PROPOSED AMENDMENTS TO ALLOW CONDITIONAL FEE ARRANGEMENTS IN SINGAPORE

Background to CFAs in Singapore

At present, lawyers in Singapore are not permitted to charge any type of outcome-dependent fee for the work rendered. The statutory prohibition against outcome-dependent fees has its roots in English common law. While in England the prohibition against CFAs was removed in 1990, thus far the prohibition has remained in Singapore law. However, recent changes in Singapore law and the commercial litigation landscape have prompted the Ministry of Law to re-look at this prohibition.

In 2017, the Civil Law Act was amended to permit third-party funding arrangements in certain prescribed contentious proceedings, including domestic and international arbitration proceedings and related court and mediation proceedings. More recently and in response to the growing interest in alternative funding arrangements for commercial claims, the Ministry of Law announced in late 2019 that it would undertake a public consultation on the possibility of allowing CFAs for certain legal proceedings. This exercise has reportedly received positive feedback from the legal profession and users of dispute resolution services alike.

Key features of the proposed amendments to allow CFAs

The amendments to the LPA concerning CFAs are set out in proposed new sections 115A to 115F of the LPA. These include the following.

• A CFA is defined as an agreement on lawyers’ remuneration and costs for contentious proceedings. Under such agreement, the remuneration / costs are payable by the client only when a specified occurrence or condition takes place. (See Section 115A(1) of the proposed amendments)
• The amount agreed under a CFA may also include an “uplift fee”. An uplift fee is where the conditional fee payable under specified circumstances is higher than the fee that would have been payable if there had been no CFA in place. (See Section 115A(1) of the proposed amendments)
• Singapore-qualified lawyers and law practices, and registered foreign lawyers and law practices, are able to enter into a CFA with their clients for certain prescribed proceedings. (See Sections 115B(1), 115A(2)(b) and 115A(2)(c) of the proposed amendments)
• CFAs are currently contemplated to be available for domestic / international arbitrations, certain proceedings in the Singapore International Commercial Court, and related court / mediation proceedings. The Ministry of Law may expand this initial list to include more types of eligible proceedings in the future.
• A CFA must be concluded in writing and signed by the client in order to be valid. (See Section 115B(4)(a) of the proposed amendments)
• CFAs, as defined in the LPA, are distinct from contingency fee arrangements. A contingency fee arrangement is where lawyers receive a share in the monies recovered by clients in the event of a successful claim or settlement. Contingency fee arrangements continue to be disallowed in Singapore. (See Section 115B(4)(b) of the proposed amendments.)
• CFAs may cover work done by legal practitioners even if legal proceedings are not eventually commenced. Among others, the scope of work that may be covered under a CFA includes preliminary advice given for, and before, the commencement of legal proceedings; and negotiations for the settlement of a claim / dispute for the purposes of any contemplated proceedings. (See Section 115B(6) of the proposed amendments)

Safeguards for litigants

CFAs will be regulated through the implementation of safeguards to protect litigants’ interests. This will be done through subsidiary legislation / further regulations, and would include the following (see Section 115B(7) of the proposed amendments):

• A standard form, and required terms and conditions, for a CFA.
• Maximum limits on costs that can be agreed under a CFA (including the uplift fee).
• Information about the CFA that must be provided to the client prior to entering into the CFA. This will allow clients to make informed decisions on CFAs.

Safeguards such as these are important as the implementation of a CFA may raise concerns about potential conflicts between the legal practitioner / law practice’s interests and those of their clients.

Fees agreed under a CFA will also be subject to the existing professional conduct rules in Singapore against overcharging by legal practitioners / law practices.

Conclusion

The proposed amendments to the LPA to introduce CFAs are a promising step forward for the Singapore legal market to remain competitive and responsive to litigants’ needs.

The introduction of CFAs could benefit litigants in the following ways. First, CFAs may facilitate access to justice. As lawyers’ fees due under a CFA are outcome-dependent, such arrangements would enable businesses or individuals with meritorious claims to explore alternative funding options. CFAs may also facilitate the efficient resolution of disputes by encouraging legal practitioners to be more cost-conscious or effective in managing cases. With CFAs in place, there would be less incentive for lawyers to pursue weak or frivolous claims.

Singapore presently ranks among the world’s preferred places for arbitration. As CFAs are being considered for arbitration and related court proceedings, this development would further strengthen Singapore’s stature as a major international center for dispute resolution.

Commercial parties and legal practitioners in Singapore are sure to be keeping a close eye on these developments, and will be looking forward with interest to further debate and discussion on the bill when the Second Reading is announced.