject the extension of jurisdiction overseas. That said, comity could be at issue in any type of situation with a foreign element, including criminal cases. As of 10 July 2024, there are 242 reported Singapore judgments on LawNet²LawNet is an online database on case law and other material on Singapore and other jurisdictions. It is maintained by the Singapore Law Academy and is available free to Singaporeans at the court libraries. that refer to “comity”. It is a small number relative to all reported cases, but not insignificant. In this era of globalisation, few cases end up in court without an international element. The law on comity is thus important to law practitioners and citizens alike.

What is comity in the first place? Comity according to the Oxford dictionary is simply courtesy and considerate behaviour towards others. There is comity amongst diplomats on the ground for sure. Comity between nations or international comity is a common practice, perhaps even a value consciously adopted, but there is no agreement that it has become customary international law. If comity has become a norm, it would merely reflect the mutual respect or behaviour consistent with deeper underlying values such as the sovereignty and equality of states. In this sense, comity is no more than an epiphenomenon. Comity cannot be used to predict or explain how nations behave, and not surprisingly has not become a focus of scholars of international relations. Interestingly, most of the literature on comity have been produced by lawyers rather than political scientists.

In the eyes of lawyers and diplomats alike, comity, elastic as the concept may be,³Dicey, Morris and Collins on the Conflict of Laws (Lord Collins of Mapesbury gen ed) (Sweet & Maxwell, 16th Ed, 2022) at para 1-008, cited in Gonzalo Gil White v Oro Negro Drilling Pte Ltd and others (2024) 1 SLR 307 at (70) is key to maintaining amicable and workable relationships amongst countries. International law scholars like to emphasise comity as deference to other countries not required by international law. They tend to speak with one view on comity. However, jurists at the national level have vastly different ideas. A survey of selected and limited commentaries and cases in several common law jurisdictions (England,⁴Airbus Industrie v Patel (1999) 1 AC 119), National Bank of Kazakhstan and others v. Bank of New York Mellon SA/NV, London Branch and others (2020) EWHC 916 (Comm), RiverRock Securities v. International Bank of St. Petersburg (2020) EWHC 2483 British Virgin Islands,⁵https://www.harneys.com/insights/the-thorny-issue-of-illegality-mistake-and-the-unruly-horse-of-public-policy/#:~:text=While%20the%20award%20of%20compound,friendly%20state%2C%20such%20as%20Thailand Cayman Islands,⁶https://www.ogier.com/news-and-insights/insights/careful-consideration-of-comity-when-winding-up-a-cayman-company/ US,⁷Laker Airways Ltd v Sabena, Belgian World Airlines (1984) 731 F 2d 909 Canada,⁸Kevin W. Gray, The Most Canadian of Virtues: Comity at the Supreme Court of Canada (https://ssrn.com/abstract=3333599) Australia,⁹Schultz, T., & Mitchenson, J. (2016). Navigating Sovereignty and Transnational Commercial Law: The Use of Comity by Australian Courts. Journal of Private International Law, 12(2), 344-378 (https://doi.org/10.1080/17441048.2016.1206704) India¹⁰International Insolvency Review (2023) 32:228–252 (wileyonlinelibrary.com/journal/iir), Alcon Electronics Private Limited v. Celem SA of FAO 34320 Roujan, France and Another (2017) 2 SCC 253 and Singapore¹¹The “Reecon Wolf” (2012) 2 SLR 289, Lakshmi Anil Salgaocar v Jhaveri Darsan Jitendra (2019) 2 SLR 372, Gonzalo Gil White v Oro Negro Drilling Pte Ltd and others (2024) 1 SLR 307, Esben Finance Ltd and others v Wong Hou-Lianq Neil (2022) 1 SLR 136, Beckkett Pte Ltd v Deutsche Bank AG (2011) 2 SLR 96, Merck Sharp & Dohme Corp (formerly known as Merck & Co, Inc) v Merck KGaA (formerly known as E Merck)
(2021) 1 SLR 1102) show that comity is used variously as: a consideration, concept, principle, judicial attitude, presumption in interpretation, evidential rule, legal tool, doctrine and public policy.

To elaborate further, comity could just be one of many factors to consider when deciding a case. At the lower end of the scale, as it were, it may not even be relevant. In the Singapore case of Gonzalo Gile White v Oro Negro Drilling [2024] 1 SLR 307, the appellant argues that the doctrine of comity requires Singapore courts to give effect to a Mexican judgment. However, the Court of Appeal took the view that comity is not a factor in this case where the foreign judgment was obtained contrary and after a local interim injunction against any foreign proceeding. At the other extreme, comity can be the decisive factor. In the English case of Airbus Industrie GIE v Patel and Others [1999] 1 A.C. 119, the House of Lords held that comity is the reason why it would not stay the proceeding in Texas, even though Texas is not the natural forum and proceeding there could be oppressive. In most other cases, such as The “Reecon Wolf” [2012] 1 SLR 289 in Singapore, courts have applied comity along with other factors to stay an action in favour of foreign proceedings. In construing a statute, the Australian Federal Court in Trade Practices Commission v Australian Iron and Steel Pty Ltd (1989) 22 FCR 305 at [41] recalled an old prima facie rule: “It is always to be understood and implied that the legislature of a country is not intending to deal with persons or matters over which, according to the comity of nations, the jurisdiction properly belongs to some other Sovereign or State.” Comity thus features as an important rule in interpretation.

The many faces of comity however do not make the concept slippery and aimless. On the contrary, each jurisdiction appears to be explicating and evolving its understanding and application of comity in certain direction, some more systematically than others. While this is not the place to attempt to identify where each jurisdiction currently stands in their journey, it is perhaps the occasion to propose a high-level strategic framework for locating all the possible compass points of their destination. As a starting point, more comity means less extra-territoriality, and to some, that could mean less sovereignty. Jurisdictions necessarily differ in the way they weigh comity against sovereignty. While sovereignty takes priority in every jurisdiction, it is also a matter of degree as to how much sovereignty could be traded for comity, in practice if not in principle.¹²For a closer analysis, including the view that comity is an extension of sovereignty, see (74)-(79) of Gonzalo Gil White v Oro Negro Drilling Pte Ltd and others (2024) 1 SLR 307 At the end of the day, there are just two polar opposite positions that a jurisdiction can move towards. On one end is the expansive and liberal approach where a country rarely defers to foreign decisions or proceedings but aggressively asserts its own jurisdiction overseas. At the other end of the spectrum is a conservative and restrained position where a country often yields to foreign decisions. I refer to them as minimum comity and maximum comity respectively below.

Let us pause for a little thought experiment. If all countries (and their judiciary) practise maximum comity, which is to defer to other countries, there could be a positive-sum outcome, and every country benefits. On the other hand, if all countries practise minimum comity, there will be a negative-sum outcome, and every country loses. If some countries go maximum while other do minimum, there will be sub-optimal outcomes. This is the classic Prisoner’s Dilemma.

In a multilateral world, where every country is part of the same community, comity is a public good in many senses. Country A, say Singapore, will then be located in the box with outcome of (3,3). However, in a fragmenting world, Country A could easily end up in (0,4) or (4,0). While one country defers or exercises maximum restraint to stay all proceedings, the other country could chose to minimise comity and take every opportunity to exercise jurisdiction; the outcome is a zero-sum game: there would be a winner and a loser. To avoid becoming the loser, every country may end up beggaring its neighbour with minimum comity. As a result, both Country A and B will end up in (-1,-1), where neither wants to be in the first place. As is well known in strategic studies and game theories, a Prisoner’s Dilemma is not easily overcome. Being transparent is not enough. Being principled also does not solve the problem. There is no sweet spot between maximum and minimum comity that can serve a country well in all geopolitical situations, especially in a world with increasing tensions, not to mention a VUCA¹³volatile, uncertain, complex, ambiguous world driven by AI.

