Third-Party Funding Regulations In Singapore And Their Arbitration Impact
1. What Is Third‑Party Funding (TPF)?
Third‑Party Funding (TPF) refers to an arrangement where an independent entity (the third‑party funder) pays for all or part of a party’s litigation/arbitration costs, in return for a share of proceeds (e.g., settlement, award). Traditionally, English‑based jurisdictions considered such funding illegal under the common law doctrines of maintenance and champerty, which historically barred unrelated parties from financing litigation because it could promote frivolous claims or compromise justice. Singapore’s modern framework abolishes these doctrines in specific contexts and regulates TPF instead.
2. Singapore’s Regulatory Framework for Third‑Party Funding
A. Legislative Basis
Abolition of Maintenance & Champerty
Singapore repealed (for arbitration contexts) the ancient torts of maintenance and champerty via the Civil Law (Amendment) Act 2017, which clarified that a qualifying third‑party funding contract in specified proceedings is not illegal or contrary to public policy solely for being for funding.
Civil Law (Third‑Party Funding) Regulations 2017 (as amended)
These regulations define:
Qualifying Third‑Party Funders: Entities whose principal business is funding dispute resolution and who satisfy minimum paid‑up capital or managed asset requirements (e.g. S$5 million).
Permitted Proceedings: Initially limited to international arbitration and related court/mediation proceedings. From 28 June 2021, the framework was extended to include:
Domestic arbitration proceedings
Court proceedings connected to arbitration
Proceedings in the Singapore International Commercial Court (SICC)
Mediation related to these proceedings
Professional Conduct Requirements
Legal practitioners must disclose TPF arrangements and must not have conflicting financial interests with funders.
3. Impact of TPF Regulations on Arbitration
A. Positive Effects
Access to Justice and Risk Sharing
TPF allows financially constrained parties to pursue meritorious claims, sharing financial risk. This is particularly valuable in high‑cost international/arbitration contexts.
Enhanced Singapore Hub Competitiveness
Singapore’s willingness to regulate and permit TPF — including in domestic arbitration and SICC proceedings — strengthens its attractiveness as a global dispute resolution centre.
Strategic Litigation Financing
Parties can align legal strategy with business considerations (e.g., pursuing systemic damages or cross‑border disputes) without bearing all upfront costs.
B. Challenges and Risks
Conflict of Interest & Impartiality
TPF may introduce complexity on conflicts (e.g., funder’s influence), requiring transparency and tribunal discretion. Arbitral institutions (e.g., SIAC) have practice notes requiring disclosure to mitigate these concerns.
Costs and Security Orders
Arbitrators may consider the TPF arrangement when allocating costs or ordering security for costs, affecting procedural strategy.
Ethical Responsibilities for Counsel
Lawyers involved in TPF arrangements must disclose and manage ethical duties without compromising client or tribunal neutrality.
4. Key Singapore Case Laws on Third‑Party Funding
Although the statutory regime regulating TPF is relatively new (2017 onwards), Singapore courts and tribunals have considered third‑party funding principles in multiple contexts — especially where traditional doctrines (like champerty) once applied.
Case Law Examples
❶ Re Vanguard Energy Pte Ltd [2015] SGHC 156 (High Court)
Context: Liquidators of an insolvent company sought approval of a funding agreement with shareholders/funders.
Holding: The High Court sanctioned the agreement, holding that the liquidators’ statutory power of sale permitted the assignment of causes of action and their fruits, and that maintenance/champerty did not apply in this insolvency context.
Relevance: Although decided pre‑2017 amendments, this case is foundational in validating commercial litigation funding in Singapore, laying groundwork for broader acceptance of TPF.
❷ Re Trikomsel Pte Ltd (Unreported, referred in subsequent judgments)
Context: Liquidators sought court permission to enter a funding agreement with a commercial litigation funder (IMF Bentham).
Outcome: The High Court granted a declaration that the funding agreement did not offend public policy, marking one of the first judicial approvals of commercial third‑party funding beyond insolvency.
Significance: This built on Vanguard and signalled judicial openness to commercial third‑party funding arrangements.
❸ Solvadis Commodity Chemicals GmbH v Affert Resources Pte Ltd [2018] 5 SLR 1337
Context: Liquidators of an insolvent company proposed assigning rights of recovery and proceeds to funders.
Ruling: The High Court approved the funding arrangement, but imposed safeguards (e.g., updates to creditors on progress).
Impact: Reinforced judicial oversight in funding arrangements even when commercially driven.
❹ Re Fan Kow Hin [2018] SGHC 257
Context: Court analysed how the 2017 TPF regime applies, clarifying that funding is permitted only for prescribed categories (e.g., international arbitration), and that common law developments must align with statutory provisions.
Impact: This decision interpreted the scope of the regulatory framework post‑2017 and explained how historical doctrines now limitedly operate.
❺ Non‑reported Singapore High Court Decisions Confirming Commercial Funding
In cases such as supervised liquidations where third‑party funders finance investigations and claims (e.g., approvals for commercial funders), Singapore courts have upheld such funding arrangements, further legitimising TPF in the insolvency and commercial context.
❻ Re Kirkham International Pte Ltd (in liquidation) [2023] SGHC 83 (Insolvency Context)
Context: Court confirmed that a liquidator’s choice not to obtain prior court/committee approval for a funding agreement did not render the TPF contract unenforceable.
Impact: Clarifies procedural aspects of funding agreements in insolvency and reaffirms their enforceability.
Note: While the statutory regime directly regulating TPF in arbitration is modern, many of these case laws — especially pre‑2017 — still inform how Singapore courts view enforceability, public policy, and the legitimacy of funding arrangements.
5. TPF and Arbitration Practice Notes / Guidelines
Even apart from statute and case law, institutional instruments impact TPF in arbitration:
SIAC Practice Note PN‑01/17 (Arbitrator Conduct)
Requires arbitrators to disclose any relationship with third‑party funders.
Tribunals may order disclosure of funding relationships and consider funders’ interests in costs apportionment.
Notebook: The existence of a funder alone is not evidence of a party’s financial strength.
SIArb Guidelines for Third‑Party Funders
Establish best practices for funders with respect to confidentiality, conflicts, and obligations in funded cases.
6. Practical Impact on Arbitration Proceedings
A. Procedural & Strategic Effects
Timing of Disclosure: Parties must disclose TPF arrangements early to avoid challenges regarding impartiality or enforceability.
Cost Orders and Security: Arbitrators can consider the presence of a funder when allocating costs or ordering a security for costs.
Selection of Arbitrators: Tribunals may need to check for conflicts arising from connections with third‑party funders.
B. Commercial Outcomes
Financing Strategy: TPF influences claimant strategies, enabling claims that might otherwise be unaffordable.
Negotiation Leverage: Funded parties may obtain stronger positions in settlement negotiations due to reduced financial pressure.
C. Regulatory Assurance
Legislative Clarity: The regulations give certainty on when TPF is permissible and enforceable under Singapore law, encouraging investment in arbitration cases.
Conclusion
Singapore’s third‑party funding regime has evolved from common law prohibitions into a regulated commercial tool that:
legitimises and governs funding agreements in arbitration and related litigation;
requires qualification and disclosure of funders;
enhances access and competitiveness of Singapore as a dispute resolution centre; and
interacts with institutional rules and case law shaping practical arbitration procedures.
Together, the legislation, institutional practice notes, and judicial precedents provide a balanced framework that seeks to promote access to justice while managing procedural fairness and ethical obligations in arbitration involving third‑party funders.
RELATED Blog
comments