E-briefing: Singapore allows Third-Party Funding for Domestic Arbitration, certain SICC Proceedings and related Mediation Proceedings

Why this is Important

In the event of a dispute, one of the most significant factors as to whether a party pursues its claim against another party is cost. How much will this case cost the company? How much will we have to spend on legal fees? Will this matter go beyond our budget, particularly if it lasts for a prolonged period of time? If a company does not have sufficient funding or the appetite to financially sustain an arbitration or a litigation, it may lead to an unwanted settlement or even abandonment of meritorious claims.

Singapore’s latest directive to extend the third-party funding framework to more categories of proceedings means that more business organisations will be able to take advantage of third-party funding to finance and sustain their meritorious claims. With cost as a controllable factor, parties will have more flexibility in managing their financial exposure in case of a dispute. 

Background on Third-Party Funding

Third-party funding refers to the funding of legal proceedings by an entity unconnected to a dispute, where the entity may agree to pay some or all of the claimant’s legal fees and expenses. Should the claimant succeed, the third-party funder usually takes a share of the damages awarded or a share of the settlement sum. In Singapore, third-party funders are generally professional funders whose principal business is funding the costs of dispute resolution proceedings, and they must have a minimum paid-up share capital.

Since 2017, third-party funding has been allowed in Singapore in relation to international arbitrations and related court and mediation proceedings. International arbitrations, as distinguished from domestic arbitrations, include (but are not limited to) those matters, for example, where at least one of the parties has its place of business outside of Singapore, or where a substantial part of the obligation of the commercial relationship to be performed is outside Singapore.

Overview of Developments

With effect from 28 June 2021, Singapore will also allow third-party funding in the following proceedings:

• Domestic arbitration proceedings;
• Court proceedings arising from or connected with domestic arbitration proceedings;
• Proceedings commenced in the Singapore International Commercial Court (SICC), for as long as those proceedings remain in the SICC, and appeal proceedings from any decisions in these proceedings; and 
• Mediation proceedings relating to any of the proceedings above.

This development significantly widens the categories of disputes in which parties may avail of third-party funding. It is a welcome development for parties who may have cost and budget concerns in relation to their potential or ongoing disputes.

The Harry Elias Partnership International Arbitration Practice

Harry Elias Partnership regularly provides advice on complex international and domestic commercial disputes. We have extensive experience in advising and successfully representing multinational entities in commercial arbitration. As a full-service Singapore law firm, we have full rights of audience before all tiers of Singapore Courts. We are therefore well placed to advise and support our clients in any arbitration-related court applications before the Singapore Courts.

Our team has an extensive network of third-party funders available. We are also able to advise on third-party funding contracts for our clients. If you would like further information or if you are already considering availing of third-party funding, please reach out to us for a confidential discussion. 

For further information, please contact:

Francis Goh

Head, International Arbitration

Partner | Harry Elias Partnership LLP

francisgoh@harryelias.com | +65 6361 9835

Janice Lee

Foreign Legal Associate | Harry Elias Partnership LLP

janicelee@harryelias.com | +65 6361 9821