Update – Expansion of Third-Party Funding framework to include more categories of legal proceedings

On 28 June 2021, the Ministry of Law (“MinLaw”) announced that it will expand the third-party funding (“TPF”) framework in Singapore to include domestic arbitration proceedings, certain proceedings in the Singapore International Commercial Court (“SICC”), and related mediation proceedings. The recent expansion of the TPF framework is the product of MinLaw’s public consultation held in 2018 and strengthens Singapore’s status as a dispute resolution hub.

What is Third-Party Funding (TPF)?

TPF refers to the funding of legal proceedings by a third-party who is unconnected to the dispute in exchange for an agreed return such as a share in the damages awarded or in the settlement sum. A third-party must satisfy the criteria set out in the Civil Law (Third-Party Funding) Regulations 2017 to qualify as a funder. For instance, the third party’s principal business must be in litigation funding[1] and a minimum paid-up share capital of $5 million[2] or in “managed assets”.[3] Where a third-party funder does not comply with these qualification requirements, its rights under any funding agreement will not be enforceable.[4]

Increased categories of legal proceedings under the TPF framework

In 2017, the TPF framework in Singapore then only included international arbitration proceedings and related court and mediation proceedings. However, with effect from 28 June 2021, the categories of proceedings under the TPF framework will be extended to include the following:[5]

• 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;
• Appeal proceedings arising from any decision made in the proceedings in (c); and
• Mediation proceedings relating to any of the proceedings in (a) to (d).

Amendments to Professional Conduct Rules

Local and certain foreign lawyers involved in proceedings involving TPF must disclose[6] who the involved funders are and must ensure that they do not have any direct or indirect interest in the funders or receive any commission.[7]

With respect to registered foreign lawyers, amendments to the Legal Profession (Representation in SICC) Rules 2014 are forthcoming – so as to provide for the same professional conduct rules to apply to those involved in SICC proceedings.

Impact of enhanced TPF framework

Since 2017, the introduction of TPF in Singapore has boosted Singapore’s position as the premier international commercial dispute resolution hub. TPF is welcomed by the TPF industry, as well as legal and arbitration communities. MinLaw, in a recently issued statement, foreshadowed a rise in disputes and the number of companies facing the risk of insolvency. The enhanced TPF framework thus provides a viable alternative avenue for businesses (especially those who facing financial constraints) to fund such claims.

[1] Civil Law (Third-Party Funding) Regulations 2017, reg 4(1)(a).

[2] Civil Law (Third-Party Funding) Regulations 2017, reg 4(1)(b).

[3] For a definition of “managed assets”, refer to reg 4 of the Civil Law (Third-Party Funding) Regulations 2017.

[4] Civil Law Act, s 5B(4)

[5] Civil Law (Third-party Funding) Regulations 2021.

[6] Legal Profession (Professional Conduct) Rules 2015, s 49A.

[7] Legal Profession (Professional Conduct) Rules 2015, s 49B.