Civil Law (Amendment) Bill 2016 will permit third-party funding of international commercial arbitrations and provide a regulatory framework for funders.

Following a public consultation exercise conducted earlier this year (see our July 2016 LawFlash), the Singapore Ministry of Law has now submitted Civil Law (Amendment) Bill 2016 for First Reading in Parliament. The bill provides that third-party funding will be permitted for international commercial arbitration proceedings, and establishes a regulatory framework for third-party funders.

“Third-party funding” refers to proceedings funded by an entity unconnected to a dispute. Historically, third-party funding of claims in Singapore has been restricted to limited circumstances because of longstanding common law rules designed to protect vulnerable litigants and to prevent dispute resolution from becoming an area of speculative business ventures.

When enacted, the new law will provide alternative avenues of financing for parties that bring or defend arbitration proceedings in Singapore. The introduction of such funding is consistent with the policy of developing and maintaining Singapore as a leading hub for arbitration and is likely to enhance the facilitative and supportive environment in which arbitration continues to flourish. It is also in line with the position taken in other major seats of international commercial arbitration such as the United Kingdom, the United States, and Hong Kong, where third-party funding is already permitted or is being considered.

In summary, the Civil Law (Amendment) Bill 2016

  • clarifies that the common law tort of champerty and maintenance is abolished in Singapore;
  • provides that in certain prescribed categories of proceedings, third-party funding contracts are not contrary to public policy or illegal, and that these categories (which will include international arbitration and related proceedings) will be specified in subsidiary legislation after the bill comes into force;
  • provides that third-party funding may only be provided by an entity that meets certain criteria to be stipulated in subsidiary legislation; and
  • provides for amendment to the Legal Profession Act to clarify that lawyers may introduce or refer funders to their clients so long as they do not receive direct financial benefit from the introduction or referral, and that they may act for their clients in relation to the third-party funding contract.