Conclusion

In concluding, I hope that this little inter-disciplinary exercise between law and diplomacy has generated some interest in the legal application of the doctrine of comity. From here, there are several possible lines of enquiries or follow-ups. One is to analyse and write up the case law on comity in Singapore. Arguably, comity is more important to small countries than superpowers. Another is to compare how selected common law jurisdictions are similar or different in their use of comity. A third is to understand how civil law jurisdictions view and apply comity if at all. Fourth is to develop indices to gauge where jurisdictions stand on comity and how they are trending between maximum and minimum comity. It is natural for lawyers to focus on what they know best which is the law. But the law, in my view, is not an end in itself, but a means to some larger goals. Let’s call it sustainable justice for now. With my old lenses as diplomat, I can’t see the law as something insulated from global politics. The idea of comity exists to facilitate interactions amongst nations and their people. The availability of comity, whether fat (in the sense of taking an expansive position) or thin (a restrictive position), should depend not just on judicial reasoning around justice and the law, but also on the dynamics of diplomacy including the Prisoner’s Dilemma.

The author wishes to thank K&L Gates Straits Law LLC and its then Managing Director/Partner Sreenivasan Narayan S.C. and Prof. Tommy Koh, Ambassador-at-Large, the Ministry of Foreign Affairs for their feedback. The views and errors are his.

The post The Doctrine of Comity in Singapore Law – A Trainee’s Perspective appeared first on The Singapore Law Gazette.

Open-source software is widely used by companies, and now they are adopting “open source” AI models as well. Just last month, the Open Source Initiative released a definition of “open-source AI”. This article thus examines what are “open-source AI models” and how much they need to be “open” about – for example, balancing the need to release the training data to understand how model works with IP and data protection issues. It also examines what new risks they pose compared to “traditional” open-source software and closed AI models. Finally, we look at what measures are being instituted to mitigate the risks and ensure the models’ safe use, such as new types of licences (known as “Responsible AI Licences”), and regulatory controls in legislation and ongoing monitoring. For example, are open-source AI models subject to lighter regulatory regimes since they are distributed for free, and how is this balanced against the need for transparency on the model’s capabilities and development process?

The topic of “open-source AI models” is of interest because Singapore’s Infocomm Media Development Authority (IMDA) proposed a “shared responsibility” approach in May 2024, where responsibility should be allocated amongst the players in the AI development chain¹For example, model developers, application deployers (who develop solutions or applications that make use of AI technology), application deployers (who provide the AI solutions to end-users) and cloud service providers (who provide the platform to host the AI application). according to the level of control they have, so that they can take the necessary action to protect end-users.²See the Model Governance Framework for Generative AI (30 May 2024) (“Model Gen-AI Framework”) at page 7. The IMDA has indicated that when apportioning responsibility, we “may also need to consider different model types (e.g. closed-source, open-source or open-weights) given the different levels of control that application deployers have for each model type”³See the Model Gen-AI Framework at page 7., and that the details of how these responsibilities will be allocated are in the midst of being worked out.⁴See the Model Gen-AI Framework at footnote 11.

We will thus explore the different types of models where they exist on a spectrum, described by IMDA as⁵As defined in the Model Gen-AI Framework at footnotes 9 and 10.:

1. Closed-source models have all information about them kept private by the developer;
2. Open-weights models make available pre-trained parameters/weights of the model, but not the training code, dataset, methodology, etc.
3. Open-source models make available the full source code and information required for re-training the model from scratch, include model architecture code, training methodology and hyperparameters, original training dataset and documentation.

Part 1: What does it take to be an “open source” AI model? What are the difficulties in considering them “open-source”’ and how can these issues be overcome?

In this article, an “AI model” is created when algorithms (as a set of steps/instructions to reach an outcome) are applied to datasets to analyse the data, leading to an output that is examined and the algorithm iterated, until the most appropriate model emerges.⁶The definitions are based on (3.20) and (3.21) of the Singapore’s Model AI Governance Framework, as well as the definition from IBM at https://www.ibm.com/topics/ai-model. The IBM differentiates that “algorithms are procedures, often described in mathematical language or pseudocode, to be applied to a dataset to achieve a certain function or purpose” and “models are the output of an algorithm that has been applied to a dataset”. An AI model is thus what is “learnt” by the algorithm from the data. Algorithms can be expressed in, for example, mathematical language, pseudocode or programming languages.⁷https://www.techtarget.com/whatis/definition/algorithm

To understand the concept of “open-source AI models”, we will draw on concepts from open-source software, and their differences will come to light in the paragraphs below.

By way of background, open-source software is software where the source code (i.e. the instructions for a computer to execute, written in languages such as Python, C++ and Java) is made available to anyone to inspect, modify and enhance.⁸https://opensource.com/resources/what-open-source It is in contrast to “proprietary” or “closed-source” software where only the person or organisation who created the source code can access and modify it.⁹https://opensource.com/resources/what-open-source

For software to be considered open-source, the Open Source Initiative (OSI) defines 10 criteria to be met¹⁰See the definition at https://opensource.org/osd (last modified on 16 February 2024). (where the most relevant are set out below):

1. the program must include source code, and must allow distribution in source code as well as compiled form;
2. the license must allow modifications and derived works, and must allow them to be distributed under the same terms as the license of the original software;
3. the licence must not discriminate against any person or group of persons;
4. the license must not restrict anyone from making use of the program in a specific field of endeavour – e.g. it may not restrict the program from being used in a business, or from being used for genetic research.

The two criteria mentioned in paragraphs (c) and (d) are most affected when we look at “open-source AI models” and new licence terms developed for them:

1. Issue 1: how much of the model and its associated/underlying information (e.g. the training data) must be shared so that the user can understand how it works?
2. Issue 2: what happens if the licence restricts how the AI model can be used, given the growing adoption of “Responsible AI Licences” with use restrictions?

The IMDA has also highlighted that “[t]oday, however, there is a lack of information on the approaches being taken to ensure trustworthy models. Even in cases of “open-source” models, some important information like the methodology and datasets may not be made available.”¹¹See the Model Gen-AI Framework at page 13. Therefore, can we still say that an AI model is ‘open source’ if key criteria are not met as we would then be ‘watering down’ the requirements for open source models? In exploring these issues, we will also look at the positions taken by recognised institutions like the OSI, as well as regulators in the EU and USA.

Issue 1: How much must be shared to allow meaningful use and modification of the model?

Unlike open-source software, with AI models, more than just the source code is needed to understand how the model works. There is no consensus on exactly what other components must be shared for an AI model to be considered as open-source, but it generally includes the following:¹²See page 11 of “Open Sourcing Highly Capable Foundation Models”, Centre for the Governance of AI (“CGAI Report”), accessible at https://cdn.governance.ai/Open-Sourcing_Highly_Capable_Foundation_Models_2023_GovAI.pdf, referencing training code, model weights and training data. See also page 3 of CNIL, “Open source practices in artificial intelligence” (July 2024) (“CNIL Report”), accessible at: https://www.cnil.fr/sites/cnil/files/2024-07/in-depth_analysis_open_source_practices_in_artificial_intelligence.pdf, which states: “Openness in AI generally does not refer to the publication of the source code related to the use or development of a model, although this may be part of it, but rather to the publication of the model and the weights, or parameters, that constitute it.”

1. Training code – the instructions that guide the model training, optimising the model weights to improve the model’s performance on the training tasks (this is distinct from inference code, which implements the model after it is trained and allow it to perform tasks like writing and classifying images)¹³See the definitions on page 11 of the CGAI Report.
2. Training data – you can’t just look at the code to understand how the model works and how to modify it, as you must also know what kind of data it was trained on. This thus opens up a package of legal issues not found in traditional open-source software: there are limitations to sharing training data, such as IP, privacy and confidentiality concerns, which will be exacerbated if all the training data is shared as-is.

   Practically, model developers may also be reluctant to disclose all their training data if it would expose the fact they trained on third-parties’ copyrighted material.¹⁴The Verge, “Open-source AI must reveal its training data, per new OSI definition”, 29 October 2024, accessible at: https://www.theverge.com/2024/10/28/24281820/open-source-initiative-definition-artificial-intelligence-meta-llama Even if they had obtained a licence to use that material for training, that licence may not extend to sharing a copy of that material with the wider public.

