Legislative Changes to Enhance Singapore as an International Hub for Commercial Dispute Resolution

1.            The Ministry of Law (MinLaw) has submitted the Civil Law (Amendment) Bill 2016 and Mediation Bill 2016 for First Reading in Parliament today.

2.            The reforms are part of on-going efforts to ensure that Singapore remains a premier international commercial dispute resolution hub.

3.            The proposed changes under the Civil Law (Amendment) Bill 2016 will enact a framework for third-party funding in Singapore which will give businesses an additional financing option for international commercial arbitration. The Mediation Bill 2016 supports international commercial mediation by strengthening the enforceability of mediated settlements.

Third Party Funding Framework

4.            Third-party funding occurs when an entity unconnected to a dispute provides funds to a party, typically the claimant, in return for financial gain, such as a share of the damages awarded should the claim succeed.

5.            Currently in Singapore, an agreement by an entity unconnected to a dispute to fund it would be unenforceable. However, third-party funding is becoming a feature in major arbitration centres around the world, such as London, Paris and Geneva.

6.            Allowing third-party funding in Singapore for international arbitration will therefore offer international businesses an additional financing option for international commercial arbitration and consolidate Singapore’s position as a key seat of arbitration in Asia.

Key features of the Civil Law (Amendment) Bill 2016

7.            The proposed Bill seeks to:

(i) clarify that the common law tort of champerty and maintenance is abolished in Singapore;

(ii) provide that in certain prescribed categories of proceedings, third-party funding contracts are not contrary to public policy or illegal. These categories will be specified in subsidiary legislation after the Bill comes into force. The first category will be international arbitration (and related) proceedings;

(iii) provide that third-party funding may only be provided by an entity which meets the criteria set out in subsidiary legislation; and allow requirements to be imposed on funders through subsidiary legislation. Non-compliant entities or funders will not be able to enforce their rights under the third-party funding agreement;

(iv) make a related amendment to the Legal Profession Act to clarify that lawyers may introduce or refer funders to their clients so long as they do not receive direct financial benefit from the introduction/referral; and may act for their clients in relation to the third-party funding contract.

Mediation Framework

8.            The Mediation Bill 2016 supports international commercial mediation by strengthening the enforceability of mediated settlements.

9.            The Bill will apply to all types of mediation including international commercial mediation and will also codify certain issues currently dealt with under common law, such as confidentiality of communications in the context of mediation. This will provide greater certainty and clarity for commercial parties who opt to conduct their mediation in Singapore.

Key features of the Mediation Bill 2016

10.            The key features of the Bill fall into the following four categories:

(i) Stay of court proceedings provisions
The Bill will provide parties with a statutory basis to apply to court for an order to stay on-going court proceedings, pending the outcome of mediation.  Such provisions mirror what is available for arbitration, and will provide greater certainty and clarity to parties by ensuring that their legal positions in any court proceedings are preserved pending the outcome of the mediation.

(ii) Restrictions on disclosure and admissibility provisions
The Bill also contains provisions that preserve the confidentiality of mediation proceedings, and clarify the circumstances in which such communications can be disclosed, or else admitted into court as evidence. Currently, such rules are based on common law principles, which could be subject to different interpretations.

(iii) Enforceability of settlement agreements resulting from mediation
Currently, if there is a breach of a mediated settlement agreement, the aggrieved party will need to institute court proceedings to enforce the mediated settlement agreement as a breach of contract, unless the dispute is already being heard by the court. The Bill provides an additional method of enforcement for these mediated settlement agreements. The proposed provision will allow parties by consent, and subject to fulfilling certain requirements, to record a mediated settlement agreement as an order of court upon reaching their settlement.  This will enable the settlement agreement to be directly enforceable as a court order should there be a breach of its terms subsequently.

(iv) Exceptions under the Legal Profession Act currently applicable to arbitration will be extended to mediation
While mediation is not commonly understood to involve the practice of law, in certain cases the relevant law may be discussed during the mediation session. This amendment will make clear that participation by foreign mediators and foreign-qualified counsel in such mediation sessions will not amount to the unauthorised practice of Singapore law.

Background

11.            As Asia’s trade and business sectors continue to grow, regional demand for legal services, particularly in the area of dispute resolution, is expected to increase. Law firms and lawyers will benefit from the increase in international dispute resolution activity here.

12.            Singapore provides a full suite of dispute resolution services (viz. litigation, arbitration, mediation) to cater to the varied needs of commercial users. Singapore has excelled in the area of arbitration and ranks among the world’s top seats for international arbitration, alongside London, Paris, Geneva, and Hong Kong. Singapore has also consistently ranked as the number one seat for International Chamber of Commerce arbitration in Asia.

13.            In the area of commercial mediation, Singapore has taken steps to develop the industry further. The Singapore International Mediation Centre and Singapore International Mediation Institute were established in 2014 as part of a slew of measures to strengthen Singapore’s international commercial mediation services.

14.            The present reforms were taken after extensive closed and public consultations earlier this year. The public consultation for the Mediation Bill 2016 took place from 17 Mar 2016 to 28 Apr 2016 and received feedback from lawyers, mediation and alternative dispute resolution practitioners and service providers, academics, mediation professional bodies and other stakeholders. The public consultation for the Civil Law (Amendment) Bill 2016 was held from 30 Jun 2016 to 29 Jul 2016 which saw lawyers, professional funders and in-house counsel providing views.

MINISTRY OF LAW
7 NOVEMBER 2016