A Singapore company with a strong legal claim but limited cash to fund years of litigation is no longer stuck choosing between walking away and mortgaging the business. Since 2017, Singapore has permitted third-party litigation funding for a defined category of proceedings, and the framework has expanded since. But the moment a funder enters the picture, two questions immediately follow: does the other side, and the court, need to know about it, and can the funder itself end up on the hook for costs if the claim fails?
1. What Third-Party Funding Is
Third-party funding (TPF) is an arrangement under which a party unconnected to a dispute (the funder) provides funds to a litigant or arbitration claimant to pursue or defend a claim, in exchange for a share of any proceeds recovered, typically a percentage of the award or settlement or a multiple of the funds advanced. Before 2017, funding arrangements of this kind were generally unenforceable in Singapore under the common law doctrines of maintenance and champerty, which treat outside interference in litigation, for profit, as contrary to public policy. Parliament changed that specifically to make Singapore a more attractive seat for international arbitration.
2. Legal Basis
Third-party funding was legalised through amendments to the Civil Law Act 1909, inserting sections 5A to 5F (renumbered in the current Civil Law Act), with effect from 1 March 2017. Section 5B empowers the Minister for Law to prescribe the categories of dispute resolution proceedings for which TPF is permitted, and the Civil Law (Third-Party Funding) Regulations set out those categories, which initially covered international arbitration and related proceedings, and have since been expanded to cover Singapore-seated domestic arbitration, mediation, and certain proceedings in the Singapore International Commercial Court.
Disclosure obligations sit not in the Civil Law Act itself, but in the Legal Profession (Professional Conduct) Rules 2015, as amended:
- Rule 49A requires a lawyer acting for a funded party to disclose to the court or tribunal, and to every other party to the proceedings, the fact that a third-party funding contract exists and the identity and address of the funder, once the funding contract is entered into.
- Rule 49B prohibits a lawyer from holding, directly or indirectly, any share or interest in a third-party funder that the lawyer has introduced to the client, or that has a funding contract with the lawyer’s own client, to prevent conflicts of interest between the lawyer’s duty to the client and any financial stake in the funder’s success.
Notably, the disclosure obligation under Rule 49A requires disclosure of the existence of the funding arrangement and the funder’s identity, but does not, on its face, require disclosure of the funding agreement’s commercial terms, such as the funder’s percentage share or the level of control the funder exercises over the litigation. Singapore courts and tribunals have, in specific cases, gone further and ordered production of the funding agreement itself where its terms were relevant to a costs or security for costs application.
3. Who Can Apply, and Who Is Bound by Disclosure
The party seeking or holding funding does not itself apply for anything to use TPF; the disclosure obligation falls on the funded party’s lawyer, who must proactively disclose the arrangement once entered into, rather than waiting to be asked. A counterparty who suspects the other side is funded, but has not received disclosure, can apply to the court or tribunal for an order compelling disclosure, particularly where the counterparty wants to apply for security for costs and needs to know whether a funder, rather than an impecunious company, stands behind the claim.
4. Step-by-Step Process
| Step | What Happens |
|---|---|
| 1 | Company negotiates and signs a funding agreement with a qualifying third-party funder for a permitted category of proceedings (international arbitration, related court proceedings, mediation, or SICC proceedings). |
| 2 | The company’s lawyer discloses the existence of the funding contract and the funder’s identity and address to the tribunal or court, and to every other party, promptly once the contract is entered into. |
| 3 | If the opposing party wishes to test the funding arrangement further, for example to support a security for costs application, it applies to the tribunal or court for disclosure of the funding agreement’s terms. |
| 4 | The tribunal or court decides, on a case-by-case basis, whether the commercial terms of the funding agreement must also be disclosed, balancing confidentiality against the opposing party’s legitimate interest in assessing costs exposure. |
| 5 | If the claim fails, the unsuccessful party (and, in some circumstances, its funder) may face a costs order. A non-party costs order against the funder itself is possible but requires a separate application and is not automatic. |
5. Documents Required
| Document | Purpose |
|---|---|
| Third-party funding agreement | Sets out the funder’s obligations, the return it is entitled to, and the extent (if any) of its control over the conduct of the claim |
| Disclosure notice to the tribunal/court and opposing parties | Confirms the existence of the funding arrangement and the funder’s identity, as required by Rule 49A |
| Funder’s regulatory and financial standing documents | Some funders voluntarily provide evidence of adequate capitalisation, particularly if a security for costs application is anticipated |
| Application for disclosure of funding terms (if contested) | Filed by the opposing party seeking access to the funding agreement’s commercial terms, supported by an affidavit explaining why disclosure is relevant, for example to a security for costs application |
6. Timeline and Costs
| Stage | Typical Timeframe | Typical Cost Driver |
|---|---|---|
| Negotiating and signing the funding agreement | 4–12 weeks, depending on the funder’s due diligence process | Funder’s own legal and analytical due diligence costs, often borne by the funder |
| Disclosure of the funding arrangement’s existence | Immediate, once the contract is signed | Minimal; a straightforward notification |
| Contested application for disclosure of funding terms | 4–8 weeks | Legal fees for the application and any responding submissions |
| Non-party costs application against the funder (if the claim fails) | Several months, typically after the substantive proceedings conclude | Legal fees for a separate, often contested, application |
7. What Happens After the Order
Where a tribunal or court orders disclosure of the funding agreement’s commercial terms, the opposing party can use that information to inform a security for costs application, on the basis that a funded but impecunious claimant may otherwise be unable to satisfy an adverse costs order. Where the underlying claim ultimately fails and a costs order is made against the funded company, the successful party may separately apply for a non-party costs order against the funder itself, though Singapore courts approach this cautiously and will examine the extent of the funder’s control over, and financial interest in, the litigation before extending costs liability beyond the actual litigant.
8. Frequently Asked Questions
Does every Singapore dispute qualify for third-party funding?
No. TPF is only available for the categories prescribed under the Civil Law (Third-Party Funding) Regulations, principally international arbitration and related court and mediation proceedings, and certain Singapore International Commercial Court proceedings. Purely domestic litigation in the General Division of the High Court outside these categories generally still cannot be funded on a champertous basis.
Must the funder’s identity always be disclosed?
Yes. Rule 49A of the Legal Profession (Professional Conduct) Rules requires disclosure of the existence of the funding contract and the funder’s identity and address, though not automatically the commercial terms of the agreement.
Can a losing party’s funder be ordered to pay the winner’s costs?
It is possible, through a non-party costs order, but it is not automatic. The court will look at how much control the funder exercised over the litigation and how much it stood to gain, and Singapore courts have historically been cautious about extending costs liability to funders who played a purely financial role.
Can a lawyer refer a client to a funder and take a referral fee?
No. Rule 49B specifically prohibits a lawyer from holding a financial interest in a funder that the lawyer introduced to the client, to avoid a conflict between the lawyer’s duty to the client and the lawyer’s own financial interest.
Does using a funder weaken a company’s claim?
Not as a matter of law. Funding does not affect the merits of the underlying claim, but a well-advised opposing party will use knowledge of the funding arrangement to assess whether a security for costs application is worth pursuing.
Is litigation funding the same as legal expenses insurance?
No. A funder invests in exchange for a share of any recovery and generally bears the loss if the claim fails; an insurer indemnifies against costs exposure in exchange for a premium, regardless of the outcome.
Need Help With This Matter?
If your company is facing this situation, Raffles Corporate Services can assist with the groundwork, ACRA filings, compliance documentation, and coordinating with experienced Singapore law firms. For matters requiring court proceedings, we work with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice.
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This article is for general information only and does not constitute legal advice. For advice specific to your situation, please consult a qualified Singapore Advocate and Solicitor.
Related reading: Security for Costs Against a Company in Singapore Litigation, Your Singapore Company Has Been Sued: A Director’s First-Steps Guide, and Singapore as an International Restructuring Hub.
Sources: Civil Law Act 1909, Sections 5A–5F; Civil Law (Third-Party Funding) Regulations; Legal Profession (Professional Conduct) Rules 2015, Rules 49A and 49B. See Singapore Statutes Online and the Ministry of Law for the governing legislation, and justfollowlaw.com for further practical guidance.
The Editorial Team, Raffles Corporate Services