Singapore Passes Legislation on Third Party Funding and Mediation
On 10 January 2017, Singapore’s Parliament made further strides in securing Singapore’s place as a leading global hub for alternative dispute resolution (ADR) by passing two pieces of legislation: (i) amendments to its Civil Law Act legalizing third party funding in international arbitration proceedings; and (ii) a mediation bill (the Mediation Bill).
As you all know, the arbitration process can be lengthy and expensive. As a result, some meritorious claims are unable to proceed when parties cannot finance their own legal costs. Third party funders can provide crucial assistance in such cases by financing the arbitration proceedings in exchange for a percentage of the award or a success fee if the outcome is positive. From their perspective, funding the arbitral proceeding is a calculated business investment, like any other. Third party funding, like other financial arrangements such as the attorney contingency fee, is a payment method accepted in certain jurisdictions and prohibited in others.
Singapore’s amended Civil Law Act will make access to such third party funding possible. Specifically, the law confirms the legality of such funding, specifies the types of proceedings in which it may be used, and stipulates the qualifications third party funders must meet – notably that such funding must be their principle source of business. The amendments also abolish certain common law torts aimed at preventing frivolous litigation that would otherwise have limited parties’ ability to use third party funding. These broad changes will be further refined through subsidiary legislation.
The current amendments apply only to international arbitration and to mediation and civil litigation arising from such proceedings. However, ministers within Singapore’s government have indicated an intention to expand the law’s scope in the future to include civil litigation and domestic arbitration, as well as potentially to permit the use of contingency fee arrangements.
In addition to the legalisation of third party funding, Singapore’s Parliament has also passed the Mediation Bill which represents yet another significant stride towards the promotion of ADR in Singapore. This legislation ensures the confidentiality of mediation correspondence from admission as evidence in both court and arbitral proceedings. It also allows for parties to stay litigation in order to seek a mediated resolution, and for a mediated settlement to be accepted as a court order and enforced by Singapore courts.
UPDATE (14 March 2017): The new legislation on third party funding in Singapore entered into force on 1 March 2017.
Please note that legal developments regarding third party funding are also currently under consideration in Hong Kong. We will of course keep you updated.