Litigation Funding Comparative Guide

• Law Firm: LCM ('Litigation Capital Management')
• Subject Matter: Finance and Banking, Consumer Protection, Financial Services, Consumer Law, Consumer Credit
• Author: Mr Roger Milburn
• Published date: 03 March 2023

1 Commercial legal finance basics

1.1 How is commercial legal finance defined in your jurisdiction?

The use of legal finance was first permitted in insolvency matters in Singapore following the seminal decisions in Re Vanguard Energy Pte Ltd, Trikomsel Pte Ltd (unreported) and Solvadis Commodity Chemical Gmbh v Affert Resources Pte Ltd, with the principles derived from those cases later being enshrined in the Insolvency, Restructuring and Dissolution Act 2018.

The Civil Law (Amendment) Act 2017 paved the way for the use of third-party funding for other types of cases. Section 5B(10) defines a 'third‑party funding contract' as a "contract or agreement by a party or potential party to dispute resolution proceedings with a Third‑Party Funder for the funding of all or part of the costs of the proceedings in return for a share or other interest in the proceeds or potential proceeds of the proceedings to which the party or potential party may become entitled".

1.2 How does commercial legal finance differ from consumer litigation finance and contingency agreements?

Contingency fees are not permitted in Singapore. However, since May 2022, lawyers have been permitted to enter into conditional fee agreements with their clients for selected proceedings, such as:

• international and domestic arbitration proceedings;
• some proceedings at the Singapore International Commercial Court (SICC); and
• related court and mediation proceedings.

Typical CFAs may adopt the 'win, more fee', 'no win, no fee' and 'no win, less fee' models.

There is no recognised provision of consumer litigation finance in Singapore. In order to provide litigation finance in Singapore, market participants must be regarded as a 'qualifying third‑party funder' by meeting criteria enshrined in the Civil Law (Third-Party Funding) Regulations 2017. These include the requirements that the funder:

• carries on the principal business of the funding of the costs of dispute resolution proceedings to which it is not a party; and
• has a paid‑up share capital of
• • not less than S$5 million or the equivalent amount in foreign currency; or
  • not less than S$5 million or the equivalent amount in foreign currency in managed assets.

1.3 What are the major legal finance products/solutions in your jurisdiction? (a) Single case fees and expenses; (b) Portfolio fees and expenses; (c) Monetisation of claims; (d) Monetisation of judgments and awards and (e) Other

Arguably the most common litigation funding product used in Singapore is the provision of capital by way of single-case funding, where financing is provided for a specific case in a single proceeding. Capital provided is repayable to the funder only out of any claim proceeds which are received by the claimant. As such the product is 'non-recourse' and the financier has no recourse to the assets of the claimant in order to be repaid its investment.

In Singapore, and as further discussed in question 2.1, financing in the form of single-case funding can be used in:

• arbitrations;
• arbitration-related court proceedings;
• proceedings before the SICC; and
• cases in the insolvency context.

Funders active in Singapore also offer portfolio funding whereby numerous cases with which a single client is involved may benefit from the financial support of the funder, with such finance being cross-collateralised across all cases in the portfolio. The effect of this is that the finance may be repaid from any one case in the portfolio even if other cases in the portfolio are unsuccessful. This makes this a less risky product for the financier than single case funding and as such, the premium charged by the financier is lower than for single-case funding.

1.4 In what areas of law is litigation finance most prevalent in your jurisdiction (eg, competition, insolvency, patents, contracts)?

In line with Singapore's efforts to promote itself as an international arbitration hub and the amendments to its laws allowing the use of funding in arbitrations, litigation funding in Singapore is most prevalent in commercial and contractual disputes which are to be resolved by way of arbitration.

Because of efforts by the government to allow the use of litigation funding in the insolvency context, there are an increasing number of potential funding opportunities in insolvency matters. As it did for arbitration, the government is also embarking on a campaign to promote Singapore as an insolvency and restructuring hub, meaning that further increases in the use and promotion of litigation finance in insolvencies are anticipated.

