- New regime regulating third party funding of international arbitration in Singapore comes into force today.
- Regulations make it clear that only professional funders are permitted.
- Changes to lawyers’ professional conduct rules, also in force today, require lawyers to disclose the existence of funding arrangements.
We recently reported on the Singapore Parliament’s approval, on 10 January 2017, of the Civil Law (Amendment) Bill (Bill No. 38/2016) to amend Singapore law to permit third-party funding for certain categories of dispute resolution proceedings. The bill entered into force as the Civil Law (Amendment) Act 2017 (the Act) today, 1 March 2017, together with associated regulations (the Civil Law (Third Party Funding) Regulations 2017 (the Regulations)) and an amendment to the professional conduct rules for lawyers in Singapore.
The Act establishes a framework for third party funding in Singapore by: (a) abolishing the common law torts of maintenance and champerty; and (b) providing that third party funding contracts with qualifying third party funders are not contrary to public policy or illegal as long as they relate to one of the enumerated categories of dispute resolution proceedings. More detailed provisions regarding the criteria a third party funder must meet to fund a claim in Singapore and the categories of dispute resolution proceedings for which third party funding is permitted are set out in the Regulations.
The Regulations provide that a qualifying third party funder must: (a) carry on the “principal business” of funding dispute resolution proceedings (in Singapore or elsewhere); and (b) have a paid up share capital or managed assets (as defined in the Regulations) of not less than S$5 million (or the foreign currency equivalent). It is therefore apparent that only professional funders are permitted to enter into third party funding arrangements in Singapore.
As to the permitted categories of dispute resolution proceedings, under the Regulations, third-party funding initially will be limited to international arbitration and related court or mediation proceedings. However, Indranee Rajah, SC, Singapore’s Senior Minister of State for Law, has indicated that the categories may be broadened following a period of monitoring the operation of the new legal framework.
New rules applicable to third party funding have also been inserted into the existing professional conduct rules for lawyers in Singapore as of today’s date. Under the new rules, which are intended to prevent conflicts of interest, a legal practitioner is obliged to disclose to the relevant court or tribunal, and to every other party to the proceedings: (a) the existence of any third party funding contract “related to the costs of those proceedings”; and (b) the identity and address of the relevant third party funder. The new provisions also prohibit legal practitioners or law practices from holding financial or other interests in, or receiving commissions, fees or shares of proceeds from, third party funders that they have introduced or referred to their clients or that have third party funding contracts with their clients.
The new third party funding regime introduced under the Act and associated Regulations represents an important development for parties involved in Singapore seated international arbitrations. Parties arbitrating Singapore seated disputes now have access to the same financing and risk management tools available in other major international arbitration centres.