On 10 January 2017 the Singapore Parliament passed the Civil law Bill (Bill No. 38/2016) legalizing third party funding in international arbitration and related proceedings in Singapore. The Bill entered into force on 1 March 2017 and is one of the first statutes in the world specifically adopted in relation to third party funding.
Third party funding was traditionally prohibited in Singaporean law as it was found to be contrary to public policy, more specifically to the common law tort of champerty and maintenance. However, the recent civil law reform explicitly allows third party funding under the condition that first, it is provided by eligible parties and second, in the prescribed categories of proceedings limited to international arbitration proceedings, and court litigation and mediation arising out of such proceedings, such as applications for the enforcement of awards, or mediation undertaken prior to or during arbitration. The Bill also prescribes specific eligibility requirements for funders, allowing funders to be only entities with at least S$5 million in paid-up capital.
The Bill is supported by amendments to other related acts such as the Legal Profession Act, which now allows lawyers to play a role in funder referral and to act for clients in relation to third party funding agreements.
Moreover, the Legal Profession Conduct Rules for Singapore lawyers now require lawyers to disclose the existence of any third party funding their client is receiving, which is unique. We have already reported on the issue of disclosure and third party funding here. The provisions of the Singaporean law are consistent with public statements made by Singapore’s Senior Minister of State for Law that Singapore “will be taking a limited but targeted regulatory approach” to third party funding. However, the duty to disclose the existence of the third party funder to the tribunal/court as well as its identity is quite unusual as it does not exist in other popular seats of arbitration such as London, Paris or Geneva.
The recent amendments in Singaporean law in relation to third party funding are a positive development. They were also necessary if Singapore wished to keep its position as a hub for international arbitration and to remain competitive with other centers such as London, Paris, Geneva and Hong Kong, where third party funding is flourishing.
The biggest third party funders see the Asian market as an emerging opportunity and did not wait long to expand their offices to Singapore and Hong Kong. IMF Bentham, one of the pioneers in third party funding and based in Australia, has announced the opening of it offices in Singapore. Furthermore, Burford Capital has also announced in June 2017 that it is already funding it first case.
The recent amendments come at a time when the Singapore International Arbitration Center (SIAC) has seen a significant increase in caseload (the precise number and statistics are available on their website). 2017 has been and continues to be an interesting and dynamic year for international arbitration in Singapore.