1.5 Who are the major players in the industry (eg, pure players, multi-strategy firms, start-ups)?

In Singapore, the major players in the litigation finance industry are of course the litigation funders themselves, which are amply represented in Singapore by established and globally operating funders. As explained in question 1.2, only companies which meet the criteria of a 'qualifying third‑party funder' are permitted to operate in Singapore.

These funders in turn receive many funding applications and enquiries from both Singaporean law firms and international law firms. In addition, because Singapore serves as a hub for the region, funders in Singapore also receive applications pertaining to disputes from all over Asia.

2 Legal framework

2.1 How mature is the market for legal finance in your jurisdiction? What types of commercial litigations and/or arbitrations may be funded by a third party?

Singapore has arguably become the leading disputes hub in Southeast Asia and the wider Asian region. In line with the government's efforts to establish an attractive disputes ecosystem, it has also taken the lead in promoting the use of litigation funding in the region (together with Hong Kong).

In 2017, the government abolished the common law torts of maintenance and champerty to allow the use of funding, initially only for international arbitration and related court proceedings. In 2021, the government expanded the permissible use of litigation funding to cover domestic arbitration (and related court proceedings) and proceedings before the Singapore International Commercial Court (and related appeals), plus mediations related to any of these categories.

Singapore's Insolvency, Resolution and Dissolution Act 2018 entered into force on 30 July 2020 and confirms that the use of funding in the insolvency context is also permissible.

2.2 Is there a dedicated legal finance regime in your jurisdiction? What other laws and regulations have relevance to legal finance in your jurisdiction?

The Civil Law (Third-Party) Funding Regulations 2017 govern the use of litigation funding in Singapore, where much of the finer detail in the applicable regime is within the scope of the Ministry of Law.

The Legal Profession (Professional Conduct) (Amendment) Rules 2017 are also relevant in the use of litigation funding in Singapore. These rules require legal practitioners to notify all parties of the existence of the funding arrangement and the identity of the funder.

In May 2017, the Singapore Institute of Arbitrators (SIArb) issued its Guidelines for Third Party Funders, which aim to promote best practices among funders that intend to provide funding to parties in Singapore-seated international arbitrations. These guidelines:

• set expectations of transparency and accountability between the funder and the funded party; and
• encourage funders to behave with high ethical standards towards their funded clients so as to uphold the integrity of international arbitration practice in Singapore.

The Singapore International Arbitration Centre (SIAC) has also issued related guidelines on third-party funding in Singapore directed at arbitrators; while the Law Society of Singapore has issued guidelines aimed at legal practitioners coming into contact with litigation funding.

2.3 Which public sector bodies and authorities are responsible for enforcing the applicable laws and regulations? What powers do they have?

There is no specific regulator with respect to litigation finance in Singapore. The Ministry of Law and the courts are responsible for policing the regulatory environment.

The regime is still in its infancy in Singapore and as such, so far as we are aware, there have been no publicly known instances requiring enforcement, such as funders or lawyers falling foul of the regulations; nor any funding arrangements being declared unenforceable by the courts.

2.4 Do the rules and codes of any self-regulatory organisations or professional associations have relevance to legal finance in your jurisdiction? What powers do such organisations and associations have?

As a disputes hub, Singapore has active organisations and institutions that aid in the regulation of, and have relevance to, litigation funding.

In line with Singapore permitting the use of litigation funding in 2017, the SIAC released a practice note for administered cases "on arbitrator conduct in cases involving external funding", which provides for the power of SIAC tribunals to order disclosure relating to third-party funding arrangements.

More recently, the SIAC explicitly included in its Investment Arbitration Rules the tribunal's power to order disclosure of the existence of third-party funding and/or the identity of the funder, and - going beyond the scope of disclosure otherwise required for litigation funding in Singapore - "where appropriate, details of the third-party funder's interest in the outcome of the proceedings, and/or whether or not the third-party funder has committed to undertake adverse costs liability".

Like the SIAC in 2017, the SIArb released the SIArb Guidelines for Third Party Funders (with accompanying notes), which aim to promote best practices among funders and address issues such as transparency, accountability and ethical standards.

To that end, the Law Society of Singapore also released in 2018 a Guidance Note on Third-Party Funding, setting out "best practices for...