SPEECH IN PARLIAMENT-2ND READING OF THE CIVIL LAW ACT (AMDT) BILL ON 10/1/17
Madam Speaker, I declare my interest as a Fellow of the Singapore Institute of Arbitrators.
I rise to support this Bill which seeks to abolish the common law tort of maintenance and champerty in Singapore and allowing third-party funding contracts in certain prescribed categories of dispute resolution proceedings (international arbitration and related proceedings) as well as set out the regulations around this.
I agree with the ambit of the proposed bill and objective to allow international businesses to use funding tools available in other jurisdictions and promote Singapore’s growth as a leading venue for international arbitration.
According to the SIAC Annual Report 2015, 84% of new cases filed with SIAC in 2015 were international in nature, and 42% had no connection with Singapore.
As third-party funding is becoming a feature in major arbitration centres around the world, allowing third-party funding in Singapore for international arbitration will offer international businesses an additional financing option for international commercial arbitration in Singapore.
However, I would like to highlight two suggestions for Ministry’s consideration.
(i) To promulgate a set of guidelines on entering into third-party funding contracts
I submit that Ministry of Law or relevant industry accepted organisations should promulgate a set of guidelines that would help parties to navigate potential areas of concern (e.g. conflicts of interest) arising from third-party funding arrangements in relation to the tripartite relationship of third-party funder, solicitor and client as parties should mitigate risks through formulation of a third-party funding contract which covers these areas of concern.
One example would be to emphasise that the solicitor-client relationship takes precedence in the tripartite relationship and especially as solicitors are allowed to introduce or refer a Third-Party Funder to the client.
Some of these potential areas of conflict are addressed in the new Sections 3A(b) and 3(A)(c) in the Legal Profession Act (Cap.161). However, they could be further expanded on in the guidelines to cover other situations where conflicts of interest may arise.
For example, a major potential area of conflict is in relation to settlements.
While both funders and funded litigants have broadly the same interest in maximising any settlement or damages award and they will share the proceeds of the litigation, they can find themselves in conflict over whether or not to settle.
This conflict can best be dealt with by providing that any irreconcilable difference over settlement be referred to counsel in the proceedings for a binding expert opinion.
In the same vein, conflicts of interest which are thought to be inherent in funded proceedings can be avoided or resolved by ensuring that the lawyers’ fiduciary and professional duties to the litigants are given precedence over any duties or contractual obligations the lawyer may owe to the funder. A properly drafted funding agreement will do just that.
One example would be that the disclosure of client’s privileged information to third-party funder should be made on the agreement that the third-party funder is bound to maintain confidentiality of the privileged information shared.
Another example would be the disclosure of funding arrangements to parties in the arbitration and to the arbitrator. In the pubic consultation on this bill, it was stated that amendments to the Legal Profession (Professional Conduct) Rules 2015 were envisaged.
These related amendments were expected to draw reference from best practices and international standards reflected in the revised International Bar Association Guidelines on Conflict of Interest in International Arbitration (October 2014) which provides in General Standard 7 that funding arrangements ought to be disclosed to the arbitrator and parties to the arbitration.
(ii) To Promulgate a Code of Conduct for Third-Party Funders
Allowing third-party funding in international arbitration in Singapore may lead to third-party funding organisations to set up/operate in Singapore.
As the number of third-party funders increase in Singapore, it would be ideal to have the third-party funders come together to design a code of conduct to self-regulate their involvement in third-party funding arrangements. Self-regulation provides greater transparency and raises standards of funding arrangements whilst not being overly restrictive on funding arrangements.
For example, the Association of Litigation Funders (the ALF) in England and Wales is an independent body that has been charged by the Ministry of Justice, through the Civil Justice Council, with delivering self-regulation of litigation funding in England and Wales.
The members of the Association are governed by a Code of Conduct which sets out standards of practice and behaviour to be observed by funders in respect of funding the resolution of disputes within England and Wales.
Madam Speaker, hoping Ministry of Law would take cognizance and consider these two suggestions, I support the Bill.