Third Party Funding

We covered the key proposed changes under the Civil Law (Amendment) Bill 2016 (“Funding Bill“) in our earlier post, which provides a framework for third party funding in Singapore. It will currently apply to international arbitration proceedings and related court and mediation proceedings, and may be broadened (by subsidiary legislation) to include more categories of proceedings after a period of assessment.

The Funding Bill was introduced in Parliament on 7 November 2016, went through a second reading and passed on the same day on 10 January 2017.

Related amendments were also made to:

The Legal Profession Act: lawyers are to be allowed to play a role in funder referral and act for clients in relation to third party funding agreement; and

The Legal Profession (Professional Conduct) Rules: lawyers will have a duty to disclose the existence of any third party funding that their client is receiving.

The passing of the Funding Bill is expected to further cement Singapore’s ambition as a premier international dispute resolution hub where similar third party funding arrangements were commonplace in major arbitration institutions in London, Paris and Geneva. The next big question would be on the possible enlargement of categories of proceedings beyond international arbitration. The Singapore courts’ willingness (in Re Vanguard Energy Pte Ltd [2015] 4 SLR 597) to recognise third party funding in litigation within the context of corporate insolvency may be a promising signal of how this area will further develop in time to come.

Mediation

The Mediation Bill, which was introduced into parliament on the same day as the Funding Bill on 7 November 2016 and similarly passed on 10 January 2017, is part of a series of deliberate steps taken by the government to strengthen and expand the international dispute resolution pie in Singapore. It is expected to cement the role of mediation in complementing the existing dispute resolution mechanisms to deepen Singapore’s position as an international dispute resolution hub.

The Mediation Bill aims at implementing recommendations made by the International Commercial Mediation Working Group (“the Working Group”). The Working Group was set up in 2013 to develop strategies to grow Singapore’s international mediation landscape. Its recommendations have resulted in the establishment of the Singapore International Mediation Centre and the Singapore International Mediation Institute (SIMI), amongst others. The Mediation Bill has 4 key features:

1. Enforceability of mediated settlement agreements strengthened: It provides for the expeditious enforcement of mediated agreements; parties can record the settlement agreement as a court order. Non-breaching parties will no longer be required to commence fresh court proceedings to sue for breach of the settlement agreement in the event of non-compliance.

2. Restrictions on disclosure and admissibility clarified: It explicitly clarifies that communications made in a mediation cannot be disclosed to third parties and cannot be admitted in court or arbitral proceedings as evidence. Parties no longer required to expend resources to dispute on admissibility issues.

3. Basis for stay of court proceedings clarified: A specific basis is now provided for parties to a mediation agreement to apply to the courts to stay concurrent court proceedings relating to the same dispute. This would lead to greater certainty and saves resources required to litigate on this.

4. Mediation no longer part of restrictions on the practice of Singapore law: The Legal Profession Act will be amended to provide more freedom for parties to choose their own mediators and counsels as long as the mediation is conducted by (1) a certified mediator; or (2) administered by a designated mediation service provider. This aims to attract international mediators and counsels to Singapore for mediation, and grow the international mediation pie in a manner similar to arbitration.

In practice, a stay of court proceedings can be granted as of right when mediation is attempted, and can lead to overall time and cost savings. A settlement negotiated through mediation provides parties with an amicable, speedy and cost-efficient resolution. Mediation’s emphasis on amicable resolution is particularly suited to business contexts where parties are desirous of preserving long term business relationships. In the event parties are unable to achieve settlement at mediation, the suit may continue to be heard before the court. In addition to point 1 above (on the enforceability of mediated settlements), the UNCITRAL Working Group II is expected to discuss a new instrument to facilitate the enforcement of international commercial settlements resulting from mediation in early February in order to similarly strengthen the enforceability of settlement agreements in the context of international mediation.

The knock-on effect of these proposed changes is expected to further increase the popularity of the SIMC, where mechanisms such as the Arb-Med-Arb protocol (see our earlier post) is already in place, as well as the Singapore Mediation Centre (SMC). The SMC, the first of its kind, which began offering mediation as a mainstream dispute resolution mechanism since its inception in 1997, has handled an unprecedented number of cases (499) and total quantum of disputes (S$775 million) in 2016.[1] This represents a 72% caseload increase (which were commercial in nature) compared to 2015. The most common types of disputes mediated were company/shareholder and construction in nature.

It should be noted that the Funding Bill mentioned above will only extend to mediation proceedings that arise from or are connected with international arbitration proceedings. The Funding Bill will not apply to stand-alone mediation proceedings (for now).

In any event, 2017 is expected to be a year of dynamic growth for international dispute resolution in Singapore as these measures kick in.

With thanks to Jonathan Beh and Lakshanthi Fernando.

[1] http://www.mediation.com.sg/assets/downloads/News-Release-Bumper-number-of-mediation-cases-for-Singapore-Mediation-Centre-in-2016.pdf