Third-party funding for arbitrations New legislation is seen to raise Singapore’s profile as an international arbitration hub.
he Ministry of Law has submitted for its First Reading in the Parliament the Civil Law (Amendment) Bill 2016 and Civil Law (Third Party Funding) regulation. The bill states that third-party funding (TPF), which had previously been restricted for disputes, will be permitted for international commercial arbitration proceedings. TPF gives the means for a party to litigate or arbitrate without having to spend money for it. The Ministry of Law says introducing TPF in Singapore, which the body notes is a leading centre for international commercial arbitration, will enable international businesses to use funding tools available to them in other centres. It also says this will promote Singapore’s growth as a leading international arbitration venue. The legal experts interviewed for this article also note how TPF can prove to be beneficial to Singapore’s standing in the world as an arbitration hub. What are your thoughts on the proposed changes under the Civil Law (Amendment) Bill 2016 enacting a framework for third-party funding in Singapore, which will give businesses an additional financing option for international commercial arbitration? Eugene Quah, litigation & dispute resolution partner, RHTLaw Taylor Wessing LLP, welcomes the development. “Litigation or arbitration costs are big ticket extraordinary expenses that many businesses are not sufficiently well-resourced to bear,” says Quah. “The changes will open up access to a source of capital previously unavailable in this jurisdiction.”
“The liberalisation demonstrates that Singapore is open to new and novel ideas and willing to introduce and embrace what is progressive to keep up with an evolving business landscape.” Quah also notes that third-party funding can inject a greater degree of objectivity into the assessment of the merits of a party’s claim: “The claimant may have unrealistic expectations of his chances of success, but the third-party funder is a calculated risk-taker and will not fund an unmeritorious claim.” The proposed changes can be seen as a positive development for businesses, says Deborah Barker, managing partner, Withers KhattarWong. “For end users of the arbitration process, the changes will reduce (or even eliminate) the risk that third-party funding arrangements will be relied on as a basis for judicial intervention on the ground of public policy, or as a premise for an application to set aside the award.” 40 SINGAPORE BUSINESS REVIEW JANUARY 2017
Marina Chin, joint managing partner, Tan Kok Quan Partnership, says the bill is part of Singapore’s natural progression as a dispute resolution hub alongside others.
It is said that law firms and lawyers will benefit from the increase in international dispute resolution activity in Singapore. What is your reaction to this? Opening the door to third-party funding is likely to benefit law firms and lawyers in Singapore, according to Barker. “Third-party funding is already permitted in the United Kingdom and the United States, and being considered in Hong Kong. Singapore law firms which have alliances with foreign law firms in these jurisdictions will be able to tap into the experience acquired by colleagues and overseas offices in relation to third-party funding arrangements.” Chin agrees: “That this would be a boon to the legal industry cannot be overstated. Cases which may not otherwise see the light of day can now have a real chance of being heard. That such cases are typically for fairly significant claims underscores the impact that funding can have.” For Quah, however, the development will be a challenge Singapore’s local firms will have to rise up to: “Whilst an increase in international dispute resolution activity in Singapore will certainly enlarge the overall pie, domestic law firms will stand to benefit only if they are perceived to be able to fight a case on an equal footing with the large Western offshore firms.” The Ministry of Law says, “Singapore has excelled in the area of arbitration and ranks among the world’s top seats for international arbitration, alongside London, Paris, Geneva, and Hong Kong.” How will the changes, if enacted, impact Singapore’s role in arbitration? The new legislation will make Singapore even more attractive as a seat for international arbitration, notes Barker, whilst allowing it to compete for a larger share of the growing volume of international arbitration cases. Singapore should go ahead with third-party funding for international commercial arbitration or lose parties that choose it for arbitration, says Quah. “If Singapore does not, parties relying on third-party funding may shy away from using Singapore as the seat of arbitration, as funders do not want to be exposed to the risks of not being able to enforce funding agreements.” “The liberalisation demonstrates that Singapore is open to new and novel ideas and willing to introduce and embrace what is progressive to keep up with an evolving business landscape,” says Chin. “Such dynamism is key to what makes a successful dispute resolution hub in the international arena.” Further, Chin notes: “This is not about Singapore alone: strengthening Singapore’s position increases the attractiveness of doing business in this region.”