On 30 June 2016, the Singapore Ministry of Law proposed new legislation to allow for third party funding (TPF) in Singapore-seated international arbitrations as well as related mediation and court proceedings. Given that Singapore is increasingly becoming an attractive business centre, the new legislative changes will allow it to maintain its competitive position in Asia. Following the lead of other major arbitration centres, Parliament passed the Civil Law (Amendment) Bill 38/2016 on 10 January 2017, approving the proposed changes to introduce TPF in international arbitration.
The Civil Law Bill enacts a new framework for TPF. It abolishes the common law tort doctrines of champerty and maintenance in Singapore, allowing TPF in certain categories of dispute resolution to be listed in the Civil Law (Third Party Funding) Regulations. The new provisions clarify that TPF contracts concluded between parties and third party funders for certain “prescribed” dispute resolution proceedings are no longer illegal or contrary to public policy. This abolition has wider implications, especially in the contingency fee agreement arena. Singapore currently does not permit contingency fee arrangements, but the abolition of champerty and maintenance might represent a starting point in developing future legislative changes. Essentially, in the long term new legislation might allow lawyers to link their remuneration to the outcome of a specific case.
Aside from abolishing the doctrines of champerty and maintenance, third party funders will be subject to certain qualifications and requirements prescribed by the Minister of Law. It should be noted that the remit of third party funders is narrower than in Hong Kong[SA1] . Singapore limits the definition to professional funders, whereas Hong Kong is less restrictive in recognising that there are different alternative funding methods available on the market. These new provisions enable conditions to be imposed on third party funders and failure to comply with them will prevent third party funders from enforcing their rights under the TPF contracts. In turn, third party funders may apply to the court or arbitral tribunal for relief against the requirements mentioned above. The court or arbitral tribunal may grant such relief, provided that the costs of the application are covered by the third party funder.
Finally, the Bill also enables lawyers to recommend third party funders to their clients, provided that such recommendations do not bring any financial benefits to the lawyers.
Singapore is one of the top choices in terms of arbitral seats, with the number of Singapore-seated disputes and value claims increasing steadily over the past years. Singapore’s competitiveness as a preferred seat of arbitration will be supported by the new TPF legislation. Furthermore, these new provisions will bring Singapore in line with other major arbitration centres, such as London, Paris, Geneva and Hong Kong. Although it is not yet clear whether there will be similar provisions to support domestic arbitration, at an international level, lawyers as well as arbitrators welcome the changes, as they represent essential steps that allow the jurisdiction to remain one of the top arbitration hubs. In terms of the beneficiaries, small and medium-sized companies will be the first ones to gain an advantage. It is usually the case that small and medium-sized business do not have the money to take the claim forward, even though such a claim might have good prospects of success.
Sabina Adascalitei LLB, LLM, MCIArb
Research and Academic Affairs Coordinator