Industry Update: Litigation Funding Spreads to Singapore

In a long-anticipated move, Singapore officially joined the ranks of other major arbitration centers like London, Paris and Geneva this month when it passed legislation permitting litigation funding. The legislation formally abolished the torts of maintenance and champerty and declared that litigation funding contracts are enforceable in Singapore courts and tribunals. Thus far, Singapore has imposed only limited restrictions on the industry but reserved authority for the government to enact additional regulations if necessary. 

The move comes at a time when the use of litigation funding in international arbitration is growing exponentially, while the types of businesses that rely upon funding are expanding. Singapore has long made clear that it viewed the introduction of litigation funding as essential to its ability to remain competitive as a leading venue for international arbitration. This is particularly true because such funding has become commonplace in other venues across the globe.[1] The international arbitration bar appears to agree: industry stakeholders have overwhelmingly welcomed the news.

The move also tracks a much broader trend across the globe and within the United States of recognizing the real value that funding can bring to legal systems. As one member of Singapore’s Parliament made clear, litigation funding gives businesses “an additional financing and risk management tool” that helps to finance “valid claims which they otherwise might not pursue due to financial constraints.”[2] The debate in Singapore reprised the now commonplace rejection of the criticism that litigation funding invites frivolous lawsuits for the simple reason that businesses “that seek to access third-party funding will typically have to undergo a rigorous process of claim assessment by the chosen funder.”[3] 

While Singapore is the first major jurisdiction in Asia to stake out such a clear position on funding, the practice has steadily grown within the region as favorable court decisions and regulatory changes have matched the global trend toward permitting funding of claims. That trend is widely expected to continue -- most notably, in Hong Kong, which many expect to soon adopt similar reforms in order to maintain its own competitive edge as a major center for dispute resolution.