OUT-LAW ANALYSIS 7 min. read
The use of third-party funding (TPF) has seen significant growth in Singapore.
05 Aug 2026, 10:06 am
The use of third-party funding (TPF) has seen significant growth in international arbitration, both in Singapore and globally.
In Singapore, this growth has been facilitated by legislative amendments introduced in 2017 through the Civil Law Act 1909 (CLA) to permit the use of TPF in limited circumstances, depending on the type of funding agreement, the qualification of the funder, and the nature of the dispute resolution proceedings.
The separate question of whether and to what extent the costs of TPF may be recoverable in a Singapore-seated arbitration, however, remains an open one. For now, practical guidance may be taken from the recent judgment of the Singapore International Commercial Court (SICC) in DTH and another v DTF and others, as well as from important judgments of the English Commercial Court.
The case arose from a Singapore-seated arbitration in which the tribunal determined that the successful parties were entitled to recover their legal costs but not their TPF costs. The result was that, after paying their own TPF costs, the parties stood to retain almost nothing from their $14.73 million award.
The applicants applied to the SICC to set aside the tribunal’s decision on TPF costs, or remit the matter for the tribunal to reconsider its decision, on two principal grounds arising under Articles 34(2)(b)(ii) and 34(2)(a)(iv) of the UNCITRAL Model Law on International Commercial Arbitration (Model Law) which applies by virtue of section 3 of Singapore’s International Arbitration Act 1994.
First, the applicants argued that the tribunal’s determination on TPF costs was in conflict with the public policy of Singapore to ensure access to justice in arbitration for impecunious but deserving parties seeking recovery of TPF costs.
Second, the applicants argued that the arbitral procedure adopted by the tribunal in arriving at its decision on TPF costs was not in accordance with the parties’ agreement, in particular rule 37 of the SIAC Rules 2016 read with SIAC Practice Note 01/17. Rule 37 authorises the tribunal to order that some or all legal or other costs of a party be paid by another party. Practice Note 01/17 provides that the tribunal may take into account the existence and involvement of any external funder in apportioning costs.
The SICC dismissed the application in its entirety and provided clarity on how future challenges based on such public policy and arbitral procedure grounds are likely to be assessed in the context of TPF costs. Significantly, however, the SICC did not make any finding as to whether TPF costs are in fact recoverable in Singapore-seated arbitrations.
On the public policy ground, the SICC identified two principal questions to be addressed: whether the asserted public policy exists and, if so, whether the tribunal’s decision conflicts with that public policy to the requisite degree. In answering both of these questions in the negative, the SICC highlighted that a policy must engage at least a substantial segment of the population in order to be considered a public policy and that the threshold to establish conflict with public policy under Article 34(2)(b)(ii) of the Model Law is a high one.
The parties made reference to the public policy of “ensuring access to justice in arbitration” in relation to the specific group of impecunious but deserving parties seeking to recover TPF costs. The SICC found that this was "manifestly limited and specific" and therefore the policy could not properly be characterised as "public" in nature.
Assuming there was such a public policy, even if the tribunal had erred in concluding that it lacked the power to award TPF costs, the SICC found that this conclusion would not meet the high threshold required to demonstrate a conflict with public policy as conveyed by expressions such as "shock the conscience". The SICC reasoned that “when Singapore law proscribes the recovery of such costs in relation to one significant area of commercial legal practice (i.e. SICC proceedings), it cannot credibly be said that the inability to recover TPF costs from the unsuccessful party shocks the conscience, violates Singapore’s most basic notions of morality and justice or is injurious to the public good”.
On the arbitral procedure ground, the SICC considered whether rule 37 could be considered part of the arbitral procedure for purposes of Article 34(2)(a)(iv) of the Model Law and, assuming so, whether the tribunal’s construction of rule 37 was open to it.
Rule 37 gives the tribunal the power to determine the allocation of costs but does not prescribe how the tribunal is to act procedurally when reaching its decision on costs. It therefore cannot be considered part of the arbitral procedure. The SICC explained that, if the tribunal was incorrect in concluding that it had no power to award TPF costs, that was at most an error as to the outcome touching on the merits — an error of substance, not of procedure.
Even if rule 37 were procedural in nature, it was open to more than one construction and it was for the tribunal to determine whether and how that rule applied. The SICC therefore would not intervene by substituting its own construction of rule 37 to conclude that the agreed procedure had not been followed.
The SICC judgment demonstrates that, under current Singapore law, parties dissatisfied with a tribunal's treatment of TPF costs face limited prospects of relief through setting-aside applications under Articles 34(2)(a)(iv) and 34(2)(b)(ii) of the Model Law.
The SICC judgment reinforces the final and binding nature of arbitral awards and the principle of minimal curial intervention – that is, the general principle in Singapore that courts will construe an award supportively rather than seek to undermine its enforceability. The SICC's refusal to re-examine the substance of the tribunal's decision is consistent with Singapore's pro-arbitration stance and illustrates the high threshold that must be met when challenging arbitral costs awards generally under Article 34 of the Model Law.
Regarding costs more broadly, the SICC judgment indicates that any public policy challenge under Article 34(2)(b)(ii) of the Model Law based on a tribunal’s determination of the allocation of costs – i.e. “deciding which categories of costs were recoverable, and which were not” – is generally unlikely to succeed. The SICC noted that “[i]t is difficult to see how such a determination could be said to shock the conscience, offend fundamental notions of morality and justice, or be viewed as injurious to the public good”. This would apply to the allocation of costs generally, whether relating to TPF or otherwise.
Additionally, the SICC discussed the tribunal’s view that the TPF agreement in this case did not fall within the permitted uses of TPF under Singapore’s Civil Law Act (CLA). The tribunal considered the particular terms of the TPF agreement and found that the funder’s return “constitutes a reward for risk assumed, rather than part of the cost of funding the proceedings and therefore falls outside the indemnity principle and the statutory protection afforded under section 5B” of the CLA, such that it “is properly characterised as a commercial investment”.
The SICC commented that this meant the TPF agreement was caught by Singapore’s rules against maintenance and champerty and was therefore not enforceable. Anyone considering the use of TPF in a Singapore-seated arbitration should accordingly bear in mind that the terms and structure of their TPF agreement can have a significant impact on its enforceability and the recoverability of TPF costs.
Unlike in Singapore, the English Commercial Court has directly addressed the question of whether TPF costs are recoverable in arbitration.
In the 2016 case of Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd, the Commercial Court upheld an ICC tribunal’s award requiring Essar to pay Norscot’s TPF costs, which amounted to approximately three times Norscot’s legal costs. Notably, the award was made in the context of particularly egregious conduct by Essar, in which the tribunal found that Essar had "set out to cripple [Norscot] financially”, effectively forcing it to resort to TPF.
The court confirmed that such TPF costs fell within the scope of “other costs” under s59(1)(c) of the Arbitration Act 1996, meaning the tribunal had the power to order them. Accordingly, even if the tribunal had erred in its construction of "other costs", this was an error in exercising a power it had, rather than an excess of power, and thus did not constitute a serious irregularity for the purposes of setting aside the award under s68(2)(b) of the Arbitration Act 1996.
The Commercial Court upheld another ICC tribunal’s award of TPF costs in Tenke Fungurume Mining SA v Katanga Contracting Services SAS in 2021. In that case, Katanga was awarded the costs of TPF obtained from a company owned by one of its shareholders. Tenke sought to set aside the tribunal’s award on this point under s68(2)(b) of the Arbitration Act 1996 on the basis that the tribunal had exceeded its powers in awarding TPF costs. The court, however, was unwilling to depart from its ruling in Essar and noted that it was “correct to conclude that at its highest[,] this was an erroneous exercise of an available power and not susceptible to challenge under section 68".
The judgments in both the Essar and Tenke cases are notable in that, as with the SICC judgment in DTH v DTF, the English Commercial Court declined to interfere with the tribunal's exercise of its discretion in determining the allocation of costs. Although the tribunals reached a different substantive outcome on the recoverability of TPF costs in these cases compared to DTH v DTF, all three affirm one consistent principle: tribunals are afforded broad discretion in awarding costs, and the courts will not readily set aside such determinations.
As noted above, the SICC did not make any finding on whether TPF costs are recoverable in Singapore-seated arbitrations and confined its analysis strictly to the grounds of the setting-aside application before it.
In the absence of authoritative guidance, the recoverability of TPF costs in Singapore-seated arbitrations will continue to be determined on a case-by-case basis by the appointed tribunal. Parties considering TPF in Singapore arbitrations should bear in mind that the terms of the TPF agreement matter and that, even if one party ultimately succeeds on the merits, its TPF costs still may not be awarded.
As the use of TPF continues to grow in Singapore and globally, more tribunals will inevitably be called upon to grapple with this issue. Until then, the recoverability of TPF costs in Singapore-seated arbitrations remains a question not of settled law, but of strategic foresight for funders, parties and their advisors.
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