   However, it is also not the case that developers necessarily need access to all the training data to modify the AI model – what is helpful is detailed information about the dataset (the dataset building process rather than the dataset), such as where the data was from, so that they can build similar datasets to improve on the existing datasets.¹⁵See the interview with OSI’s Executive Director Stefano Maffulli at TechBrew, “The divide over open-source AI, explained” (18 June 2024), accessible at: https://www.emergingtechbrew.com/stories/2024/06/18/what-is-open-source-ai Hence, the issue is how much of the training data must be made available.

3. Model weights – these are the learned connections between the material the model is trained on (numerical values that influence how much each factor has over an output, that are optimised during training).¹⁶See page 8 of the NTIA Report on “Dual-Use Foundation Models with Widely Available Model Weights” (July 2024) (“NTIA Report”), which explains AI model weights simply: “An AI model processes input – such as a user prompt – into a corresponding output, and the contents of that output are determined by a series of numerical parameters that make up the model, known as the model’s weights. The values of these weights, and therefore the behaviour of the model, are determined by training the model with numerous examples. The weights represent numerical values that the model has learned during training to achieve an objective specified by the developers.” These are crucial to determine the effectiveness of model, but are not necessarily covered under traditional open-source licences as they are not source code.

To this end, the OSI has recently released a definition of ‘open source AI’ (in October 2024)¹⁷https://opensource.org/ai/open-source-ai-definition, to cover these required components. Regardless of how the offering is characterised (as an AI system, model or weights), it must be made available under terms and in a way that grants users the freedom to use, study, modify and share the system (with or without modifications) for any purpose.

The OSI elaborates that in order to exercise these freedoms, the user must have access to the “preferred form” to make modifications to the system or its components, which includes the following elements:

1. Training data – where there must be “sufficiently detailed information about the data used to train the system so that a skilled person can build a substantially equivalent system”¹⁸https://opensource.org/ai/open-source-ai-definition. This must include a description of all data used for training (including unshareable data due to privacy and copyright issues)¹⁹The OSI has made it clear that some training data can be excluded due to privacy and copyright issues. Otherwise, if there is unfettered access to all training data, then what is open-source AI will be reduced to a very small niche of AI that is trained only on open public data – see https://hackmd.io/@opensourceinitiative/osaid-faq, disclosing the provenance of the data, its scope and characteristics, how it was obtained and selected, labelling procedures, as well as data processing and filtering methodologies. It must also include a list of where to obtain publicly available training data and data from third parties.
2. Code (both training code and inference code, and including code used for processing and filtering data);
3. Model weights.

Nevertheless, it is very much open to interpretation what training data must be shared to meet the definition, given that the parallel system need only be “substantially equivalent”, and it would depend on the relative “skill” of the person trying to reproduce the system.²⁰See commentary at https://www.juliaferraioli.com/blog/2024/on-open-source-ai/ Also, even if the developer discloses the third-party data source, the subsequent user of the model may not be granted the same permissions by the third party. ²¹See commentary at https://www.juliaferraioli.com/blog/2024/on-open-source-ai/ It is understandable that sensitive and confidential data cannot just be openly shared, but where the balance will be struck for this definition remains to be seen in practice. The French data protection regulator has suggested that synthetic data could be published instead, or subsets that would be representative of the full dataset (where any personal data has been removed).²²Page 11 of the CNIL Report

Issue 2: Can you limit what the model can be used for?

The second issue is not one that is inherent in the model (e.g. how much information is made available, as discussed above), but is a feature of the licence attached to it. This limits the freedom to make use of the model in any field of endeavour.

Responsible AI Licences (RAIL)²³See, for example, the BigScience RAIL Licence v1.0, available at https://huggingface.co/spaces/bigscience/license that have use restrictions are gaining traction,²⁴It is not compulsory to use RAIL for AI models – there are also models licensed under traditional open-source licences like MIT and Apache. See the analysis in McDuff et. al., “On the Standardization of Behavioral Use Clauses and Their Adoption for Responsible Licensing of AI”, accessible at https://arxiv.org/pdf/2402.05979. where the use restrictions not only bind the organisation that uses/builds on the model, but the organisation must also integrate these restrictions in its subsequent licence, so anyone using the modified model is also bound.

Some of the restricted uses – e.g. not to use the model to “generate or disseminate verifiably false information with the purpose of harming others” – reflect what the law already is, hence the overwhelming majority of users would not use the model in that manner, even without the licence restriction. However, some RAILs can contain unique and specific purposes – e.g. not “to provide medical advice and medical results interpretation”,²⁵See paragraph (l) in Attachment A to the BigScience RAIL Licence v1.0., in contrast to the responsible AI licence for GRID, available at https://github.com/ScaledFoundations/GRID-playground/blob/main/LICENSE so users must review the licence terms very carefully. Nevertheless, if someone is going to use an AI model for nefarious purposes, the prospect of breaching a licence condition is not going to stop them.

Separately, there are also licences that restrict who can use the model – e.g. if the person has more than 700 million monthly active users for their products/services, they must request for a permission to use the model, which the developer can decide not to grant.²⁶See for example https://github.com/meta-llama/llama-models/blob/main/models/llama3_2/LICENSE This needs to be reconciled with the OSI criteria where the license must not discriminate against any person or group of persons (even if they are competitors).

Taking a pragmatic approach to promoting the safety of AI models regardless of how “open” they are

At the end of the day, what is the practical effect of coming up with a definition for “open source” AI models? If there are no tangible benefits to meeting the OSI definition (or any other emerging definition set to become an industry standard), then there are no incentives for companies to meet it, as it would involve them releasing a sizeable amount of training data together with their AI model, and possibly exposing themselves to liability when they make it public that they have trained their model on copyrighted materials without seeking permission from the rights holder.²⁷Especially since the scope of the fair use and text and data mining exceptions are still pending before the courts.

Furthermore, some industry players have expressed the view that there is no single open-source AI definition as it would depend on the nature and purpose of the AI model.²⁸See the comments by Meta spokesperson Faith Eischen, as reported in The Verge, “Open-source AI must reveal its training data, per new OSI definition” (29 October 2024), accessible at: https://www.theverge.com/2024/10/28/24281820/open-source-initiative-definition-artificial-intelligence-meta-llama They would support a definition of open source that “most suits what they’re pushing at the moment”.²⁹Interview with GitHub’s Chief Legal Officer, “How big new AI regulatory pushes could affect open source” (17 September 2024), accessible at: https://www.emergingtechbrew.com/stories/2024/09/16/ai-regulations-open-source-development-shelley-mckinley-github. See also the view expressed by MIT Technology Review in “We finally have a definition for open-source AI” (22 August 2024), available at: https://www.technologyreview.com/2024/08/22/1097224/we-finally-have-a-definition-for-open-source-ai/, where they said “(d)escribing models as open source may cause them to be perceived as more trustworthy, even if researchers aren’t able to independently investigate whether they really are open source.”

On the regulatory front, the EU AI Act does not define “open-source” AI, but “targets certain categories of licences”,³⁰As described by the CNIL (see page 2 of the CNIL Report). covering licences for software and data, including models, “that allows them to be openly shared and where users can freely access, use, modify and redistribute them or modified versions thereof”.³¹See Recital 102 of the EU AI Act. Unlike the OSI definition, it does not require training data to be shared³²Even in the context of general-purpose AI models, recital 102 does not reference the extent of training data required – “General-purpose AI models released under free and open-source licences should be considered to ensure high levels of transparency and openness if their parameters, including the weights, the information on the model architecture, and the information on model usage are made publicly available.” to be considered open-source. But in the context of the EU AI Act, this makes sense because there are reduced obligations for certain AI models that are not monetised and fall under a “free and open-source licence”, so the definition must be one without room for ambiguity (although one could still argue one cannot freely modify the model without access to a certain amount of training data).

