Singapore Third Party Funding in Arbitration and changes to Arbitration Rules

3rd October 2016

The use of third party funding by parties involved in disputes continues to be a hot topic worldwide.

The common law historically baulked at the concept of allowing a third party to interfere in a dispute in which it had no direct involvement.  This was even more the case where the third party sought to do so in return for a share of the spoils for the litigation at the end of the case.

This sort of involvement became known as “maintenance and champerty” and was generally unlawful in common law countries.

However, modern legal systems have begun to recognise that in many cases litigants, particularly those of limited means, may have need to recourse to assistance from outside funders if they are to be able to have access to justice and the law is developing to accommodate this.

Singapore is the latest jurisdiction to recognise this need and the Singapore Ministry of Law published draft legislation to legalise third party funding for arbitration (and related litigation and mediation) earlier this year.

A public consultation period on the legislation expired on 29th July 2016 and it is now anticipated that the new law, and related regulations, will become law very soon.

If so, this will enable the use of third party funding in arbitration in Singapore but this will be subject to various conditions including, for example, the need for the funder to be suitably qualified.

It is understood that Hong Kong, as the main Asian competitor to Singapore, is considering similar reforms.

At the same time, the Singapore International Arbitration Centre released the 6th Edition of it’s rules.  The SIAC Rules 2016 came into force on 1st August 2016 and these are aimed at increasing the popularity of Singapore as a centre for international dispute resolution.

Perhaps the most important change brought in by the new rules is to include a procedure which enables the Tribunal to strike out unmeritorious or vexatious claims at an early stage.

This is something which Courts have often dealt with but is novel for arbitrators.  How this will work in practice remains to be seen and it will depend to a large extent upon the quality and robustness of arbitrators to exercise these powers. Doubtless, at least at the early stages, only the most obvious case is likely to see an award being challenged in the Courts.

There are also other less striking but, nevertheless important, changes such as a streamline process for disputes arising out of multiple contracts and for dealing with related disputes.

Singapore clearly recognises the value of being seen as a leading international centre for dispute resolution and it is likely that further innovative initiatives will be seen.

Howard Colman