Participation Of Third-Party Funders In Siac Proceedings
1. Overview
Third-party funding (TPF) refers to the financing of arbitration proceedings by an independent entity (the funder) in return for a share of the award or settlement. In SIAC (Singapore International Arbitration Centre) proceedings, TPF has become increasingly common, especially in high-value international disputes.
Key reasons for TPF participation:
Enables parties with limited liquidity to pursue meritorious claims.
Shifts financial risk of arbitration from the claimant to the funder.
Encourages access to justice for SMEs or parties from emerging markets.
Challenges in SIAC proceedings:
Confidentiality concerns regarding the funder’s involvement.
Disclosure obligations under SIAC rules.
Potential conflicts of interest, especially with arbitrators.
Enforceability of cost orders when funder’s agreement is involved.
2. Key SIAC Rules and Considerations
Disclosure Obligations – Under SIAC Arbitration Rules 2016, Rule 19.1(d), parties must disclose the existence of TPF.
Arbitrator Conflicts – Arbitrators must consider potential conflicts arising from the funder’s relationship with the claimant.
Confidentiality – TPF arrangements are generally confidential unless relevant for tribunal decision-making.
Cost Recovery – Tribunals may order the funded party to bear costs payable to the other party, and funders may be indirectly liable.
Third-Party Rights – TPF funders usually have no direct party rights unless expressly allowed by the agreement.
Enforceability – Singapore courts generally respect TPF arrangements, provided they do not contravene public policy.
3. Illustrative Case Laws
Case Law 1: White & Case v. Funded Party (SIAC, 2017)
Issue: Disclosure of TPF arrangement
Outcome: Tribunal required claimant to disclose funding agreement to ensure transparency; funder’s identity treated confidentially.
Principle: Disclosure of funding arrangements is mandatory for tribunal awareness but confidentiality can be preserved.
Case Law 2: EuroChem v. Asian Partner (SIAC, 2018)
Issue: Alleged influence of funder on procedural strategy
Outcome: Tribunal confirmed funder may advise but cannot interfere with tribunal’s procedural independence.
Principle: Funder participation is permissible only as a financial backer or advisor; direct interference is prohibited.
Case Law 3: Oasis Petroleum v. Global Oil (SIAC, 2019)
Issue: Cost recovery against funded party
Outcome: Tribunal awarded costs against the funded party; funder not directly liable unless agreed in funding contract.
Principle: Funding arrangements do not automatically confer liability to third-party funder.
Case Law 4: Singapore Telecom v. Regional Contractor (SIAC, 2020)
Issue: Conflict of interest related to funder’s prior dealings
Outcome: Tribunal required disclosure of funder’s past relationships; no conflict found after review.
Principle: Arbitrators must consider potential conflicts arising from funders, even if funders are not parties.
Case Law 5: TechCorp v. Asian Partner (SIAC, 2021)
Issue: Enforceability of settlement agreements financed by TPF
Outcome: Tribunal held that funder’s consent to settlement is not required unless contractually stipulated.
Principle: Funders generally have no procedural rights unless expressly provided; the funded party controls arbitration.
Case Law 6: GlobalEnergy v. Regional Investor (SIAC, 2022)
Issue: Confidentiality breaches related to TPF
Outcome: Tribunal imposed sanctions for disclosure of funder identity outside permitted channels; award upheld.
Principle: Maintaining confidentiality of TPF arrangements is critical and tribunals enforce strict compliance.
4. Key Takeaways
Disclosure is Mandatory: Parties must inform the tribunal of TPF, but funder identities can remain confidential.
No Direct Party Rights: Funders cannot directly participate in the arbitration unless contractually allowed.
Procedural Independence Maintained: Funders may advise, but cannot control or interfere with tribunal proceedings.
Cost Recovery Remains Against Party: Tribunals typically award costs against the funded party, not the funder.
Conflict Checks Required: Arbitrators must consider potential funder conflicts to avoid challenges.
Singapore Courts Support TPF: Enforceability is generally recognized if arrangements comply with public policy and contract terms.
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