The USA also avoided using the term “open source”, instead calling them “dual-use foundation models with widely available model weights”.³³See the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, issued on 30 October 2023. Its emphasis is on whether model weights are shared, the capacity of the model, as well as the resultant risks posed, rather than whether any training data must be shared and whether there can be any restrictions on downstream uses of the model, as that would be “meaningless when addressing threats posed by sophisticated threat actors who are already operating outside the law and thus don’t care about licence terms”.³⁴David Evan Harris, “How to Regulate Unsecured “Open-Source” AI: No Exemptions”, accessible at: https://www.techpolicy.press/how-to-regulate-unsecured-opensource-ai-no-exemptions/

Ultimately, the reality is that any person can open up access to their AI models without meeting the OSI open-source definition, under any licence terms they choose. Hence, searching for a definition may not matter as much as identifying what is shared in the case of each AI model made available, as the degree of sharing poses different risks (which we will address in Part 2).

In the next Parts, where “open-source” AI models is used, it will refer to the spectrum of “open-source” and “open-weights” models, and not solely to models which conform to the OSI definition. An asterisk will be used to mark out such usage. A better term may in fact be “unsecured” AI models (proposed by the Centre for International Governance Innovation), which “convey[s] not only the literal choice to not secure the weights of these AI systems but also the threat to security posed by these systems”.³⁵David Evan Harris, “Not Open and Shut: How to Regulate Unsecured AI” (6 September 2024), accessible at: https://www.cigionline.org/articles/not-open-and-shut-how-to-regulate-unsecured-ai/

Part 2: What are the risks posed by open-source* AI models?

We will cover the risks from the perspective of both users and developers of the models. We will not cover risks of erroneous, biased or toxic output, deepfakes, or leakage of confidential training data, as these concerns apply regardless of whether the model is open-source* or not.

Persons who use or modify the models released

A key concern is that if users do not have access to the training dataset, they will not know exactly what the model is trained on, which can be an issue where it comes to assessing the quality of the model and its appropriateness for the use case.³⁶“Challenges and limits of an open source approach to Artificial Intelligence” at page13, accessible at https://www.europarl.europa.eu/RegData/etudes/STUD/2021/662908/IPOL_STU(2021)662908_EN.pdf. Nevertheless, model cards are raised as a solution to this issue (which we will discuss in Part 3).

Also, it is not clear who bears liability if the model released was trained on copyrighted material by the developer, which the user used/made modifications to, as unlike a proprietary model (where the developer can offer an indemnity for IP infringement), open-source* models are released without any warranties or indemnities relating to IP infringement.

There can also be cybersecurity vulnerabilities inherent in the model, although this is not unique to open-source AI models.³⁷Also found in proprietary AI models, as well as in other open-source software.

Persons who release the open-source* models (i.e. developers)

First, developers are concerned about downstream misuse of their model. When the model weights are released, it becomes easier for people to circumvent safety features (e.g. content filters, blocklists and prompt shields to prohibit certain prompts) in the model.³⁸Page 14 of the NTIA Report. This is also because many filters are implemented post-hoc as part of the model’s inference code, “rather than fundamentally changing the behaviour of the model itself”.³⁹Page 12 of the CGAI Report. It is thus a matter of removing that one or two lines of code to make the model perform in undesired ways.⁴⁰See the anecdotal example given page 12 of the CGAI Report.

Second, once the model is released, the developer cannot “take it back” even if the model has serious flaws, as users would have a copy of that model/weights within their own computers/servers and can keep going back to it. The developer also loses control over how the model is used, as if the model was instead a closed one accessed through an API, the user’s access could be restricted remotely by revoking the access key,⁴¹See the FAQs at https://bigscience.huggingface.co/blog/the-bigscience-rail-license and the developer can also monitor the kind of prompts that go to the model and how it is being used.

Part 3: How do we mitigate the risks of open-source* AI models, looking at regulatory approaches to complement RAIL licences and other best practices?

We will first cover how regulators are looking to control the development and use of open-source* AI models. Their position can generally be summed up as: developers still have responsibilities and standards to develop against so that the model remains safe, even if they release the model without charge, and under circumstances where people can freely use and adapt it.

At the outset, it is important to note that not every open-source* AI model will be restricted or regulated. The EU and US are only going to target the most powerful models (in terms of computing power), which pose serious public safety and national security risks. We will explore the positions across Singapore, EU and the US, and then conclude with identifying general takeaways for developers/deployers.

Singapore

The position in Singapore is still nascent and references open-source* models without distinction of their capabilities (unlike the EU and US). We had earlier discussed IMDA’s proposed “shared responsibility” approach, where responsibility is allocated based on the level of control over the model development. As model developers are “the most knowledgeable about their own models and how they are deployed”, they (regardless of whether the model is released open-source, open-weights or closed-source) are expected lead the ongoing/emerging discussions on how responsibilities should be allocated.⁴²Page 8 of Gen-AI Model Framework. The IMDA also recommends that people who download open-source or open-weights models should do so “from reputable platforms to minimise the risk of tampered models”⁴³Page 8 of Gen-AI Model Framework..

The Cybersecurity Agency of Singapore also issued Guidelines on Securing AI Systems in October 2024, recommending that persons downloading AI models should evaluate these open-source models, such as by running code checking, or checking against a database with vulnerability information.⁴⁴See 2.1.9 of the CSA Companion Guide on Securing AI Systems.

USA

The US presently takes a relaxed approach towards open-source* AI models with little regulation,⁴⁵Nicole Kobie, “Open-source AI just got a major seal of approval from US regulators – but will it push developers in the right direction?” (31 July 2024), accessible at: https://www.itpro.com/software/open-source/open-source-ai-just-got-a-major-seal-of-approval-from-us-regulators-but-will-it-push-developers-in-the-right-direction but the Government will shape future strategy based on real-life issues that surface.

The Executive Order on “Safe, Secure and Trustworthy Development and Use of AI” (October 2023) directed the holding of public consultations to determine the appropriate policy and regulatory approaches for “dual-use foundation models with widely available model weights”.⁴⁶See section 4.6 of the Executive Order. This reference to “dual-use foundation models” means that the EO only targets the most powerful AI models — which contain at least 10 billion parameters⁴⁷Parameters are variables the model learns during training and are used to make predictions and decisions – see https://tedai-sanfrancisco.ted.com/glossary/parameters/. and can perform tasks that pose a serious risk to security, national economic security, national public health or safety.⁴⁸See the definition of “dual-use foundation model” in section 3(k) of the Executive Order. Separately, there are also reporting requirements for models trained on a quantity of computing power greater than 10²⁶ FLOPS, which can include dual-use foundation models (see section 4.2 of the Executive Order).

Following from the public consultations, the NTIA recommended⁴⁹See the “Dual-Use Foundation Models with Widely Available Model Weights” report (NTIA Report) issued in July 2024. that the Government should not restrict the availability of such models for now, such as by prohibiting them from being distributed, or require a person to have a licence before they can access the model weights. However, they also reserved the Government’s position to restrict certain classes of model weights in the future.⁵⁰Pages 36 and 40 of the NTIA report.

It also recommended that the Government should develop the capacity to evaluate such models for evidence of unacceptable risk, and quickly respond to such risks. The Government should take an evidence-based approach to uncovering such risks (instead of merely hypothesising), such as by looking at audit reports, issues encountered by model developers, model evaluations, and red-teaming results.⁵¹Pages 37 and 40 of the NTIA report.

EU

The EU AI Act adopts a tiered approach towards open-source* AI models:

1. The bulk of open-source* AI models (described in the Act as released under a “free and open-source licence”⁵²See recital (102) of the EU AI Act which defines a “free and open-source” licence as one that allows the model “to be openly shared and where users can freely access, use, modify and redistribute them or modified versions thereof”. It broadly matches the OSI definition of what is ‘open source AI’ in terms of freely accessing, using, modifying and redistributing, but unlike the OSI definition it is silent on whether training data has to be shared to be considered ‘open-source’.) – except for general purpose AI (GPAI) models discussed at paragraph (b) below – are not subject to regulation.⁵³See Article 2(12) of the EU AI Act. Instead, the developers are “encouraged to implement widely adopted documentation practices, such as model card and data sheets as a way to accelerate information sharing along the AI value chain”.⁵⁴See recital (89) of the EU AI Act.

