From 28 June 2021, Singapore will permit third-party funding of domestic arbitration proceedings, proceedings in the Singapore International Commercial Court (SICC) and related mediation proceedings. Before this, Singapore permitted third-party funding for international arbitration proceedings and related court and mediation proceedings only (as reported in our blog post of January 2017). In making these changes, the Ministry of Law is demonstrating its willingness to respond to the needs of international commercial parties who are considering Singapore for the resolution of their disputes, whether in mediation, litigation or arbitration.
Overview
The Ministry of Law (MinLaw) announced these changes on 21 June 2021 as a result of feedback from funders, businesses and the legal and arbitration community, and against the backdrop of the COVID-19 pandemic. In its press release, MinLaw said that these amendments would offer parties who are in financial hardship a way to pursue their claims.
As a result, Singapore will now permit third-party funding for the following new categories of proceedings:
- domestic arbitration proceedings;
- court proceedings arising from or connected with domestic arbitration proceedings;
- proceedings commenced in the SICC, for as long as those proceedings remain in the SICC, and any appeals from those proceedings; and
- mediation proceedings relating to any of the proceedings above.
SICC proceedings
The extension of third-party funding to proceedings commenced in the SICC is significant. However, it appears that third-party funding will not be available for proceedings commenced in the General Division of the High Court and transferred to the SICC under the registrar's case management powers. The impact of this change may therefore take some time to be felt, as the SICC's docket currently primarily consists of transferred matters. Funding for international arbitration-related court proceedings (including those transferred from the General Division) was already allowed under the prior regime.
Related amendments have also been made in relation to the rules governing SICC proceedings. These rules have been amended to clarify that the costs of any third-party funding contract will not be recoverable as part of the costs of SICC proceedings. However, the amendments also state that the SICC may:
- order a third-party funder to give security for the defendant's costs of the action or other proceedings;
- take into account the terms of any third-party funding contract in ordering costs; and
- order costs to be paid by a third-party funder.
The professional conduct rules for third-party funding that apply to Singapore-qualified lawyers and registered foreign lawyers involved in SICC proceedings have also now been aligned. All lawyers involved in SICC proceedings must disclose the use of third-party funding. They will also be prohibited from having certain financial and other interests in third-party funders to avoid conflicts of interest.
Summary
These developments will be of particular interest to funders and parties looking to mitigate the financial risks associated with litigation and arbitration.
With these developments, the SICC is likely to become a court of choice. Parties who wish to have their international commercial disputes decided in the Singapore Courts may wish to specify the SICC as the dispute resolution forum so as to avail themselves of the option of third-party funding.
For more information, please contact Alastair Henderson, Gitta Satryani, Tomas Furlong, Elaine Wong, Joshua Chia or your usual Herbert Smith Freehills contact.
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Disclaimer
Herbert Smith Freehills LLP has a Formal Law Alliance (FLA) with Singapore law firm Prolegis LLC, which provides clients with access to Singapore law advice from Prolegis. The FLA in the name of Herbert Smith Freehills Prolegis allows the two firms to deliver a complementary and seamless legal service.