Singapore update: litigation funding moves a step closer and new legislation proposed to give force to settlement agreements made through mediation

Last week saw two important and novel pieces of legislation related to dispute resolution put before the Singapore Parliament.  The first is a bill to amend current legislation to permit third party funding in international arbitration and related litigation.  The second is a bill to encourage mediation through, amongst other things, giving binding force to settlement agreements reached through mediation.

Third party funding

On 7 November 2016, the Civil Law (Amendment) Bill (the "Funding Bill") was introduced to Parliament for a first reading.  This follows a consultation on the draft legislation to legalise third party funding that was published in July 2016, which was discussed in our previous post. The Funding Bill is similar to that put out for consultation, with only some minor changes introduced.

The Funding Bill is a first critical step in enabling third party funding for international commercial arbitration proceedings and related court litigation as it will abolish the common law tort of maintenance and champerty and clarify that third party funding contracts (for certain classes of permitted proceedings) will not be contrary to public policy and therefore enforceable in Singapore.  Importantly, the Funding Bill also lays the groundwork for a regulatory framework for third party funders, which will be elaborated in regulations to be published by the Government. The Funding Bill does not, however, deal with contingency fees or other alternative fee structures for dispute resolution work by Singaporean lawyers or foreign lawyers within Singapore, which remain unlawful.

It is expected that the Funding Bill, if approved by Parliament following a second reading, will be enacted early in 2017.

Enforcement of settlement agreements in mediation

The Mediation Bill was also introduced to Parliament for a first reading on 7 November 2016 and is intended to help encourage the growth of mediation as a form of dispute resolution.  The Mediation Bill includes three key proposals:

1. A power to stay court proceedings in favour of mediation

It is proposed that parties to a contract which provides for disputes to be subject to mediation (or parties who have agreed to refer a specific dispute to mediation) can seek a stay of any court proceedings relating to the dispute in question.  This is intended to prevent parties from using court process as a way of interfering with the mediation process.  As currently drafted, the mechanism is permissive and not mandatory – in other words, while a court may choose to stay a proceeding in favour of a mediation, it is not automatically required to do so (as would be the case with a stay in favour of arbitration).

2. Enforcement of mediation settlement agreements

In a novel development, the Mediation Bill proposes a mechanism by which parties to a settlement agreement reached through mediation can apply to the Singapore courts for the agreement to be recorded as a court order, which could then be enforced as a normal Singapore court judgment.  This new power would be restricted to agreements reached in disputes where there is no pre-existing court litigation and following mediations which are administered by a designated mediation centre (to be determined in future regulations) or mediations using a mediator certified under future regulations.

3. Confidentiality of mediation communications

The Mediation Bill would also confirm that all correspondence in a mediation is prima facie confidential and inadmissible in evidence in a Singapore court or before an arbitral tribunal seated in Singapore, subject only to a number of specified exceptions).

During the consultation process for the Funding Bill, we understand that a large number of detailed submissions were provided to the Singapore Government from interested parties.  While only minor changes were subsequently made to the Funding Bill, it anticipated that the finer details of the third party funding framework and the mediation framework will be fleshed out in regulations. 

These two important developments further reinforce Singapore's determination to develop itself as a global market-leading hub for dispute resolution, whether litigation, arbitration or ADR.  We will provide further updates as more details are provided by the Government.

For further information, please contact Alastair Henderson, Partner, Daniel Waldek, Senior Associate, Gitta Satryani, Senior Associate, or your usual Herbert Smith Freehills LLP contact.