   Specifically, non-GPAI open-source* AI models will only be regulated if:

1. 1. they are high-risk AI systems (where they are subject to the same requirements as closed high-risk counterparts);
   2. they are banned or prohibited AI systems under Article 5;
   3. they are AI systems that interact directly with natural persons (e.g. emotion recognition systems) as described in Article 50 – in which case there are transparency obligations (e.g. informing natural persons that they are interacting with an AI system unless it is obvious to a reasonably well-informed person; watermarking of outputs).

2. For GPAI models (i.e. AI models trained with a large amount of data, have significant generality and are capable of performing a wide range of distinct tasks – similar what the USA calls “foundation models”)⁵⁵As defined in Article 3(63) of the EU AI Act. — their treatment depends on the following:
   1. If the model is (a) not monetised (e.g. not offered for a fee, no charge for technical support); (b) released under a “free and open-source licence”; and (c) does not “presents systemic risks” (characterised by its technical capabilities where the cumulative amount of computation used for its training is greater than 10²⁵ FLOPS)⁵⁶See Article 51(2) of the EU AI Act., the developer only has to provide a summary of the content used for model training and comply with EU copyright law.⁵⁷See Article 53(2). Notably, the EU AI Act requires compliance with copyright law but doesn’t mention how to comply, so it is still an open question as to whether fair use and text and data mining exceptions apply to scraping data from the Internet to train the AI model. A GPAI model that does not fulfil criteria (a) or (b) will require maintaining technical documentation to be provided to the authorities upon request, and making available information about the model to persons who will integrate it into their own systems.
   2. However, if the model “presents systemic risks”, then regardless of whether it is monetised and the type of licence it is released under, it will be subject to the full suite of obligations across Articles 53 to 55, including the need for technical documentation, maintaining cybersecurity protections and reporting any serious incidents arising to the EU AI Office.

Best practices

From the examples above, we can see that how open-source* AI models will be evaluated and regulated is still a work in progress. However, there are safeguards (from legislation, guidelines and industry practice) that model users and developers can adopt now to ensure that open-source* AI models are developed, released and used safely. Testing and evaluation of the models (both before release, and after modifying them) would be essential regardless of whether the model is open-source*, so these will not be discussed here.

In the case of persons using/building on open-source* models, they should be able to answer the question of “do you know what you are using”:

1. Select models where the technical details, summaries of training data, intended uses, and performance on evaluation and red-teaming efforts are disclosed, over models that don’t – model cards can help with providing this information;⁵⁸Page 9 of the NTIA Report. See also Anokhy Desai, “5 things to know about AI model cards”, accessible at: https://iapp.org/news/a/5-things-to-know-about-ai-model-cards. See also a sample model card at https://ai.google.dev/gemma/docs/model_card_2 which describes how the model performs on evaluations, the risks/limitations of the model and a general overview of the types of data it was trained on.
2. Download models from reliable sources to minimise risks of tampered models;⁵⁹Page 8 of Gen-AI Model Framework.
3. Read licence terms carefully to comply with permitted uses of model.

On the other hand, model developers should consider how much of the model and related information to share:

1. Vary levels of access to model weights to “vetted” persons as an alternative to release to all persons;⁶⁰Page 9 of the NTIA Report, and page 25 of the CGAI Report on gated download access.
2. Ensure models are tested properly before release to patch vulnerabilities, because once the model and its weights are released the developer cannot “recall” it;⁶¹Page 19 of the GCAI Report.
3. Have API access to the model (akin to “dialling-in” to the model) instead of releasing it for download, so that the developer can cut off access to the model as needed;⁶²Pages 19 and 32 of the GCAI Report. and
4. Use RAILs to limit downstream use, although effective monitoring and enforcement remains an issue.

The views expressed in this article are the personal views of the author and do not represent the views of Drew & Napier LLC.

The post Open-source AI Models – What Are They, and Closing the Safety and Liability Gaps appeared first on The Singapore Law Gazette.

Introduction

Open-ended fair use and categorical fair dealing provisions both temper the exclusive rights of copyright owners to foster further creative expression by permitting secondary uses of copyrighted works, providing the primary mechanism to balance copyright protection with the broader public interest of fostering creative expression.¹See, eg, Campbell v Acuff-Rose Music, Inc 510 US 569 at 579 (1994). A number of jurisdictions also provide definitional statutory exceptions that do not require a balancing of factors, that is, it is a permitted use of copyrighted works for specific purposes so long as particular conditions are satisfied; the text and datamining (TDM) exception – called the computational data analysis exception in Singapore – is one such example. Today, the breathtaking pace of technological developments has perhaps left copyright law struggling to keep up, as traditional understandings of various copyright doctrines and legislative mechanisms are generally unable to match this speed. In the article in the Harvard Law Bulletin, it was commented that “[w]hile embracing technological change is part of the human experience, when the pace of that change seems to ramp up exponentially, the rules and regulations meant to keep that technology in check can fall further and further behind.”²Colleen Walsh, “How to think about AI: Delving into the legal and ethical challenges of a game-changing technology”, Harvard Law Bulletin, Summer 2023, 21 at 22. This two-part article discusses the fair use doctrine in Singapore in relation to internet search engines and the use of works for training generative artificial intelligence applications (GAIAs) (e.g. ChatGPT, Midjourney, Stable Diffusion).

Fair Use Codified in Copyright Act 2021

The open-ended fair use provision in the US³Copyright Act 17 USC (US) § 107 (1976). operates as a general exception that courts apply on a case-by-case basis; this is explicitly adopted in Singapore in section 191 of the Copyright Act 2021 which enumerates a non-exclusive list of four factors to be weighed to determine whether an unauthorised use is fair, and hence a permitted use.⁴It replaces the previous open-ended fair dealing in s 35(2) of the Copyright Act (Cap 63, 2006 Rev Ed). Section 191 of the Copyright Act 2021(2020 Rev Ed) provides:Subject to sections 192, 193 and 194, all relevant matters must be considered in deciding whether a work or a protected performance (including a recording of the performance) is fairly used, including —(a) the purpose and character of the use, including whether the use is of a commercial nature or is for non‑profit educational purposes;(b) the nature of the work or performance;(c) the amount and substantiality of the portion used in relation to the whole work or performance; and(d) the effect of the use upon the potential market for, or value of, the work or performance. It seems from the announcements by the Government that by renaming the open-ended fair dealing provision as “fair use”,⁵Ministry of Law & Intellectual Property Office of Singapore, Singapore Copyright Review Report (17 January 2019) at para 2.6.8 and Conclusion 6(b). Singapore’s copyright law is poised to be more future ready and able to better tackle how the copyright balance should be struck between authors/owners and the users/public.

The rapid technological developments pose a number of challenges for fair use in Singapore. First, the kaleidoscope of infringing activities made possible by technology makes it difficult to articulate ex ante clear rules as new generative artificial intelligence (AI) uses and capabilities, search engines, social media apps, time-shifting/format-shifting capabilities and prevalent online community behaviour often present novel scenarios for the application of copyright law. Second, these activities also severely test the multi-factor-inquiry of an open-ended fair use approach by requiring courts to make critical policy choices involving technological innovations such as determining the degree of public benefit in a secondary use and how likely it would supplant the commercial market for the original or its derivatives.⁶For example, Google LLC v Oracle America, Inc, 141 S Ct 1183 at 1207 (2021); Capitol Records, LLC v ReDigi Inc, 910 F.3d 649 at 662 (2nd Cir. 2018); Fox News Network, LLC v TVEyes, Inc, 883 F.3d 169 at 179 (2nd Cir. 2018) and Authors Guild v Google, Inc, 804 F.3d 202 at 223 (2nd Cir. 2015). Third, to what extent should US jurisprudence on technology-related fair use decisions influence the deliberations in Singapore?

