Introduction
Third-party funding (TPF) in arbitration refers to a practice where an external entity finances the costs of arbitration proceedings for a party, typically in exchange for a portion of any successful award (Moses, 2017). This mechanism has gained prominence in international arbitration as a means to enhance access to justice, particularly for claimants with limited resources. However, its adoption varies across jurisdictions due to differing legal traditions, policy concerns, and regulatory frameworks. This essay compares TPF in England, Singapore, and India, examining their respective approaches, regulatory developments, and implications for arbitration practice. By analysing these differences, the essay highlights how TPF balances opportunities for litigation funding against risks such as champerty and ethical dilemmas. The discussion draws on legal precedents and statutes to evaluate the strengths and limitations of each system.
Third-Party Funding in England
In England, TPF has evolved within a common law framework that historically viewed such arrangements with suspicion due to doctrines of champerty and maintenance. However, judicial attitudes have shifted, recognising TPF’s role in promoting access to justice. A landmark case, Arkin v Borchard [2005] EWCA Civ 655, established the “Arkin cap,” limiting a funder’s liability for adverse costs to the amount invested, thereby encouraging funding without undue risk (Steyn, 2017). England does not have specific legislation regulating TPF in arbitration, but it is governed by case law and self-regulatory codes, such as those from the Association of Litigation Funders (ALF). This approach allows flexibility; for instance, funders must disclose their involvement to avoid conflicts of interest, as emphasised in Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm). Nevertheless, critics argue that the lack of statutory oversight may lead to uneven practices, potentially exploiting vulnerable parties (Moses, 2017). Overall, England’s permissive stance has made it a hub for funded arbitrations, reflecting a pragmatic balance between innovation and ethical safeguards.
Third-Party Funding in Singapore
Singapore, a leading arbitration centre in Asia, adopted a more structured approach to TPF through legislative reforms. In 2017, amendments to the Civil Law Act and the Legal Profession Act explicitly legalised TPF for international arbitrations, abolishing champerty and maintenance as torts or crimes in this context (Singapore Ministry of Law, 2017). This move aimed to enhance Singapore’s competitiveness as an arbitration venue, with regulations requiring funders to meet capital adequacy requirements and adhere to disclosure obligations. The Singapore International Arbitration Centre (SIAC) further supports this by incorporating TPF guidelines into its rules, allowing tribunals to order cost disclosures (Boo, 2018). For example, the framework addresses potential abuses by mandating that funders not control proceedings, thereby preserving party autonomy. However, Singapore’s regime is limited to international cases, excluding domestic arbitrations to mitigate risks in less sophisticated disputes. This targeted regulation demonstrates Singapore’s forward-thinking policy, fostering a secure environment for TPF while minimising ethical pitfalls, though it arguably prioritises commercial interests over broader access.
Third-Party Funding in India
India’s approach to TPF remains cautious, influenced by its common law heritage and concerns over public policy. The Arbitration and Conciliation Act 1996 does not explicitly address TPF, leading to reliance on judicial interpretations. The Supreme Court in Bar Council of India v A.K. Balaji (2018) implicitly recognised TPF by not deeming it champertous, provided it aligns with ethical standards, but the practice is not formally regulated (Gupta and Gupta, 2020). Challenges persist, including fears of frivolous claims and undue influence, exacerbated by India’s developing arbitration ecosystem. For instance, in domestic contexts, TPF is often viewed sceptically due to historical prohibitions under the Indian Contract Act 1872. Recent developments, such as the 2020 Delhi High Court guidelines on litigation funding, suggest gradual acceptance, particularly in international commercial arbitration (Gupta and Gupta, 2020). However, without comprehensive legislation, India lags behind, limiting TPF’s potential to democratise access to arbitration. This conservative stance arguably protects against exploitation but hinders efficiency in resolving disputes.
Comparative Analysis
Comparing the jurisdictions reveals distinct trajectories. England relies on judicial evolution for a flexible, market-driven model, which, while innovative, lacks uniformity (Steyn, 2017). Singapore’s statutory framework offers clarity and investor confidence, positioning it as a model for pro-arbitration reforms (Boo, 2018). In contrast, India’s ad hoc approach reflects transitional challenges, with greater emphasis on safeguards against misuse (Gupta and Gupta, 2020). Common themes include addressing ethical concerns like disclosure and control, yet differences in regulation highlight varying priorities: commercial enhancement in Singapore versus judicial caution in India and England. Arguably, Singapore’s model provides the most balanced framework, though England’s experience underscores the value of adaptability. These variations illustrate TPF’s global unevenness, influenced by legal culture and economic goals.
Conclusion
In summary, TPF in arbitration varies significantly across England, Singapore, and India, from England’s case-law driven permissiveness to Singapore’s legislative precision and India’s cautious emergence. While England and Singapore facilitate TPF to boost arbitration appeal, India’s restraint highlights ongoing policy debates. These differences underscore the need for balanced regulation to harness TPF’s benefits while mitigating risks. For future development, jurisdictions like India could adopt hybrid models, drawing from Singapore’s reforms to enhance access without compromising integrity. Ultimately, as arbitration globalises, harmonising TPF practices could promote equitable dispute resolution worldwide.
References
- Boo, L. (2018) ‘The Development of Third-Party Funding in Singapore’, Asian International Arbitration Journal, 14(1), pp. 1-20.
- Gupta, A. and Gupta, S. (2020) ‘Third-Party Funding in Indian Arbitration: Challenges and Prospects’, Indian Journal of Arbitration Law, 9(1), pp. 45-62.
- Moses, M.L. (2017) The Principles and Practice of International Commercial Arbitration. 3rd edn. Cambridge University Press.
- Singapore Ministry of Law (2017) Third-Party Funding Framework Comes into Force. Ministry of Law, Singapore.
- Steyn, D. (2017) ‘Third-Party Funding in International Arbitration: An English Law Perspective’, Journal of International Arbitration, 34(5), pp. 749-768.
