27 April 2018

On 3 April 2018, the Ministry of Law (“MinLaw”) announced it is seeking public feedback on the operation of the current third-party funding framework for international commercial arbitration which was introduced by the Civil Law (Amendment) Act 2017 (“amended Civil Law Act”) in January 2017. These amendments, together with the Civil Law (Third-Party Funding) Regulations 2017 (“Civil Law TPF Regulations”), came into force on 1 March 2017.

This new third-party framework allows the funding of proceedings by an unconnected entity to a dispute in return for financial gain, such as a share of the damages awarded or a share of the settlement sum. Prior to the passage of the amended Civil Law Act, funding of legal proceedings by unconnected parties was characterised as maintenance and champerty and considered unlawful.

The consultation closes on 15 May 2018.

Third-party framework

The amended Civil Law Act clarified that the common law torts of maintenance and champerty, which previously restricted the use of third-party funding, were abolished. Contracts affected by maintenance and champerty continue to be contrary to public policy or are otherwise illegal, and hence are unenforceable unless they fall under permitted categories of dispute resolution proceedings.

The Civil Law TPF Regulations specify the categories of dispute resolution proceedings for which third-party funding are permitted as being:

  • international arbitration proceedings;
  • court proceedings arising from or out of or in any way connected with international arbitration proceedings;
  • mediation proceedings arising out of or in any way connected with international arbitration proceedings;
  • application for a stay of proceedings referred to in section 6 of the International Arbitration Act and any other application for the enforcement of an arbitration agreement;
  • proceedings for or in connection with the enforcement of an award or a foreign award under the International Arbitration Act.

There are also qualifying criteria specified for an entity to act as a third-party funder. The entity must have not less than S$5 million or its foreign currency equivalent in paid-up share capital or managed assets. The entity must also carry on the principal business of funding costs of dispute resolution proceedings to which it is not a party, in Singapore or elsewhere.

Entities that do not meet the criteria to fund, or funders who do not comply with requirements imposed on them, will not be able to enforce their rights under the third-party funding arrangement but will still be obliged to fulfil its obligations in relation to the funding agreement.

Request for feedback

MinLaw is seeking views and any other feedback on the operation of the current third-party funding framework thus far, including any suggestions to improve the framework. MinLaw has posed the following specific questions:

  • If you have accepted or provided funding for funded cases in Singapore, or if you have advised on or been involved with one or more funded cases since the third-party funding reforms came into force.
  • If you have found the third-party funding reforms useful and whether it has had an impact on your practice or business.
  • Whether you are of the view that there is a need to expand the safe harbour for funding of international arbitration cases into new areas (if so, which areas and why).

Reference materials

The public consultation paper is available on the MinLaw website www.mlaw.gov.sg, or by clicking here.

 

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