Singapore continues to cement its place as a preferred seat of international arbitration globally, but it has remained in the minority within the group of leading venues in terms of its approach to third party funding. Third party funding is currently prohibited in Singapore, but this is about to change.
On 30 June 2016 the Singapore Ministry of Law announced proposed legislative amendments to expressly allow third party funding in international arbitration and related court proceedings in Singapore. These proposed amendments follow similar legislative reforms proposed by the Hong Kong Law Reform Commission in the Consultation Paper released by its Third Party Funding for Arbitration Sub-committee in October 2015, thereby enhancing the attraction of resolving disputes in the region generally.
The public consultation closed on 29 July 2016, and it is anticipated that Singapore will act quickly to implement the proposed amendments, potentially before the end of this year. This is a significant development for Singapore’s dispute resolution regime, and global dispute resolution generally.
Summary of the Changes Proposed
The current prohibition against third party funding in Singapore operates in two ways:
The prohibition applies to both litigation and arbitration proceedings in Singapore, although there is an important exception in the insolvency context which permits a liquidator to use the statutory power of sale to sell a cause of action or its proceeds to a third party (see Re Vanguard Energy Pte Ltd  SGHC 156).
The Ministry has released drafts of the Civil Law (Amendment) Bill (“Bill”) and Civil Law (Third-Party Funding) Regulations 2016 (“Regulations”), which contain the proposed legislative amendments.
If passed they will bring about the following changes:
The Ministry has also indicated that related amendments would be made to the Legal Profession (Professional Conduct) Rules 2015 to supplement the Bill and new Regulations. While these related amendments have not been made available for review as part of the public consultation, the amendments are expected to draw reference from the revised International Bar Association Guidelines on Conflict of Interest in International Arbitration (October 2014) and the Ministry foreshadowed may include:
The Ministry has emphasised that the proposed legislative amendments are part of a broader regulatory framework which includes best practices and guidelines for lawyers and third party funders, giving precedence to party autonomy and flexibility, with disclosure as the central tenet. The Ministry of Law has adopted a “light touch” approach to regulation in the proposed amendments, drawing from the approach of other jurisdictions which permit third party funding.
Consistent with this approach, there are no minimum paid-up capital requirements, nor any restrictions on the subject matter or quantum of the disputes for which third party funding is allowed. This is a significant relaxation from the narrower legislative amendments proposed by the Ministry the last time it held a public consultation on the possibility of allowing third party funding for international arbitration in 2011.
Room for Further Liberalisation
Notwithstanding the unrestricted subject matter and quantum of the disputes for which third party funding will be permitted under the proposed amendments, one significant restriction still remains. As things stand, the amendments will permit third party funding only for international arbitration and court proceedings which are related to international arbitration. Contracts providing for third party funding of domestic arbitration or litigation remain unenforceable under the new legislation, although parties to such contracts can no longer be sued under the tort of champerty and maintenance.
The proposed legislative amendments, however, expressly allow the Minister of Law to prescribe further categories of dispute resolution proceedings for which third party funding is permitted. This paves the way for third party funding to be further extended to domestic arbitration and commercial litigation more generally.