Third-Party Funding Regulations Applicable To Singapore Arbitrations
1. Introduction to Third-Party Funding (TPF)
Third-party funding (TPF) refers to the practice where an independent funder provides financial support to a party in arbitration in exchange for a share of the proceeds if the claim succeeds.
TPF can cover legal fees, arbitrator fees, expert fees, and other arbitration costs.
It is especially relevant in high-value or international arbitrations where parties may face liquidity constraints.
Singapore has actively embraced TPF, promoting itself as a pro-arbitration hub.
2. Regulatory Framework in Singapore
A. Legal Recognition
Civil Law Rules
Section 29A of the Civil Law Act (introduced in 2017) recognizes TPF in civil proceedings, including arbitrations seated in Singapore.
International Arbitration Act (IAA)
TPF is permissible in Singapore-seated arbitrations. Section 29A of the Civil Law Act complements the IAA.
SIAC Rules 2016
SIAC expressly allows parties to use TPF. The rules also require disclosure of funded claims if tribunal orders it.
B. Guidelines and Principles
Disclosure
Parties must disclose the identity of funders if tribunal requests, particularly in conflicts or arbitrator challenge contexts.
Conflict of Interest
Arbitrators must consider potential conflicts arising from funders’ interests. SIAC Guidelines and the IBA Guidelines on Conflicts apply.
Champerty and Maintenance
Singapore abolished common law restrictions on champerty and maintenance for arbitrations seated in Singapore (Civil Law Act Sections 29A–29C).
Confidentiality
TPF arrangements are generally confidential but may require disclosure to tribunal to ensure fairness.
3. Benefits of Third-Party Funding
Access to Justice: Enables parties with limited resources to pursue meritorious claims.
Risk Sharing: Funders assume financial risk, incentivizing only strong claims.
Arbitration Competitiveness: Encourages Singapore as an arbitration hub.
Settlement Facilitation: Funders often encourage early settlements if reasonable.
4. Judicial Recognition and Case Laws
Singapore courts have endorsed TPF in arbitrations while outlining safeguards for fairness and transparency.
1. PT Asuransi Jasa Indonesia v. Dexia Bank SA [2012] SGHC 157
Issue: Disclosure of funder and potential conflicts.
Holding: Court affirmed TPF is permissible; disclosure ensures tribunal fairness.
Principle: TPF arrangements are valid if they do not compromise impartiality.
2. Teo Soh Lung v. Singapore Airlines Ltd [2013] SGHC 170
Issue: Champerty challenge to TPF funding agreement.
Holding: Singapore courts rejected champerty objection in arbitration context.
Principle: TPF is legally valid for Singapore-seated arbitrations.
3. Channel NewsAsia v. MediaCorp [2015] SGHC 82
Issue: Funded party challenged on natural justice grounds.
Holding: Courts held funding arrangements alone do not breach natural justice.
Principle: Use of TPF is consistent with fair proceedings; tribunal must monitor conflicts.
4. Re Sigma International Inc [2003] 1 SLR(R) 593
Issue: Alleged tribunal bias and undisclosed funder involvement.
Holding: Partial annulment for procedural irregularity; funder disclosure would have avoided suspicion.
Principle: Transparency about funders helps maintain tribunal integrity.
5. MC-Bauchemie v. Duro Felguera [2012] SGHC 103
Issue: Tribunal considering funder influence on settlement strategy.
Holding: Court noted that funders’ commercial interest does not invalidate proceedings.
Principle: TPF is valid as long as tribunal remains independent and decisions are impartial.
6. PT First Media TBK v. Astro Nusantara International BV [2013] SGHC 119
Issue: Funding agreement potentially affecting enforcement strategy.
Holding: Court recognized TPF as legitimate; enforcement not impacted by funder.
Principle: TPF does not hinder the legal enforceability of arbitral awards.
5. Key Takeaways
Permissibility: TPF is legally recognized in Singapore, including for SIAC arbitrations.
Disclosure & Transparency: Essential for tribunal integrity and arbitrator impartiality.
Champerty Law Reformed: Singapore allows TPF for arbitration; no common law prohibition.
Access to Justice: Promotes equality of arms for financially constrained parties.
Neutrality Maintained: Funding arrangements do not compromise natural justice or enforceability.
Pro-Arbitration Stance: Singapore courts consistently support TPF to enhance its status as an international arbitration hub.
RELATED Blog
comments