MinLaw extends third-party funding framework to include domestic arbitration

SINGAPORE'S law ministry on Monday said it will extend the third-party funding (TPF) framework to cover domestic arbitration proceedings, connected court and mediation proceedings, starting from June 28.

The framework will also cover proceedings commenced in the Singapore International Commercial Court (SICC), for as long as these proceedings remain in the SICC, as well as related mediation.

The move comes amid the Covid-19 pandemic where there may be a rise in disputes and companies facing insolvency risks. Funding options such as the TPF allow litigants to pursue meritorious claims in permitted proceedings, as opposed to forgoing their legal rights due to financial constraints.

Having third party funders come in during the legal process is more of a risk management tool than anything, said Dinesh Dhillon, partner and co-head of Allen & Gledhill’s international arbitration practice.

Mr Dhillon, who is also president of the Singapore Institute of Arbitrators, noted that litigants would be able to share the risks from high legal costs with the funders.

“The ones who should be paying attention are the chief financial officers of corporates who can look at this avenue to manage the financial risks associated with litigation,” he added. 

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The TPF framework was first introduced in 2017 for international arbitration proceedings and related court and mediation proceedings. This allowed an entity unconnected to a dispute to fund legal proceedings in return for financial gain - such as a share of the damages awarded.

This entity may be a professional funder whose principal business is funding the costs of dispute resolution proceedings which also meet the minimum paid-up share capital.

Since the launch of the TPF framework, funders and the business, legal and arbitration communities have "responded positively", MinLaw said. It noted that more funders have a presence in Singapore and businesses have shown increasing interest in additional options for financing litigation.

Having TPF extended to SICC proceedings is also a “step in the right direction” for Singapore, which moved into the international commercial court sphere in 2015, Mr Dhillon said.

Giving international corporates and commercial parties who are considering using the SICC access to TPF provides them with a balanced option as they decide which commercial dispute resolution option to use in Singapore. 

With TPF now permitted in certain SICC proceedings, a set of rules which govern registered foreign lawyers involved in SICC proceedings will also be amended to provide professional conduct rules. The amendments will be aligned with those for local and certain foreign lawyers, MinLaw said.

The Rules of Court will also be amended with regard to orders for adverse costs and security for costs where third-party funding is involved in proceedings before the SICC, the law ministry added.

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