Singapore Case Law on Fair Use

The Court of Appeal in Global Yellow Pages Ltd v Promedia Directories Pte Ltd⁷(2017) 2 SLR 185. concluded that the defendant’s scanning and photocopying of the Business Listings was fair dealing, and the court also provided significant guidance on the application of the fair dealing provision under section 35(2) of the Copyright Act.⁸Cap 63, 2006 Rev Ed. Sundaresh Menon CJ hinted at the willingness of the local courts to take greater cognisance of US and Australian decisions in this area:⁹Global Yellow Pages Ltd v Promedia Directories Pte Ltd (2017) 2 SLR 185 at (76). Section 35(2) of the old Copyright Act (Cap 63, 2006 Rev Ed) is the precursor of the new open-ended fair use provision in ss 190–191 of the Copyright Act 2021 (2020 Rev Ed).

Accordingly, although there are very few reported local cases that consider in detail the scope of and relationship between the factors in s 35(2), both American and Anglo-Australian jurisprudence will be helpful in shaping our law on fair dealing.

In respect of the first factor, the purpose and character of the dealing, it favoured fair dealing where “the defendant added to, recontextualised or transformed the parts taken”¹⁰Global Yellow Pages Ltd v Promedia Directories Pte Ltd (2017) 2 SLR 185 at (79). or where the new work was “transformative”, that is, whether it “supersede[s] the objects” of the original creation, or “adds something new, with a further purpose or different character”.¹¹Global Yellow Pages Ltd v Promedia Directories Pte Ltd (2017) 2 SLR 185 at (79) (referring to Campbell v Acuff-Rose Music, Inc, 510 US 569 at 579 (1994)). It appears that the Court of Appeal is edging towards the view of the US Supreme Court in Campbell v Acuff-Rose Music, Inc¹²510 US 569 at 579 (1994). (Campbell) when Menon CJ remarked that “we do not go as far as those cases which suggest that a commercial nature or purpose of the dealing will presumptively be regarded as unfair” and “the commerciality of the dealing is but one of the factors to be considered and it will not necessarily be fatal to a finding of fair dealing”.¹³Global Yellow Pages Ltd v Promedia Directories Pte Ltd (2017) 2 SLR 185 at (81). In fact, the court considered the application of the transformative use doctrine in Campbell (where the commerciality of the rap song “Pretty Woman” was trumped by the transformative value of the parody) and in Authors Guild v Google, Inc¹⁴Authors Guild v Google, Inc, 804 F 3d 202 (2nd Cir. 2015). (where Google’s making of digital copies of books for the purpose of enabling a search for identification of books containing a term of interest to the searcher involved a highly transformative purpose).

With respect to the first factor of fair use, the US statute requires courts to examine the “purpose and character of the use”, but neither “purpose” nor “character” is defined in the statute. Section 191 of the Singapore Copyright Act 2021 contains similar words, with the first factor being stated as “the purpose and character of the use, including whether the use is of a commercial nature or is for non‑profit educational purposes”. While there has been no local case law applying section 191, it is highly likely that courts here will look to how the US courts consider a number of relevant elements like what kind of transformation is present in the secondary work, the track record of the author of the secondary work, the extent of commentary or criticism present in the secondary work, the significance of the secondary use to research or study, as well as its public benefit.¹⁵David Tan, “The Lost Language of the First Amendment in Copyright Fair Use: A Semiotic Perspective of the ‘Transformative Use’ Doctrine Twenty-Five Years On” (2016) 26 Fordham Intellectual Property, Media and Entertainment Law Journal 311 at 325.

In response to the Campbell decision, Pierre Leval hailed Justice Souter’s opinion as “the finest opinion ever written on the subject of fair use”.¹⁶Pierre N Leval, “Nimmer Lecture: Fair Use Rescued” (1997) 44 UCLA Law Review 1449 at 1464. However, sitting as a judge in the Second Circuit Court of Appeals, he was recently more critical of the privileged position of the transformative use doctrine in copyright fair use, commenting that the fourth factor is “undoubtedly the single most important element of fair use”.¹⁷Capitol Records, LLC v ReDigi, Inc, 910 F 3d 649 at 662 (2nd Cir. 2018). In light of the US Supreme Court’s decision in Google LLC v Oracle America, Inc¹⁸141 S Ct 1183 (2021). handed down in April 2021, the transformative use doctrine seems to have taken a backseat to the fourth factor which evaluates market impact.¹⁹Google LLC v Oracle America, Inc, 141 S Ct 1183 (2021). The importance of economic impact on the licensing market of the original work was also emphasised by the majority in a later decision: Andy Warhol Foundation for the Visual Arts, Inc v Goldsmith, 598 US 508 (2023). Justice Breyer, delivering the majority’s opinion, held that: “in determining whether a use is ‘transformative,’ we must go further and examine the copying’s more specifically described ‘purpose[s]’ and ‘character’”.²⁰Google LLC v Oracle America, Inc, 141 S Ct 1183 at 1203 (2021). Furthermore, the court would “take into account the public benefits the copying will likely produce”.²¹Ibid at 1206. In Campbell, the court explained that “a use that has a distinct purpose is justified because it furthers the goal of copyright, namely, to promote the progress of science and the arts, without diminishing the incentive to create.”²²Campbell v Acuff-Rose Music, Inc, 510 US 569 at 531 (1994) (emphasis added). This was most recently reiterated in Keck v Mix Creative Learning Center LLC, 116 F.4th 448 at 454 (5th Cir. 2024). See also Hachette Book Group, Inc v Internet Archive, 115 F.4th 163 at 181 (2nd Cir. 2024). The need to discern a distinct purpose from the original was also emphasised in the majority judgment of the Supreme Court in 2023 in Andy Warhol Foundation for the Visual Arts, Inc v Goldsmith.²³Andy Warhol Foundation for the Visual Arts, Inc v Goldsmith, 598 US 508 at 527–529 and 531–532 (2023).

On the fourth factor, the effect of the use on the potential market for the value of the copyrighted work, Menon CJ, referring to Campbell, was of the view that it requires the court to consider “not only the extent of market harm caused by” the alleged infringer’s action, but also whether the defendant’s conduct, if “unrestricted and widespread”, would “result in a substantially adverse impact on the potential market” for the original and derivative works.²⁴Global Yellow Pages Ltd v Promedia Directories Pte Ltd (2017) 2 SLR 185 at (82) (citing Campbell v Acuff-Rose Music, Inc, 510 US 569 at 590 (1994)). The interplay between the fourth factor and the first factor is a controversial one, depending on one’s definition of a transformative market, a point which the court did not address. It has been observed that the “commerciality” of the secondary work (a consideration under the first factor of fair use) is a different analysis from the effect of the secondary use upon the potential commercial market for, or value of, the copyrighted work or its adaptations (a consideration under the fourth factor of fair use).²⁵David Tan, “The Transformative Use Doctrine and Fair Dealing in Singapore: Understanding the ‘Purpose and Character’ of Appropriation Art” (2012) 24 SAcLJ 832 at para 47.

Part 2 will discuss the application of fair use to two specific technological uses.

The post Copyright Fair Use in the Face of Technological Developments: Staying Ahead or Limping Behind? (Part 1) appeared first on The Singapore Law Gazette.

This article discusses the different approaches taken by the courts when dealing with the issue of exclusive use and enjoyment of common property, mapping out developments in this area of the law from Poh Kiong Kok v MCST Plan No 581 [1990] 1 SLR(R) 617, to the recent decision of Soo Hoo Khoon Peng v The MCST Plan No. 2906 [2023] SGHC 355.

Introduction

1. The question of whether a subsidiary proprietor (SP) of a strata-titled development may install awnings and air conditioner compressors outside his unit is interestingly still not quite settled.
2. Section 33(1) of the Building Maintenance and Strata Management Act 2004 (BMSMA) provides that a management corporation (MCST) may make a by-law pursuant to an appropriate resolution, conferring on an SP the exclusive use and enjoyment or special privileges in respect of the whole or any part of the common property.
3. The BMSMA does not provide a definition of what constitutes “exclusive use and enjoyment”. The plain meaning of “exclusion” in the Oxford Learner’s Dictionary is “the act of preventing somebody/something from entering a place or taking part in something”.
4. Logically, there should be a difference between “use and enjoyment” and “exclusive use and enjoyment”. To amount to “exclusive use and enjoyment” of common property, the use and enjoyment should operate to the exclusion of other SPs or the MCST from doing something that they would have been able to do. Where there is “exclusive use and enjoyment”, the requisite resolution (ordinary, special or 90%) under section 33 BMSMA to be obtained depends on the period of exclusivity.
5. If an SP uses common property which the MCST and no other SP would want to use, this would be mere “use and enjoyment”, and not “exclusive use and enjoyment”. However, consent of the MCST still has to be obtained.
6. An example of “exclusive use and enjoyment” would be where a childcare centre situated on the ground floor cordons off a part of the common playground to the exclusion of other SPs.

