Third-party funding permitted for more categories of legal proceedings in Singapore: Allen & Gledhill

15 July 2021

From 28 June 2021, the third-party funding framework in Singapore has been expanded to cover domestic arbitration proceedings, certain proceedings in the Singapore International Commercial Court (“SICC”), and related mediation proceedings. At its inception in 2017, Singapore’s third-party funding framework applied only to international arbitration proceedings and related court and mediation proceedings. Funders and the business, legal and arbitration communities have responded positively to the third-party framework.

Respondents to the Ministry of Law’s (“MinLaw”) public consultation in 2018 on the third-party funding framework also supported the extension of the framework to more categories of proceedings, which has led to these latest changes.

For completeness, “third-party funding” refers to the funding of legal proceedings by an entity unconnected to a dispute in return for financial gain, such as a share of the damages awarded or a share of the settlement sum. In Singapore, only entities which meet set criteria may provide third-party funding. For instance, they must be professional funders whose principal business is funding the costs of dispute resolution proceedings, and they must have a minimum paid-up share capital.

Rationale

MinLaw announced the expansion of the third-party funding framework on 21 June 2021 and explained that businesses will be able to consider an alternative avenue to fund meritorious claims. These changes will benefit Singapore’s legal community by strengthening the country’s position as an international commercial dispute resolution hub. MinLaw also notes that, against the backdrop of the Covid-19 pandemic, there may be a rise in disputes and companies facing the risk of insolvency. As financial constraints may cause litigants to forgo pursuing their legal rights, additional funding options such as third-party funding will offer another solution for these litigants, to enable them to pursue meritorious claims in permitted proceedings.

In explaining its decision to expand the framework at this time, MinLaw noted that more funders now have a presence in Singapore, and businesses have shown increasing interest in additional options for financing litigation.

Extended categories of proceedings

The categories of proceedings for which third-party funding framework is permitted have been extended to include, in addition to international arbitration and related court and mediation proceedings, the following:

Domestic arbitration proceedings;
Court proceedings arising from or connected with domestic arbitration proceedings;
Proceedings commenced in SICC, for as long as those proceedings remain in SICC;
Appeal proceedings arising from any decision made in the proceedings in paragraph (c); and
Mediation proceedings relating to any of the proceedings above.

This amendment is set out in the Civil Law (Third-Party Funding) (Amendment) Regulations.

Amendments to professional conduct rules

The Legal Profession (Professional Conduct) Rules 2015 will continue to apply for local lawyers (i.e. persons admitted to practise as an advocate and solicitor of the Supreme Court in Singapore) and certain foreign lawyers (i.e. regulated foreign lawyers under the Legal Profession Act, defined as lawyers registered under sections 36B, 36C, 36D, or granted approval under section 176 of that Act) involved in proceedings funded through the third-party funding framework. These rules serve to prevent conflicts of interest amongst practitioners and funders.

Registered foreign lawyers involved in SICC proceedings are governed by a separate set of rules. With third-party funding now permitted in certain SICC proceedings, the Legal Profession (Representation in Singapore International Commercial Court) Rules 2014 has been amended to provide professional conduct rules for these registered foreign lawyers. These amendments are aligned with those for local lawyers and certain foreign lawyers. The rules set out the disclosure obligations in relation to the use of the third-party funding framework in SICC proceedings, and regulate a registered foreign lawyer’s financial interests in relevant third-party funders.

Related amendments will also be made to the Rules of Court with regard to orders for adverse costs and security for costs where third-party funding framework is involved in proceedings before SICC.

Reference materials

Available on the MinLaw website www.mlaw.gov.sg are the following materials: