A detailed comparison of third-party funding regulations in Hong Kong and Singapore

ABSTRACT

Third-party funding (TPF) has played a major role in international arbitration over the last decade. Despite uncertainties and continuing discussions on whether TPF should be regulated, Singapore and Hong Kong successively passed laws to legalize and regulate TPF, and both jurisdictions have become leading pioneers globally. This can be largely attributed to their competition with each other to be Asia’s leading arbitration centre, and by regulating the use of TPF, they have moved closer to this goal. However, even though both wish to ensure the legality of TPF in international arbitration, their laws and the consequences of non-compliance differ dramatically in each jurisdiction. Moreover, although these two jurisdictions are leading arbitration centres, their laws on TPF have not yet been analysed thoroughly in the existing scholarship. This article aims to fill the gap, following the comparative law methodology and analysing the rules on TPF in Hong Kong and Singapore. It also aims to investigate the advantages and disadvantages of the laws adopted differently by the two jurisdictions and answer two important questions: (i) What laws could create better conditions for funders? and (ii) What can be done to improve those conditions?

KEYWORDS:

• Third-party funding
• Hong Kong
• Singapore
• international arbitration
• mediation

Acknowledgements

The author wishes to thank Professor Julien Chaisse, Editor-in-Chief of the Asia Pacific Law Review, as well as Dr Orkun Akseli, Carrie Shu Shang, Professor Deborah Hensler, and Jamie O’Connell for comments on an earlier draft of this article. The author also wishes to thank the Journal’s anonymous peer reviewers for their helpful comments, as well as the Managing Editor of APLR, Madeleine Fitzpatrick, for editorial support leading up to the article’s publication.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For various problems of international arbitration, see Stephen M Schwebel, Luke Sobota, and Ryan Manton, International Arbitration: Three Salient Problems (Cambridge University Press 2020); Emmanuel Gaillard, ‘Three Philosophies of International Arbitration’ in Arthur W Rovine (ed), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2009, vol 3 (Brill 2010) 305; A F M Maniruzzaman, ‘Conflict of Laws Issues in International Arbitration: Practice and Trends’ (1993) 9(4) Arbitration International 371. See also Kimberly Chen Nobles, ‘Emerging Issues and Trends in International Arbitration’ (2012) 43(1) California Western International Law Journal 77.

2 In this survey, 67% of the participants chose cost as the worst characteristic of international arbitration. Queen Mary University and White & Case, ‘2018 International Arbitration Survey: The Evolution of International Arbitration’ 8 <https://www.whitecase.com/publications/insight/2018-international-arbitration-survey-evolution-international-arbitration> accessed 25 September 2020.

3 United Nations Commission on International Trade Law Working Group III (Investor–State Dispute Settlement Reform), 35th Session in New York, 23–27 April 2018, ‘Possible Reform of Investor–State Dispute Settlement (ISDS) Submission from the European Union’ 11. For further discussions on issues in investment arbitration, see <https://www.jus.uio.no/pluricourts/english/projects/leginvest/academic-forum/papers> accessed 2 October 2020. Here, cost is one of the issues identified, among others. For further discussion on cost, see Gabriel Bottini and others, ‘Excessive Costs and Recoverability of Cost Awards in Investment Arbitration’ (2020) 21(2–3) Journal of World Investment and Trade 251.

4 TPF offers opportunities to ‘companies of all sizes’, as stressed on Burford’s website. See <https://www.burfordcapital.com/how-we-work/with-companies> accessed 2 October 2020.

5 Related laws and case law are explained in the following sections of this article.

6 With the new laws: TPF is now legal in Hong Kong for arbitration, both domestic and international; in Singapore, TPF is legal only for international arbitration. Therefore, all references herein to the legality of TPF in arbitration mean for international arbitration in Singapore, and for both domestic and international arbitration in Hong Kong. Hong Kong’s TPF regulations also include TPF for mediation.

7 On the subject of the abolition of the common law offences of maintenance and champerty: in England, see the Criminal Law Act 1967; in Canada, see Section 9 of the Criminal Code; in Australia, see the Maintenance, Champerty and Barratry Abolition Act 1993. In the United States (US), depending on the state, those doctrines are either never applied or applied with different levels of scrutiny. For further explanations on champerty and maintenance in the US states, see Marie Stoyanov and Olga Owczarek, ‘Third-Party Funding in International Arbitration: Is It Time for Some Soft Rules?’ (2015) 2(1) BCDR International Arbitration Review, 171.

8 Civil Law (Third-Party Funding) Regulations 2017 <https://sso.agc.gov.sg/SL-Supp/S68-2017/Published/20170224?DocDate=20170224> accessed 18 April 2020.

9 Hong Kong Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 <https://www.gld.gov.hk/egazette/pdf/20172125/es1201721256.pdf> accessed 18 April 2020 (hereinafter ‘Ordinance’).

10 Unruh v Seeberger (2007) 10 HKCFAR 31 <https://www.hklii.hk/eng/hk/cases/hkcfa/2007/10.html> accessed 18 April 2020 (hereinafter ‘Unruh’).

11 Otech Pakistan Pvt Ltd v Clough Engineering Ltd and Anor (2006) SGCA 46 <https://www.supremecourt.gov.sg/docs/default-source/module-document/judgement/2006-sgca-46.pdf> (hereinafter ‘Otech’).

12 The Law Reform Commission of Hong Kong, Third Party Funding for Arbitration Sub-Committee Consultation Paper <https://www.hkreform.gov.hk/en/docs/tpf_e.pdf> accessed 13 January 2020.

13 Giovanni Alemanni and Ors v Argentine Republic, ICSID Case No ARB/07/8, 278.

14 ‘Public Consultation on the Draft Civil Law (Amendment) Bill 2016 and Civil Law (Third Party Funding) Regulations 2016’ <https://www.mlaw.gov.sg/news/public-consultations/public-consultation-on-the-draft-civil-law--amendment--bill-2016> accessed 22 September 2020. One of the missions of Singapore’s Ministry of Law is to advance access to justice. For further details about Singapore’s Ministry of Justice, see <https://www.mlaw.gov.sg/about-us/what-we-do> accessed 2 October 2020.

15 ‘Public Consultation to Seek Feedback on the Third-Party Funding Framework’ <https://www.mlaw.gov.sg/news/public-consultation-third-party-funding> accessed 15 December 2019.

16 Singapore Civil Law (Third-Party Funding) Regulations 2017 (hereinafter ‘Singapore Regulations’), S 1.

17 ‘Bills Committee on Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016’ <https://www.legco.gov.hk/yr16-17/english/bc/bc102/general/bc102.htm> accessed 26 April 2019.

18 ‘Code of Practice for Third Party Funding of Arbitration’ <https://www.info.gov.hk/gia/general/201812/07/P2018120700601.htm> accessed 8 May 2019.

19 Oliver Gayner and Susanna Khouri, ‘Singapore and Hong Kong: International Arbitration Meets Third Party Funding’ (2017) 40(3) Fordham International Law Journal 1033, 1046. Rebecca Mulder and Marc Krestin, ‘Third-Party Funding in International Arbitration: To Regulate or Not to Regulate?’ Young ICCA Arbitration Blog <https://www.youngicca-blog.com/third-party-funding-in-international-arbitration-to-regulate-or-not-to-regulate> accessed 28 September 2020.

20 Singapore’s parliament passed the legislation in January 2017 <https://www.mondaq.com/civil-law/672342/spotlight-on-third-party-funding-in-singapore-and-hong-kong> accessed 25 September 2020. The Legislative Council of Hong Kong passed the legislation in June 2017 <https://www.legco.gov.hk/yr16-17/english/bc/bc102/general/bc102.htm> accessed 19 November 2020.

21 Singapore Civil Law (Amendment) Act 2017 <https://sso.agc.gov.sg/Acts-supp/2-2017> accessed 20 November 2020 (hereinafter ‘CLAA’).

22 Ibid, S 5B(2).

23 Ibid, S 5B(8).

24 Ibid, S 5B(4).

25 Singapore Regulations (n 16), S 3.

26 Ibid, S 4(1).

27 Ibid, S 4(2).

28 Ibid, S 4(3).

29 Singapore Legal Profession Act (Ch 161), S 107(3A).

30 Ibid, S 107(3B).

31 Ibid, S 107(1).

32 Ibid, S 107(2).

33 Ibid, S 107(4).

34 SIArb Third Party Funding Guidelines (18 May 2017) <https://siarb.org.sg/index.php/resources/third-party-funding> accessed 5 November 2020 (hereinafter ‘SIArb Guidelines’).

35 Singapore International Arbitration Centre (SIAC) Practice Note (31 March 2017) <http://www.siac.org.sg/images/stories/articles/rules/Third%20Party%20Funding%20Practice%20Note%2031%20March%202017.pdf> accessed 21 September 2020.

36 SIAC, Investment Arbitration Rules of the SIAC, SIAC Investment Rules (1st edn, 1 January 2017) <http://www.siac.org.sg/our-rules/rules/siac-investment-arbitration-rules> accessed 21 September 2020.

37 The Law Society of Singapore Guidance Note 10.1.1 Third-Party Funding <https://www.lawsociety.org.sg/wp-content/uploads/2020/03/Third-Party-Funding-GN-10.1.1.pdf> accessed 21 September 2020.

38 Hong Kong Ordinance (n 9).

39 Ibid.

40 Ibid, S 98E.

41 Ibid, S 98F.

42 Ibid.

43 Ibid, S 98J(1).

44 Ibid, S 98J(2).

45 Ibid, S 98G.

46 Ibid, S 98H.

47 Ibid, S 98O.

48 Ibid, S 98Q.

49 Hong Kong Code of Practice for Third Party Funding of Arbitration <http://gia.info.gov.hk/general/201812/07/P2018120700601_299064_1_1544169372716.pdf> accessed 18 April 2020.

50 Hong Kong Ordinance (n 9), S 98S.

51 ALF, Code of Conduct <http://associationoflitigationfunders.com/code-of-conduct> accessed 19 April 2020 (hereinafter ‘ALF Code of Conduct’).

52 For discussions on the subject, the following articles, report and book chapter can be referred to as examples: Chiann Bao, ‘Third Party Funding in Singapore and Hong Kong: The Next Chapter’ (2017) 34(3) Journal of International Arbitration 387; Derric Yeoh, ‘Third Party Funding in International Arbitration: A Slippery Slope or Levelling the Playing Field?’ (2016) 33(1) Journal of International Arbitration 115; International Council for Commercial Arbitration (ICCA)–Queen Mary Task Force on Third-Party Funding in International Arbitration (The ICCA Reports No 4) (April 2018) C 4; Gary J Shaw, ‘Third-Party Funding in Investment Arbitration: How Non-Disclosure Can Cause Harm for the Sake of Profit’ (2017) 33(1) Arbitration International 109. See also Eric De Brabandere, ‘Mercantile Adventurers? The Disclosure of Third-Party Funding in Investment Treaty Arbitration’ in Willem H van Boom (ed), Litigation, Costs, Funding and Behaviour: Implications for the Law (Taylor and Francis 2014).

53 Hong Kong Ordinance (n 9), S 98U.

54 Ibid, S 98V.

55 Ibid, S 98W.

56 See n 7 above.

57 Singapore Civil Law Amendment Act 2017 (n 21), S 5B(4).

58 See Singapore Arbitration Act (Ch 10), S 3: ‘This Act shall apply to any arbitration where the place of arbitration is Singapore and where Part II of the International Arbitration Act (Cap 143A) does not apply to that arbitration.’ See Singapore International Arbitration Act (Ch 143A), S 5(1): ‘This Part and the Model Law shall not apply to an arbitration which is not an international arbitration unless the parties agree in writing that this Part or the Model Law shall apply to that arbitration.’

59 See Hong Kong Arbitration Ordinance (Cap 609). However, Singapore has two different arbitration acts, one for international arbitration and one for domestic arbitration. See Singapore International Arbitration Act (Ch 143A); Singapore Arbitration Act (Ch 10).

60 For Singapore, it is only international arbitration, not domestic arbitration; for Hong Kong, it is any arbitration, including both domestic and international.

61 Philip Morris Brands Sàrl, Philip Morris Products SA, and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7.

62 See the Law Society of Singapore’s guidance note for lawyers <https://app.mlaw.gov.sg/files/Council_GN_Third_Party_Funding.pdf> accessed 20 April 2020.

63 SIAC, Investment Arbitration Rules of the SIAC (1st edn, 1 January 2017) (hereinafter ‘SIAC IA Rules’). Arts 24, 33 and 35 of the SIAC IA Rules bring rules specific to TPF. These rules give power to arbitrators, e.g. Art 24 gives the arbitrator the power to order disclosure <https://siac.org.sg/our-rules/practice-notes/practice-notes-previous-edition/61-our-rules> accessed 28 December 2019.

64 See the Singapore Institute of Arbitrators’ (SIArb) guidelines for third-party funders <https://www.siarb.org.sg/images/SIArb-TPF-Guidelines-2017_final18-May-2017.pdf> accessed 20 April 2020. SIArb also published a note on its website for funders <https://www.siarb.org.sg/images/Accompanying-note-to-Revised-SIArb-Guidelines-for-Third-Party-Funders18-May-2017.pdf> accessed 20 April 2020.

65 ALF Code of Conduct (n 51).

66 SIArb Guideline (n 34).

67 Lacey Yong, ‘Burford Funds First Singapore Case and Hires in Hong Kong’ (Global Arbitration Review, 5 July 2017) <https://globalarbitrationreview.com/third-party-funding/burford-funds-first-singapore-case-and-hires-in-hong-kong> accessed 20 April 2020.

68 ‘Public Consultation on Conditional Fee Agreements in Singapore’ (27 August 2019) <https://www.mlaw.gov.sg/news/public-consultations/public-consultation-on-conditional-fee-agreements-in-singapore> accessed 20 April 2020.