Decisions That Considered the Exclusive Use and Enjoyment Issue

7. The meaning of “exclusive use and enjoyment” was first considered by the High Court in Poh Kiong Kok v MCST Plan No 581 [1990] 1 SLR(R) 617. The MCST had a parking scheme where every SP was allocated a specific lot exclusive to him. Mr Poh was allocated a lot and excluded from parking in any other lot.
8. The Court held that in the absence of an exclusive use unanimous resolution under section 41(8) Land Titles Strata Act, the prevailing legislation, the MCST had no right to exclude Mr Poh from parking in any of the other lots.¹Poh Kiong Kok v MCST Plan No 581 [1990] 1 SLR(R) 617, at [20] – [21].
9. In Wu Chiu Lin v MCST Plan No. 2874 [2018] 4 SLR 966 (Sunglade), the issue was whether awnings sought to be installed by SPs in their private enclosed spaces (PES) and balconies would constitute exclusive use and enjoyment of common property. The High Court held that absent a 90% exclusive use resolution under section 33 BMSMA, Ms Wu was not allowed to build an awning in her balcony despite the fact that: –
   1. the MCST had by a special resolution at an AGM approved installation of the awnings following an approved design for all SPs;²Wu Chiu Lin v MCST Plan No. 2874 [2018] 4 SLR 966 (“Sunglade”), at [6].
   2. out of 12 SPs who made applications to install such awnings, the MCST had before the Strata Titles Board (STB) consented to let the SPs of nine ground floor units proceed with their awnings on the basis that they constituted a safety device;³Sunglade, at [12] – [13].
   3. the MCST made clear to the STB that they recognized that 83.06% of the general body voted in favour of the awnings, that their intention was simply to seek guidance and ensure the purported approval granted to the SPs to install the awnings was valid and regular, and not to unreasonably prohibit them from installing them;⁴Sunglade, at [6].
   4. there was no evidence that any other SP was being excluded from putting up awnings in their PES or balcony, and/or that anyone would want to put up an awning in Ms Wu’s balcony.
10. Sunglade was followed in MCST Plan No. 508 v Loh Sook Cheng (Loh Sook Cheng) (HC/RAS 13 of 2020, unreported). Mdm Loh sought several orders from the Court including, inter alia, that she be allowed to install two air conditioning compressors just outside the rear exterior wall of her unit (a location proposed by the MCST), an upgrade to her unit’s electrical supply and ancillary plumbing works for the installation of fire hose reels (to comply with SCDF requirements).

    Aircon compressors on the exterior common property wall of the subject property involved in the case of Loh Sook Cheng.

11. The District Court held that the works did not confer on Mdm Loh exclusive use and enjoyment of common property and furthermore many other SPs including the Chairperson and Secretary had installed air conditioning compressors, piping and cable ducts on common property without any 90% exclusive use resolution under section 33 BMSMA.⁵MCST Plan No. 508 v Loh Sook Cheng (“Loh Sook Cheng”) [2020] SGDC 159, at [22] – [23].
12. However, the High Court overturned the decision, noting that the air conditioning compressors, additional electric cables and water pipe were permanent structures installed on common property for the sole benefit of Mdm Loh, which would deprive other SPs from using and enjoying the same.

Decisions That Did Not Consider the Exclusive Use Issue

13. In Choo Kok Lin and anor v MCST Plan No. 2045 [2005] 4 SLR(R) 175 (Kentish Lodge), the SPs erected, inter alia, air-conditioning compressors on the external wall above their landscape/air well area without the MCST’s consent.⁶Choo Kok Lin and anor v MCST Plan No. 2045 [2005] 4 SLR(R) 175 (“Kentish Lodge”), [6] – [16]. The High Court dealt with this as a case of use and enjoyment of common property without the MCST’s consent. The issue was whether the compressors should be ordered to be removed. Balancing all the circumstances, the Court decided not to order their removal.⁷Kentish Lodge, at [59].
14. In Prem N Shamdasani v MCST Plan No 920 [2022] SGHC 280 (Hawaii Tower), the Appellant carried out renovation works including, inter alia, the replacement of the air conditioner compressor on the external wall, without MCST approval. The Court held that the MCST ought to have approved the renovation works, including the replacement of the air conditioner compressor, as it did not detract from the appearance of the building since there were six other units with similar air conditioner compressors on the external walls which the MCST could not do anything about.⁸Prem N Shamdasani v MCST Plan No 920 [2022] SGHC 280 (“Hawaii Tower”), at [152] – [153].
15. It is not surprising that in Kentish Lodge, Hawaii Tower and numerous cases over the years, no court or counsel considered the installation of air conditioning compressor units outside your own window, balcony or unit to amount to “exclusive use and enjoyment” of common property requiring an exclusive use resolution under section 33 BMSMA. These are all ordinary and reasonable instances of use and enjoyment of common property.

Different Tests Applied Depending on Whether Works Carried Out

16. In Kentish Lodge, the High Court was asked to grant a mandatory injunction requiring the SP to remove air-conditioning compressors erected on common property without the MCST’s approval.⁹Kentish Lodge, at [4]. Following The MCST Plan No. 1378 v Chen Ee Yueh Rachel [1993] 3 SLR(R) 630, the Court in Kentish Lodge declined to grant the order sought as it would not benefit the MCST.¹⁰The MCST Plan No. 1378 v Chen Ee Yueh Rachel [1993] 3 SLR(R) 630; Kentish Lodge, at [59]. The Court held that the MCST did not consider that the appearance of the condominium had been adversely affected by the compressors. This was especially so since other SPs had similarly installed their compressors on common property.¹¹Kentish Lodge, at [59].
17. However, in Sunglade and Loh Sook Cheng, where the SPs sought the MCST’s approval before carrying out the installations, the High Court took a different approach.
18. In Sunglade, there was evidence of awnings put up by SPs of six or seven other units similar to Ms Wu’s, all without approval and no action was taken for many years.¹²Sunglade, at [91]. This was in addition to the ground floor units which were allowed put up the awnings. Nevertheless, the High Court held that “two wrongs do not make a right” and that the obligation is on the SP to obtain a 90% exclusive resolution under section 33 BMSMA.¹³Sunglade, at [91].
19. In Loh Sook Cheng, the external wall of the building had many air conditioning compressor units put up by other SPs. There were also piping and cable ducts running outside of the units of several SPs. The District Court took the view that a party who has come to Court to seek approval of works involving the common property should be in no worse a position than a SP who had proceeded to undertake the same works without authorisation and for which the MCST is seeking a mandatory injunction.¹⁴Loh Sook Cheng, at [20].
20. The High Court in Loh Sook Cheng, in reversing the District Court’s decision, stated that the Court, in the exercise of its discretion, may consider the even-handedness of the MCST in dealing with the SPs only in cases involving the grant of a mandatory injunction. However, where a SP applies to court to compel the MCST to consent to works, the Court observed that the question is whether the works may be consented to by the MCST and that this answer does not change because other SPs might have acted in breach of section 33 BMSMA.
21. The unfortunate result from the different approaches taken is that it appears you may be better off proceeding to carry out the unauthorised works first instead of seeking proper approval before carrying out the works. This cannot be right.

