A Singapore court has rejected an attempt by successful arbitration claimants to recover approximately $14.6 million in third-party funding costs, adding an important new decision to the international debate over who should ultimately bear the expense of financing arbitration.
The dispute arose from a Singapore International Arbitration Centre proceeding in which the claimants, identified in the court proceedings as DTH, succeeded in obtaining an award of approximately $14.7 million. To finance the case, however, the claimants had entered into a third-party funding arrangement that ultimately generated costs almost equal to the amount they recovered.
After prevailing in the arbitration, the claimants sought to have those funding costs shifted to the unsuccessful respondents. The arbitral tribunal declined to do so.
The claimants then challenged that part of the award before the Singapore International Commercial Court, arguing that the tribunal had failed to properly exercise its authority over costs. The court rejected the challenge, leaving the tribunal’s decision intact.
The ruling is significant because third-party funding has become an increasingly important feature of international arbitration, particularly in complex commercial and investor-state disputes where legal costs can reach millions of dollars.
Under a typical funding agreement, an outside financier pays some or all of a claimant’s legal expenses in exchange for a return if the case succeeds. The arrangement can allow parties to pursue claims without committing substantial capital to years of litigation or arbitration, but the price of that financing can be considerable.
The DTH case illustrates that point unusually clearly.
With approximately $14.6 million in funding costs attached to a recovery of roughly $14.7 million, the economics of the dispute raise questions about how arbitration costs should be allocated and how tribunals should treat the financial arrangements claimants use to pursue their cases.
Third-party funding itself is well established in Singapore. The jurisdiction first permitted funding for international arbitration in 2017 and later expanded the framework to cover additional categories of proceedings. Singapore’s embrace of legal finance formed part of a broader effort to strengthen its position as a leading international dispute resolution center.
The latest decision does not challenge the legitimacy of third-party funding. Instead, it addresses the separate question of whether the losing party in an arbitration should be required to reimburse the potentially substantial premium or return owed to the funder.
That issue has divided arbitration practitioners. Supporters of recovering funding costs argue that a successful claimant may otherwise be left significantly out of pocket even after prevailing. If outside financing was reasonably necessary to pursue a meritorious claim, they contend that tribunals should have flexibility to consider those expenses when allocating costs.
Opponents argue that funding agreements are private commercial arrangements between claimants and financiers. Requiring an unsuccessful respondent to pay a funder’s return could expose that party to costs it neither agreed to nor controlled, particularly where the funding arrangement carries a substantial premium.
The Singapore decision is especially relevant because arbitral tribunals generally enjoy broad discretion when allocating costs. National courts, meanwhile, typically exercise only limited oversight of tribunal decisions, reflecting the longstanding principle that judicial intervention in arbitration should remain narrow.
By declining to disturb the tribunal’s treatment of funding costs, the court reinforced that distinction. The case may also influence how parties negotiate funding arrangements in the future. Claimants cannot necessarily assume that a successful arbitration will allow them to transfer the full cost of financing to their opponent, even where the underlying award includes an order for legal costs.
For funders and law firms, that places greater importance on evaluating the economics of a case before financing is secured.
Third-party funding has moved firmly into the mainstream of international arbitration, but questions surrounding disclosure, security for costs and recoverability remain unsettled across jurisdictions.
The DTH decision provides another important reference point in that developing body of law. It also serves as a reminder that winning an arbitration does not necessarily mean recovering every expense incurred to get there.
