The Singapore Ministry of Law confirmed on Monday (21 June) the extension of rules allowing third party funding in Singapore to matters beyond simply those involving international arbitration and related mediation. From 28 June 2021, third party funding will also now be available to parties involved in domestic arbitration and related mediation as well as certain cases heard in the Singapore International Commercial Court (SICC). The SICC is a division of the Singapore High Court which uses international judges as well as Singapore judges to deal with transnational commercial disputes governed by both Singapore and foreign law.
Third party funding and this latest extension of the areas in which it will now become available provides businesses an alternative option for funding claims by in effect, turning a claim with good prospects of success into an asset which may be ‘sold’ to funders. When a third party funder agrees to fund a claim, it will usually do so on a non-recourse basis in the sense that even if the claim is not successful, the business will not have to pay any costs. It is only if a funded claim is successful and a recovery in damages is made from the other party that a payment is made to the funder. Of course, this is not inexpensive (a funder will be well rewarded for taking on the associated risks) and it depends on the claim being meritorious if a funder is to be persuaded to take it on. However, the upside is that it provides businesses with certainty in that they can draw a line under an otherwise potentially time-consuming, expensive and uncertain legal process and focus their resources on pursuing other more commercial interests.
Based on the Ministry’s press release, part of the rationale in extending Singapore’s third party funding legislative framework is the likelihood that as a result of the COVID-19 pandemic, there may be a rise in disputes plus associated financial pressures which may in part be addressed with the extended availability of funding. Moreover, this development serves to underline the continuing growth in dispute resolution options available in Singapore and its increasing reputation as an international hub for the resolution of cross-border commercial disputes.
A link to the Ministry’s Press Release is here.
For more information on the pros and cons of third party funding, please see our earlier article which discusses it in more detail.
