*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.
Introduction
Third-party funding (“TPF”) in Singapore was historically restricted by virtue of common law prohibitions against maintenance and champerty. In 2017, landmark legislative amendments (“2017 Amendments”) were passed to permit TPF in prescribed dispute resolution proceedings, which has since expanded in scope from international arbitration (and related court and mediation proceedings) to domestic arbitration proceedings and proceedings before the Singapore International Commercial Court (“SICC”), allowing parties to consider TPF arrangements in a wider range of disputes.
Questions concerning the recoverability of TPF costs in a Singapore-seated arbitration recently arose before the SICC in DTH and another v DTF and others [2026] SGHC(I) 5 (“DTH v DTF”), with important implications for parties considering similar arrangements.
Case background
DTH and DTI (“Applicants”) commenced SIAC arbitration against the respondents for breaches of shareholder and investment agreements. The Applicants also entered into a litigation funding agreement (“LFA”) with a litigation funder (“Funder”) to finance the pursuit of their claims. The terms of the LFA entitled the Funder to a reimbursement of the total funded costs and further amounts calculated with reference to sums awarded to the Applicants in the arbitration.
The Applicants largely prevailed in the claims for relief. The Tribunal issued a Partial Award ordering the first respondent to buy out the Applicants’ shares for a total sum of approximately USD 14.7 million. As the overall successful parties in the arbitration, the Applicants sought to recover their TPF costs of approximately USD 14.6 million (“TPF Costs”) in addition to legal costs and disbursements. The Tribunal by a majority awarded the Applicants legal costs but dismissed the claim for TPF Costs principally on grounds that it did not have the power or authority to award such costs (“TPF Decision”).
In practical terms, the TPF Decision meant that payment by the Applicants of the TPF costs to the Funder would leave the Applicants with almost nothing by way of recovery from the sum of USD 14.7 million payable under the share buy-out order.
The Applicants then applied to the Singapore courts to set aside the TPF Decision (“Setting-Aside Application”).
Case analysis
The Applicants submitted that the TPF Decision should be set aside pursuant to the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) on two distinct grounds.
-
First, the TPF Decision conflicts with the public policy of Singapore pursuant to Article 34(2)(b)(ii) of the Model Law. The applicable public policy was ensuring “access to justice for impecunious but deserving parties with meritorious claims”. The TPF Decision undermined such policy as impecunious parties risk being shut out from vindicating their rights through the use of TPF if they are unable to recover their TPF costs.
-
Second, the procedure adopted by the Tribunal majority in arriving at the TPF Decision was not in accordance with the agreement of the parties pursuant to Article 34(2)(a)(iv) of the Model Law. The Applicants submitted that the 2016 SIAC Rules were part of the parties’ agreed arbitral procedure and Rule 37 empowered the Tribunal to order that “all or a part of the legal or other costs of a party be paid by another party”, including TPF costs. The majority’s refusal to award the TPF Costs thus constituted a departure from the parties’ agreement.
The SICC dismissed the Setting-Aside Application and upheld the TPF Decision.
Public Policy Issue
The questions to be determined by the SICC were (i) whether the public policy suggested by the Applicants exists and (ii) if so, whether the TPF Decision conflicts with that public policy to a high degree such that upholding the Decision would “shock the conscience”, “violate the forum’s most basic notions of morality and justice”, or be “clearly injurious to the public good”, which are the relevant standards established in case law on Article 34(2)(b)(ii) of the Model Law.
The SICC rejected the Applicants’ formulation of the applicable public policy for being impermissibly narrow in scope, emphasizing that the notion of “public” policy in common law necessarily refers to principles which engage, if not the entirety of the public, at least a substantial segment thereof. The class of impecunious but deserving arbitrants seeking the recovery of TPF Costs is too limited and specific to be properly characterised as “public” in nature.
The SICC further determined that there was in any event no public policy conflict because:
-
While the 2017 Amendments legalise TPF, they do not go so far as to suggest that TPF costs are generally recoverable from the unsuccessful party.
-
Access to justice was compatible with less than full recovery of actual legal costs which is a common occurrence even in arbitration.
-
Access to justice requires both parties’ interests to be considered, and there were countervailing reasons not to adopt the Applicants’ case since it would result in a defendant being at risk of bearing higher costs when sued by an impecunious claimant financed by TPF, even if the defendant was not responsible for the claimant’s impecuniosity.
-
The fact that recovery of TPF costs is prohibited under the SICC costs regime meant that it could not credibly be said that the inability to recover TPF costs from an unsuccessful party shocks the conscience, violates Singapore’s most basic notions of morality and justice or is injurious to the public good.
Arbitral Procedure Issue
The SICC rejected the Applicants’ argument and reasoned as follows.
-
Article 34(2)(a)(iv) of the Model Law applies to situations of irregularity in the agreed procedural rules for the conduct of the arbitration (such as submission timelines and requirements). Rule 37 of the 2016 SIAC Rules was not procedural in nature. It is a provision authorising the Tribunal to determine the issue of costs, not one prescribing how the Tribunal shall act procedurally in such determination. The TPF Decision was a substantive decision rather than one on procedural matters, and thus outside the remit of Article 34(2)(a)(iv) of the Model Law.
-
Even if Rule 37 of the 2016 SIAC Rules were procedural, it was for the Tribunal to determine whether that Rule applied and what was required by or authorised under that Rule (including the power to determine whether the Rule authorised the award of TPF Costs). As the TPF Decision involved a determination on the merits, it was not open to review by the SICC.
Concluding thoughts
The decision in DTH v DTF is a timely reminder that recovery of TPF costs is not guaranteed for successful parties in Singapore-seated arbitrations. A funded and successful claimant may ultimately find itself left with a pyrrhic victory if its TPF costs outstrip or are nearly equivalent to its awarded sums, thereby diminishing their overall recovery prospects.
As the case illustrates, it is critical that parties contemplating TPF carefully assess both legal and commercial implications of such arrangements, and factor the risk of non-recovery of TPF costs into the overall legal strategy appropriately.
This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. Given the nature of this newsletter as general information, statutory provisions and source citations may have been intentionally omitted. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.
Download full text（PDF）
