Disputes - Economic Risk
The Landscape of Litigation Funding in the United Arab Emirates (UAE)
Disputes - Economic Risk
This is the first article in Clyde & Co’s latest international arbitration series covering the topic of third-party funding (or litigation funding) across various international jurisdictions. In this piece, Leon Alexander (Partner), Hannah Chua (Legal Director) and Elizabeth Teo (Associate) from our Singapore office provide the legal perspective from Singapore.
Litigation funding, also referred to broadly as third-party funding, is where a third-party with no prior connection to the litigation agrees to finance all or part of the legal costs of the litigation in return for a fee payable from the damages or settlement sum recovered by the funded litigant if successful. It is a course of action often considered by a litigant who has a meritorious case but does not have the financial means or wherewithal to pursue their claim in legal proceedings to fruition. Apart from a general inability to afford the associated legal costs, a litigant may also simply be keen to remove or reduce its costs exposure, or it may prefer to put its working capital towards other business needs instead. In such situations, the litigant turns to third-party funding.
Historically, Singapore’s laws on champerty and maintenance were inherited from English common law. These doctrines were developed to forestall the use of the law as an instrument of oppression against parties lacking in financial means whereby an unrelated party with no interest in the outcome of the litigation could provide assistance or encouragement to one of the parties to litigation.
However, with the evolution of the modern litigation and commercial landscape, it has become increasingly common and acceptable for third parties with no direct interest in the outcome of a case, such as insurers and trade unions, to maintain litigation. It has therefore been argued that the protections originally afforded by champerty laws are no longer necessary and jurisdictions including Singapore have taken steps towards removing these doctrines and allowing third-party funding.
Following the amendment of the Civil Law Act (“CLA”) in 2017 which effectively abolished the torts of maintenance and champerty and the enactment of the Civil Law (Third-Party Funding) Regulations 2017, third-party funding for international arbitration and related court and mediation proceedings is now permitted in certain circumstances and provided that the funders meet the requisite criteria.
The permitted circumstances
In 2021, the permitted third-party funding framework was expanded to more categories of proceedings and, at present, litigation funding is permitted in the following contexts:
(a) international arbitration and related court proceedings arising out of or in any way connected with international arbitration;
(b) application for a stay of proceedings under section 6 of the International Arbitration Act (“IAA”) and any other application to enforce an arbitration agreement;
(c) proceedings for or in connection with the enforcement of an award or foreign award under the IAA;
(d) domestic arbitration and related court proceedings;
(e) court proceedings commenced in the Singapore International Commercial Court (“SICC”) so long as those proceedings remain in the SICC;
(f) appeal proceedings arising from any decision made in proceedings commenced in the SICC so long as those proceedings remain in the SICC;
(g) court proceedings in the insolvency context (i.e. subject to the Singapore courts’ approval, a liquidator can enter into third-party funding agreements); and
(h) mediation proceedings in relation to any of the proceedings in items (a) to (d) above.
The requisite funder criteria
In order to provide litigation funding services in Singapore, market participants must satisfy the ‘qualifying third‑party funder' criteria prescribed under the Civil Law (Third-Party Funding) Regulations 2017. These include the following requirements:
(a) The funder must carry on the principal business of the funding of the costs of dispute resolution proceedings to which it is not a party; and
(b) The funder must have a paid‑up share capital of:
i. not less than S$5 million or the equivalent amount in foreign currency; or
ii. not less than S$5 million or the equivalent amount in foreign currency in managed assets.
Last but not least, whilst the commercial terms of the funding contract do not need to be disclosed, pursuant to Singapore’s Legal Professional Conduct Rules, legal practitioners are required to disclose to the court or tribunal, and every other party to the proceedings, the existence of the funding contract, and the identity and address of the funder.
As discussed above, third-party funding is permitted in arbitrations in Singapore and, generally, third-party funding is more widely permitted (and used) in the arbitration context than in litigation. In the litigation context, as matters currently stand, the scope of permitted third-party funding still remains limited to SICC proceedings.
In Singapore, the Singapore International Arbitration Centre,1 the Singapore Institute of Arbitrators (“SIArb”)2 and the Law Society of Singapore3 have issued guidelines on third-party funding in Singapore, in particular, on issues relating to confidentiality, privilege and funders’ involvement in proceedings. To-date, there have been several funders who have voluntarily signed up to these guidelines.
At present, there are no upcoming statutory changes to be made and/or public consultations being sought by the Singapore Ministry of Law in respect of litigation funding in Singapore, bearing in mind that latest revisions came into effect in June 2021.
Although third-party funding only became permitted in Singapore in 2017 and more widely used in recent years, there have been a few key decisions on various aspects of the practice issued by the Singapore courts.
These decisions include:
(a) a declaration that a funding agreement did not offend the doctrine of champerty and maintenance – this High Court decision in Re Trikomsel Pte Ltd was not written but was referred to and applied in Re Fan Kow Hin  3 SLR 861;
(b) a decision by the Singapore High Court clarifying that the 2017 amendments to the CLA, in permitting third-party funding for international arbitrations and related proceedings, were not to be understood as limiting the development of the law on champerty and maintenance in Singapore – instead, the extent to which the rule against maintenance and champerty should continue to operate is a matter left to the courts (see Re Fan Kow Hin  3 SLR 861); and
(c) a decision confirming that a plaintiff can provide security for costs in the form of an undertaking from its litigation funders (as opposed to an upfront payment of funds) – this decision is a nod towards the creditworthiness of litigation funders and effectively reduces the upfront costs of litigation funding (see Hyflux Ltd (in compulsory liquidation) and others v Lum Ooi Lin  SGHC 113).
Since the 2017 CLA amendments, established litigation funders such as Omni Bridgeway have set up offices in Singapore and appear to be growing fast.
In recent times, we have observed an increased use of litigation funding in Singapore particularly in enforcement and insolvency contexts. The aftermath of the COVID-19 pandemic has prompted more litigants to turn to third-party funding to remove litigation risks. There has also been a rise in companies facing insolvency risks and/or financial constraints.
Whilst there is no formal list of funders operating in Singapore, there is a list of third-party funders who have signed up to the SIArb Third Party Funding Guidelines. This list, which is by no means a comprehensive list of funders operating in Singapore, is reproduced as follows:
List of Third Party Funders Who Support the SIArb Third Party Funding Guidelines 4
(a) Augusta Ventures Ltd
(b) Balance Legal Capital LLP
(c) Burford Capital
(d) Calunius Capital LLP
(e) Deminor Recovery Services
(f) Harbour Litigation Funding
(g) IMF Bentham
(h) La Francaise IC2
(i) LCM - Litigation Capital Management
(k) Profile Investment
(l) Vannin Capital
(m) Woodsford Litigation Funding
(n) Harbour Litigation Funding
The next article in this series will cover the perspective from France.