Law changes proposed to enhance Singapore's position as commercial dispute resolution hub

Senior Minister of State for Law Indranee Rajah introduced two new bills in Parliament on Monday (Nov 7) to elevate Singapore's position as a commercial dispute resolution hub.
Senior Minister of State for Law Indranee Rajah introduced two new bills in Parliament on Monday (Nov 7) to elevate Singapore's position as a commercial dispute resolution hub. PHOTO: ST FILE

SINGAPORE - Two new bills were introduced in Parliament on Monday (Nov 7) by Senior Minister of State for Law Indranee Rajah to enhance Singapore's stance as an international hub for commercial dispute resolution.

One of them, the Civil Law (Amendment) Bill, will enact a framework for third-party funding in international commercial arbitration. This allows businesses an additional option to finance such proceedings and will see Singapore joining other major arbitration centres such as London and Paris, where such funding can take place.

The other bill, the Mediation Bill, is set to make settlements more enforceable.

As the trade and business sectors in Asia continue to grow, regional demand for legal services, particularly in dispute resolution, is expected to increase, said the Ministry of Law in a statement on Monday.

Last year, the Singapore International Arbitration Centre saw its highest number of new cases filed in recent years at 271 cases. Of these, 84 per cent were international with at least one foreign party, while 42 per cent had no connection with Singapore.

The Law Ministry added that allowing third-party funding will help to consolidate Singapore's position as a "key seat of arbitration in Asia".

In third-party funding, an entity not connected to a dispute provides funds to one party in return for financial gain such as a share of damages awarded. Traditionally, the party involved or a related company foots the bill.

Currently, a third-party funding agreement cannot be enforced in Singapore, said the Law Ministry. Historically, this was to protect vulnerable parties, prevent the judicial system from becoming a site for speculative business ventures and guard against abuse of court processes.

But the new framework is set to change the situation and set out rules for funders.

Only professional funders whose main businesses include financing claims will be allowed under criteria set out. Lawyers will be required to disclose who the involved funders are as well, and should not have an interest in the funders or receive commission from them.

The public consultation for the Civil Law (Amendment) Bill was held from June 30 to July 29, while that of the Mediation Bill was from March 17 to April 28.

The Mediation Bill, which will apply to international commercial mediation among other types, is set to give agreements more bite.

Currently, if parties do not comply with a settlement agreement, one of them will need to start court proceedings to enforce this as a breach of contract. But the bill will provide another means of enforcement.

Under the proposal, parties may record an agreement as an order of court, which can be directly enforceable if they do not comply.

Parties involved can apply to halt ongoing court proceedings until the outcome of the mediation as well, mirroring what is available for arbitration. While the confidentiality of proceedings will be preserved, the bill will clarify circumstances where communications can be disclosed or admitted into court as evidence.

The amendment will also make clear that participation of foreign mediators and lawyers will not mean an unauthorised practice of Singapore law, said the Law Ministry.