Singapore to Consider Third-Party Funding in International Arbitration

The Singapore Ministry of Law has commenced a public consultation of the Draft Civil Law (Amendment) Bill 2015 and Civil Law (Third Party Funding) Regulations 2016.

On June 30, the Singapore Ministry of Law announced a public consultation on proposed legislative amendments regarding third-party funding for international arbitration proceedings. Third-party funding refers to proceedings funded by an unconnected entity to a dispute. Third-party funding of claims in Singapore has been restricted to limited circumstances because of long-standing common law rules that protect vulnerable litigants and prevent the area of dispute resolution from becoming an area of speculative business ventures.

Third-party funding is permitted or is being considered in other popular arbitral seats. For example, such funding is available and has grown popular in places such as the United Kingdom and the United States. In addition, the arbitration subcommittee of the Law Reform Commission of Hong Kong released a consultation paper in October 2015 proposing that third-party funding for arbitration be permitted under Hong Kong law. If enacted, these proposals will provide alternative avenues of financing for parties that bring or defend arbitration claims in Singapore.

In summary, the proposed legislation provides the following:

1. Clarification that the common law tort of champerty and maintenance is abolished in Singapore.
2. In certain areas of dispute resolution, third-party funding is not contrary to public policy or illegal.
3. Certain conditions will be imposed on third-party funders through subsidiary legislation.
4. Lawyers may recommend third-party funders to their clients or advise their clients on third-party funding contracts as long as the lawyers themselves do not receive direct financial benefit from their recommendations.

The new proposals, similar to those being proposed in Hong Kong, relate only to third-party funding for international arbitration proceedings and proceedings that arise from these and will not apply, for the time being, to other litigation proceedings in the Singapore courts (including the Singapore International Commercial Court).

The public consultation period ends on 29 July 2016.