Singapore's status as legal hub boosted by changes to law

Businesses involved in international commercial arbitration cases in Singapore will be allowed to get funding from third parties.
Businesses involved in international commercial arbitration cases in Singapore will be allowed to get funding from third parties.PHOTO: ST FILE

Amended Civil Law Act allows third-party funding in global commercial arbitration

Amendments to the Civil Law Act passed yesterday will allow businesses involved in international commercial arbitration cases here to get funding from third parties, a move that has been described as a boost to Singapore's position as a legal hub.

The framework may be broadened to other types of cases after a period of assessment, said Senior Minister of State for Law Indranee Rajah.

"We want to have (it) tested in a limited sphere," she said. "If the framework works well, as and when appropriate, the prescribed categories of proceedings may be expanded."

Third-party funding - where an entity not connected to a dispute provides funds to one party in return for financial gain - is allowed in major arbitration centres such as London and Paris.

The new Bill framework will set out rules for parties.

  • New law could draw more mediation cases here

  • The Mediation Bill passed yesterday to make international commercial settlements more enforceable could help to draw more of such cases to Singapore, said Senior Minister of State for Law Indranee Rajah.

    She also gave the assurance that high standards of mediation would be maintained.

    While parties currently have to start legal proceedings to enforce a settlement agreement, the Bill provides another means of enforcement.

    Parties may record an agreement as an order of court, which may be directly enforceable if not complied with. They can apply to halt ongoing court proceedings pending the outcome of mediation as well.

    The Bill also clarifies circumstances where mediation communications can be disclosed or admitted to court.

    Mr Patrick Tay (West Coast GRC) and Associate Professor Fatimah Lateef (Marine Parade GRC) highlighted the need to maintain high standards and levels of professionalism. Prof Fatimah asked if the issue of specialist mediators had been considered.

    Ms Indranee replied that the Singapore Mediation Centre and Singapore International Mediation Centre already have specialist mediators spanning areas such as banking, finance and family.

    She added that bodies such as the Singapore International Mediation Institute, set up in 2014, will act as an independent group to promote mediation and set high standards.

    The Bill will not apply to mediation under the Industrial Relations Act, by the Family Justice Courts and the Women's Charter, or under the Small Claims Tribunal, "to prevent inconsistency with existing legislative frameworks", she said.

    Community mediation is also excluded.

    Seow Bei Yi

Only professionals whose principal business is funding claims will be allowed, and lawyers will have to disclose who the fund providers are.

The lawyers also should not hold shares or have ownership interest in these fund providers, or receive referral fees and commission, to prevent conflicts of interest.

While MPs yesterday agreed that third-party funding helps facilitate access to justice by enabling parties who may not have the financial means to prosecute a genuine dispute, they also raised suggestions and concerns on issues such as regulation.

Mr Murali Pillai (Bukit Batok) suggested that such funding be allowed in litigation and domestic arbitration.

Potential beneficiaries are small and medium-sized enterprises facing cash-flow issues, but which may have legitimate claims.

Mr Vikram Nair (Sembawang GRC) suggested considering contingency fee arrangements, where lawyers may receive a sum of money only if a case is won.

"Unlike jurisdictions such as the United Kingdom, Australia and even the United States, we have until now not permitted more creative fee arrangements," he said.

"So in our competition to be a hub for international arbitration, Singapore is sometimes at a disadvantage," he added.

Contingency fees may have a "bad reputation" with astronomical claims, but the risk of that may not be as great here.

Singapore does not have class-action litigation, he said, where lawyers take on claims for large groups of unnamed people, or jury trials where "a lot of the largest personal injury awards are made".

In response, Ms Indranee said event-triggered fee arrangements, including contingency fee arrangements, will be studied as part of the review of the civil justice system.

Until then, it remains prohibited for lawyers and law firms.

Other issues raised touched on the regulation of third-party funding and how bad practices will be dealt with.

A heavy regulatory framework will have "little practical effect", said Ms Indranee, as many parties, counsel, arbitrators and fund providers will not be in Singapore's jurisdiction.

The preference was for "soft law regulation", for example, through International Bar Association guidelines, or collective self-regulation through a code of conduct, she said.

MORE CREATIVE FEE ARRANGEMENTS, PLEASE

Unlike jurisdictions such as the United Kingdom, Australia and even the United States, we have until now not permitted more creative fee arrangements.

MR VIKRAM NAIR (SEMBAWANG GRC), on the possibility of allowing contingency fee arrangements.

To tackle abuses typically arising from "lack of transparency and conflicts of interest", she added, disclosure will be a central tenet.

Legal practitioners have to disclose if their clients are receiving third-party funding but not the commercial terms of the funding agreement, enhancing transparency.

"The proposed approach to regulation would be in line with that in other jurisdictions," she said.

While Nominated MP Mahdev Mohan asked if disclosure would affect the willingness of third parties to provide funding here, Ms Indranee said disclosure received "major support" from most professional fund providers who responded to the public consultation.

A version of this article appeared in the print edition of The Straits Times on January 11, 2017, with the headline 'S'pore's status as legal hub boosted by changes to law'. Print Edition | Subscribe