Singapore Set To Become Top Choice For Arbitration
SINGAPORE: On January 10, this year, Parliament passed amendments to the Civil Law Act which paves the way for businesses involved in international commercial arbitration cases here to get third party funding (TPF).
TPF basically refers to proceedings funded by an entity unconnected to a dispute. This development opens a significant new market for funders worldwide and further asserts Singapore’s eminence as an arbitral centre and paves the way for further reform.
Among others, the Act:
– abolishes the common law torts of champerty and maintenance (which restricted the use of third party funding)
– allows lawyers to recommend third-party funders to their clients provided the lawyers do not receive any direct financial benefit from such recommendations.
– Allows conditions to be imposed on third-party funders. Funders who do not comply with these conditions will not be able to enforce their rights under their third-party funding contracts.
According to reports, the passing of the amendments will likely encourage more investments into international arbitration proceedings in Singapore, which would make the nation a more attractive forum to conduct international arbitration.
The recent development is also in line with the position taken in other major seats of international commercial arbitration such as the United Kingdom, the United States and Hong Kong where third-party funding is already permitted or being considered.
Over the years, the number of disputes and value of claims resolved by arbitration in Singapore have increased and recent treaties, such as the Trans-Pacific Partnership Agreement (TPPA) indicate a further shift towards resolving more disputes in Singapore.
The passing of the Act further enhances Singapore’s competitiveness as a top choice for arbitrations.
According to Singapore’s Senior Minister of State for Law Indranee Rajah, if the new legal framework works well, as and when appropriate, the prescribed categories of proceedings may be expanded.
“The third party funding legislative framework may be broadened in the future to other dispute resolution proceedings after a period of assessment. We will provide further updates on the progress of the relevant legislative amendments,” she was quoted as saying.
TPF funding will offer businesses an additional source of financing and a way to manage the financial risk of proceedings, paving the way for claims which may otherwise not be brought due to financial constraints.
Lawyers said the amendments are a welcome change and presents additional funding options and risk management strategies for litigants, while it is also a positive boost for Singapore to become an attractive and competitive arbitration centre.
As has been widely reported, Singapore is in competition with Hong Kong for the status as the preferred seat for international arbitrations in the Asia- Pacific region and removing obstacles to third party funding is central to give Singapore the edge.