Green light for Third-Party Funding for International Arbitration in Asia
J. Harrison, A. Chung & S. Cheung
On 14 June 2017 hot on the heels of Singapore, Hong Kong became the second jurisdiction in Asia to provide an express framework for third party funding in international arbitration. In bringing these changes Singapore and Hong Kong have ensured that they can continue to compete with other leading arbitration jurisdictions such as the US and UK where third-party funding arrangements were already allowed.
Singapore The Civil Law (Amendment) Act 2017 (the Act) and Civil Law (Third Party Funding) Regulations 2017 (the Regulations) came into force on 1 March 2017, together with the insertion of new rules into Singapore's Legal Profession Act (the LPA) and Legal Profession (Professional Conduct) Rules 2015 (the LPCR). These developments follow the Civil Law (Amendment) Bill which was passed on 10 January 2017. Summary of legislative amendments In summary, the Act provides that third party funding agreements with qualifying third-party funders will no longer be illegal and unenforceable under Singapore law as long as they relate to one of the specified categories of dispute resolution proceedings. The Regulations set out detailed provisions regarding: - The classes of "Prescribed dispute resolution proceedings" for which third party funding is permitted. At present, only third-party funding contracts in relation to international arbitration and related court or mediation proceedings are enforceable. This would include applications for stay of court proceedings in respect of matters which are the subject of arbitration agreements, as well as the enforcement of arbitration awards. - It is clear from the Regulations that only professional funders are permitted to enter into third-party funding arrangements in Singapore. Regulation 4 provides that a "qualifying Third-Party Funder" must (a) carry on the "principal business" of funding dispute resolution proceedings in Singapore or elsewhere, and (b) have a paid-up share capital of not less than SGD 5 million (or the equivalent amount in foreign currency) Lawyers and Third-Party Funding New rules applicable to third-party funding have also been inserted into the LPA and LPCR: - Section 107(3A) of the LPA provides that lawyers may introduce or refer a third-party funder to their clients, as long as the lawyer does not receive a direct financial benefit from the introduction or referral. Lawyers may also advise on or draft a third-party funding contract for their clients and act for their clients in any dispute arising out of the third-party funding agreement. - The amendments to the LPCR concern two key areas: