DTH and another v DTF and others
Facts in brief The Applicants were the successful parties in an international arbitration. To finance the arbitration, they entered into a third-party funding agreement. Under that agreement, the funder was entitled to receive the greater of: a variable multiple of the funded costs, ranging from 0.5x to 3x depending on how long the case took; or a percentage of the recovery, ranging from 5% to 30%, also depending on the time elapsed. The Applicants’ total recovery appears to have included US$14,736,000 under the arbitral award, plus US$4,129,633.56 in legal and arbitration costs under the Costs Award. They also sought to recover US$14,608,695.11 in third-party funding costs. The Tribunal, via the Majority, dismissed the claim for third-party funding costs. Its reasoning can be summarised in two main points. First, although the relevant amendments legalised qualifying third-party funding contracts, they did not create a right to recover the funder’s return from the losing party. Under the applicable law, the Tribunal had no authority to order the losing party to pay the Applicants’ third-party funding costs, nor did those costs fall within the definition of "other costs" under Rule 37 of the SIAC Rules. Second, section 12(5) of the International Arbitration Act provides that an arbitral tribunal “may award any remedy or relief that could have been ordered by the General Division of the High Court”. The Tribunal reasoned that, because the High Court could not have ordered an unsuccessful party to pay the successful party’s third-party funding costs, the Tribunal had no greater power to do so. The Applicants asked the Court to set aside the part of the Costs Award dealing with third-party funding costs, or alternatively to remit that issue to the Tribunal for reconsideration. They relied on two grounds: first, that the Majority’s decision conflicted with Singapore public policy; and second, that the Majority had not followed the arbitral procedure agreed by the parties when deciding whether third-party funding costs were recoverable. Public Policy Issue Notably, the Court has engaged in a very helpful consideration of the concept of "public policy" under the Model Law, see cited below: The Court then considered VV v VW [2008] 2 SLR(R) 929. In particular, it reiterated that it is not part of Singapore public policy to require costs incurred in private dispute resolution processes, including arbitration, to be assessed according to any specific principle such as proportionality. It further stated: On the reasoning in VV, the absence of any operative public policy constraint can only be explained on the basis that no relevant public policy is engaged at all. In other words, if no limitation founded upon public policy arises, it is because public policy has no application in the circumstances. Court brought up a very significant argument against understanding illegality and public policy as mirror concepts. The Court's reasoning on this issue was encapsulated in the para 78–81, quoted below: Arbitral Procedure Issue The Applicants argued that the Tribunal’s refusal to award third-party funding costs amounted to a breach of the agreed arbitral procedure. The Court rejected that argument. It held that, properly construed, Rule 37 of the SIAC Rules, which provides that the Tribunal "shall have the authority to order in its award that all or part of the legal or other costs of a party be paid by another party", is not a procedural rule and does not fall within the concept of "arbitral procedure" under Article 34(2)(a)(iv) of the Model Law.