SINGAPORE — To boost Singapore’s position as a legal hub for settling commercial disputes, the Ministry of Law (MinLaw) is seeking to allow third-party funding.
This means an entity that is not involved in a dispute can help bear one side’s legal fees — typically the claimant — in exchange for a share of the damages awarded.
The Civil Law (Amendment) Bill tabled in Parliament on Monday (Nov 7) also proposes letting law firms that deal solely in financing claims refer funders to clients. But the firm cannot get direct financial benefits — such as commissions — from doing so. The use of third-party funders must also be disclosed to the tribunal and opposing party.
The move comes as demand for legal services, especially in dispute resolution, are set to grow, said MinLaw. Last year, there were 271 new cases filed with the Singapore International Arbitration Centre — its highest in recent years.
The ministry had said that third-party funding is increasingly used in other arbitration centres such as London, Paris and Geneva. So, allowing the same here ensures that foreign companies settling disputes here can use a wider range of funding tools.
Currently, third-party funding is not allowed, so as to guard the judicial system from becoming a site for speculative business ventures and potential abuse of court processes.
Some lawyers said the move would solidify Singapore’s position as a leading arbitration hub, and in particular, help smaller and medium-sized companies finance potentially protracted legal proceedings.
Providence Law Asia’s managing director Abraham Vergis said: “It has allowed them to pursue claims against larger corporations, especially after major strategic initiatives have failed, and they are particularly cash-strapped.”
Some lawyers, however, said the move might not necessarily translate to a growth in arbitration cases flowing to Singapore.
“Most sophisticated funders will conduct very detailed assessments of the merits of the cases before they take them on. Therefore, it is unlikely to really add to the overall portfolio,” said Mr Paul Tan, a partner at law firm Rajah & Tann. “However, it may prevent parties from moving away from using Singapore when deciding which city to stipulate as the seat of arbitration.”
Meanwhile, MinLaw also introduced the Mediation Bill yesterday, which seeks to strengthen the enforceability of settlements. The Bill proposes that parties in a dispute may record a mediated settlement as a court order, which can be enforced if there is a breach of terms.
Currently, an aggrieved party has to initiate court proceedings if there is a breach of contract.