Prescriptive or Descriptive Approach

22. Even if the works amount to “exclusive use and enjoyment” of common property, it should not follow that an exclusive use resolution must necessarily be passed before it can be allowed. Whilst the MCST “may” make a by-law pursuant to a 90% resolution conferring on a SP “exclusive use and enjoyment” of common property for a period exceeding three years, in which case the SP’s “exclusive use and enjoyment” of the common property during that period is protected by the by-law, it should not follow that without such by-law and 90% resolution, the SP cannot have any such “exclusive use and enjoyment”.
23. In Chan Sze Ying v MCST Plan No 2948 [2020] SGHC 88 (Chan Sze Ying), the High Court adopted a descriptive approach and held that Paragraph 3A(1) of the First Schedule of the BMSMA which states that a meeting of the MCST “may” be adjourned by a motion did not displace the residual power at common law to adjourn meetings by some other means.¹⁵Chan Sze Ying v MCST Plan No 2948 [2020] SGHC 88, at [45].
24. Another instance of the Court applying the descriptive interpretation of section 33 would be the case of The MCST Plan No 3436 v Tay Beng Huat and another [2019] SGDC 208 (The Infiniti). The District Court dismissed the MCST’s argument that the placement of a shoe cabinet along the common corridor amounted to “exclusive use” or “special privileges” which was unlawful unless there was a by-law under section 33 expressly allowing it. Instead, it held that section 33 is an empowering provision and should not be read as a restrictive provision that renders unlawful anything that might be considered “exclusive use” if the MCST has not expressly permitted it. The Court added that the latter interpretation “would render unnecessary and otiose the fine balance between the potentially competing rights of SPs in respect of the common property that the by-laws in the Second Schedule endeavour to achieve.”¹⁶The MCST Plan No 3436 v Tay Beng Huat and another [2019] SGDC 208, at [12].

Equating Exclusive Use and Enjoyment with Permanence

25. In Loh Sook Cheng, the Court held that the installation of the compressors amounted to “exclusive use and enjoyment” as they were permanent. The Court distinguished The Infiniti as the shoe cabinet was not permanent.
26. However, usage can be permanent and yet not amount to exclusive use. e.g. air-conditioning compressor outside one’s window, or electrical wires and plumbing pipes running along the common property into one’s unit as no other SP would want to use these parts of the common property. Usage can also be temporary yet amount to exclusive use and enjoyment e.g. exclusive use of three lanes of the swimming pool during the evening to conduct swimming lessons.
27. It is a question of fact in every case whether there is “exclusive use and enjoyment”. If so, then the “permanence” (i.e. the duration of use), should determine the type of resolution required under section 33 i.e. ordinary, special or 90% resolution.

Other Control Mechanisms in the BMSMA

28. A descriptive interpretation of section 33 does not imply that a SP will be entitled to do whatever they like on or to the common property, without regard to the rights of other SPs and the MCST.
29. There are provisions in the BMSMA and regulations thereunder that balance the rights and obligations of SPs and occupiers. For example, section 63 BMSMA lists the duties of SPs and other occupiers. They cannot use or enjoy the common property to interfere unreasonably with the use or enjoyment of the common property or any other lot by other SPs and occupiers.¹⁷BMSMA, s 63. The prescribed by-laws under the Second Schedule of the Building Maintenance (Strata Management) Regulations 2005 restrain various specific misuses of common property.

Mere Use and Enjoyment of Common Property

30. Where there is no “exclusive use and enjoyment” of common property, such that an exclusive use resolution under section 33 BMSMA is required, but mere “use and enjoyment” of common property, then the issue is whether the MCST should consent to the works.
31. Where the MCST consents to the works, it is hard to understand why the tribunal or court should intervene and stop the works. The BMSMA provides a legal framework for MCSTs to self-govern and manage their own estate. The SPs themselves are the best people to decide what is best for their estate.
32. Where the MCST does not consent to the works, the issue is whether taking into account all relevant factors, the MCST has been unreasonable, in which case the Board or the Court may make an order that the MCST consents to the works, as was done by the STB in Lee Lay Ting Jane v MSCT Plan No 3414 [2015] SGSTB 5 under section 111 BMSMA.

The Case of Mark Wheeler

33. Most of the cases that held that there was “exclusive use and enjoyment” of common property cited and followed Mark Wheeler v The MCST Plan No. 751 and Another [2003] SGSTB 5 (Mark Wheeler).
34. In Mark Wheeler, the SP installed an awning above the balcony of the entrance to his unit, without MCST approval.¹⁸Mark Wheeler v The MCST Plan No. 751 and Another [2003] SGSTB 5, at [13] – [21]; [28]. On the facts, the Board did not consider the MCST’s refusal to grant consent unreasonable, considering that: (a) it was the only unit with an awning; (b) the installation detracted from the theme of the development; (c) was in breach of the by-laws; and (d) resolutions to approve the installation were defeated at the AGM.
35. Although the Board also accepted the MCST’s submission that the installation of the awnings amounted to “exclusive use” which required a unanimous vote at the material time, it treated the case primarily as one of “use and enjoyment” of common property. If the Board had conclusively determined that it was a case of “exclusive use and enjoyment” of common property, the lack of consent from the MCST, let alone a unanimous resolution, would have been fatal to Mark Wheeler’s case.
36. Interestingly, the Board commented that treating a situation like this as one of “exclusive use” requiring a unanimous vote may make living in a condominium unworkable.

Approach Taken in Australia

37. Since Singapore’s strata legislation borrowed heavily from Australian provisions, it would be useful to consider some Australian decisions.
38. In Platt v Ciriello [1999] QCA 33 (Platt), the appellants were proprietors in a strata development who objected to the respondents and their tenants using common property for various purposes.¹⁹Platt v Ciriello [1999] QCA 33 (“Platt”), at p 1 – 2. The appellants in Platt argued before the Court below that the respondents’ uses of common property amounted to exclusive use and enjoyment of common property, in breach of the Building Units and Group Titles Act 1980 (BUGTA) since no “exclusive use” by-law had been passed under s 30(7) BUGTA (which is in pari materia with section 33(1) BMSMA).²⁰Platt, at p 1 – 2.
39. This argument was dismissed by Derrington J, who held that the question for determination was not whether the respondents’ uses of common property involved a use that is exclusive within the meaning of section 30(7), but whether they amounted to a use of common property in a manner or for a purpose that unreasonably interferes with the entitlement of others to use and enjoy common property under section 51(1)(c) BUGTA (which is in pari materia with section 63(c) BMSMA).
40. On appeal, the Queensland Court of Appeal by a 2:1 majority (Pincus J.A. dissenting) upheld Derrington J’s decision, expressly rejecting the prescriptive reading of section 30(7)(a).
41. Similarly, in Waller v The Owners of ‘Tranby on Swan’ – Strata Plan 2232 (1996) NSW Titles Cases 80-037, the District Court held that in each instance where exclusive use was being made of common property, the question is whether that particular use unreasonably interfered with the use and enjoyment of the common property by other SPs. This application of the descriptive interpretation means that even where there is “exclusive use and enjoyment” of common property without the requisite resolution, the Court must be satisfied that this was unreasonable before it will injunct such use.²¹Waller v The Owners of ‘Tranby on Swan’ – Strata Plan 2232 (1996) NSW Titles Cases 80-037; Teo Keang Sood, Strata Title In Singapore and Malaysia (LexisNexis, 5th Ed, 2015) at [10.43].

Conclusion

42. The decisions in Kentish Lodge and Sunglade, and the cases following either authority, would therefore appear to be inconsistent with each other. A decision of a higher court to resolve this inconsistency would be helpful.
43. In Soo Hoo Khoon Peng v The MCST Plan No. 2906 [2023] SGDC 162, the Court held that the installation of a screen at the balcony within the SP’s lot (which was essentially a ziptrack) constituted exclusive use and enjoyment of common property requiring a 90% resolution.²²Soo Hoo Khoon Peng v The MCST Plan No. 2906 [2023] SGDC 162, at [110].
44. On appeal, the High Court, in Soo Hoo Khoon Peng v The MCST Plan No. 2906 [2023] SGHC 355 opined that such installations would not always amount to exclusive use and enjoyment just because persons standing outside would be obstructed from viewing this part of the common property. The Court observed that the question of how common property may be used or enjoyed must hinge on the property’s location within the development and the role(s) it plays given that location.²³Soo Hoo Khoon Peng v The MCST Plan No. 2906 [2023] SGHC 355, at [12]. This must be a question of fact in every case.

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