In a recent development, Singapore’s Ministry of Law proposed a framework for conditional fee agreements (“CFAs”) that may be entered into between lawyers and their clients in prescribed proceedings. This liberalisation of the legal landscape in Singapore promises to strengthen Singapore’s position as an international dispute resolution hub. It also levels the playing field for lawyers practising in Singapore in areas such as international arbitration or the Singapore International Commercial Court (“SICC”) vis-à-vis their counterparts in foreign jurisdictions who are already able to offer such arrangements.

Conditional Fee Arrangements in Singapore

On 1 November 2021, Singapore’s Ministry of Law tabled for First Reading in Parliament the Legal Profession (Amendment) Bill(the “Bill”) which sought to create a statutory exemption for CFAs in Singapore. CFAs are arrangements whereby the whole or a part of a lawyer’s fees only become payable in specified circumstances (for e.g. where the claim is successful). Such arrangements were hitherto prohibited in Singapore due to its laws against champerty and maintenance.[1] When champerty and maintenance were abolished as torts in 2017,[2] contracts that were affected by champerty and maintenance were still considered illegal and contrary to public policy except for permitted categories.

In addition to creating a statutory exemption for CFAs in relation to fees or costs for prescribed proceedings that comply with specified requirements, the Bill also sets out an overarching framework for CFAs that will apply to Singapore law practices and certain registered foreign lawyers and foreign law practices to which the Legal Profession Act applies.

The Bill defines a CFA as “an agreement relating to the whole or any part of the remuneration and costs in respect of contentious proceedings (whether relating to proceedings in Singapore or any state or territory outside Singapore) conducted by a solicitor, a foreign lawyer or a law practice entity, which provides for the remuneration and costs or any part of them to be payable only in specified circumstances, and may provide for an uplift fee.” CFAs are to be distinguished from contingency fee arrangements. In a contingency fee arrangement, a lawyer will ordinarily receive an agreed percentage of the sum recovered by the client, with no direct correlation to the work done. Contingency fee arrangements will continue to be prohibited under the Bill.

Contentious proceedings relate to proceedings before a court or an arbitrator or any other dispute resolution proceedings, and they could be proceedings occurring in Singapore or elsewhere. In its press release on 1 November 2021, the Ministry of Law clarified that as a start, these proceedings include international and domestic arbitration proceedings, certain proceedings in the SICC, and related court and mediation proceedings.

To come within the purview of the Bill, the CFA must: (i) be in writing and signed by the client; (ii) not provide for the remuneration or costs to be payable as a percentage or proportion of the amount of damages or other amounts awarded to or recovered by the client in any contentious proceedings (i.e. not a contingency fee arrangement); and (iii) comply with the regulations made by the Minister of Law to carry out or give effect to the Bill. The proposed framework also provides for a mandatory cooling-off period of five (5) days upon entry into a CFA and three (3) days in respect of a variation to a CFA. This mandatory cooling-off period has been instituted in Australia, but not in the equivalent English legislation regulating CFAs.

An “uplift fee” would be the remuneration or costs which are payable in specified circumstances, which are higher than the remuneration or costs that would otherwise be payable without a CFA. The proposed draft section 115C(2) of the Bill provides that uplift fees cannot be recovered as party-and-party costs by a client who had entered into a CFA. The current arbitration regime in Singapore gives the arbitral tribunal a broad discretion to award party-and-party costs, but the Bill appears to prohibit an arbitral tribunal from exercising such discretion in relation to uplift fees in CFAs. The ability to recover uplift fees from counterparties continues to be a hotly debated topic among legal practitioners since its non-recoverability has apparently contributed to an increase in solicitor-client disputes in certain jurisdictions like the UK. It remains to be seen whether the eventual legislation passed by Parliament would continue to adopt an absolute prohibition against such recovery, or take on a more nuanced, qualified position. 

Benefits of Introducing CFAs to Singapore’s Legal Landscape

Feedback from the legal profession and other respondents to a public consultation exercise conducted by the Ministry of Law in 2019 was generally positive and supportive. The feedback recognised that CFAs stood to improve access to justice by providing litigants with additional funding options to pursue meritorious claims, which they may otherwise not pursue. Furthermore, considering that fees under a CFA are contingent on the outcome, CFAs may also help to discourage lawyers from pursuing weak cases and frivolous claims. Any concerns about intermeddling in or profiting from litigation (the main objections to maintenance and champerty) are addressed by the regulations and safeguards provided in the Bill that CFAs will be subject to. Fees charged under a CFA will also continue to be subject to professional conduct rules against overcharging.

Ultimately, the ability to provide additional funding options to litigants would strengthen Singapore’s position as an international dispute resolution hub. This builds on the third-party funding framework, which was introduced for international arbitrations in 2017 and extended to domestic arbitrations, certain proceedings in the SICC, and related court and mediation proceedings in June 2021.

The ability to provide CFAs places Singapore lawyers in a better competitive position with lawyers in other jurisdictions who were already able to offer such arrangements. For example, although the prohibition against maintenance and champerty stemmed from the English common law, this prohibition was removed in England by the Courts and Legal Services Act 1990, and since 1998, conditional fees were made available in all civil litigation proceedings, save for certain family law matters, and in arbitration proceedings.

It will be interesting to see how the CFA regime will develop in Singapore. As mentioned, the Ministry of Law will continue to provide safeguards for the implementation of CFAs. Nonetheless, the experience of other jurisdictions would be useful in identifying issues, which would require diligent scrutiny. For example, issues such as the recoverability of CFA success fees and the interpretation of the statutory requirements for CFAs appear to have contributed to a rise in solicitor-client disputes in the UK and Australia. Such issues should be given particular attention as it would be an ironic albeit unintentional consequence if the proposed framework –introduced to provide greater access to justice to parties with meritorious claims but who may be facing cashflow issues – were to result in more solicitor-client disputes.

Conclusion

In areas such as international arbitration, lawyers and legal practices practising in Singapore have been handicapped or placed at a relative disadvantage when compared to their counterparts in other jurisdictions that allow CFAs. Parties involved in international arbitrations are likely to be more commercially sophisticated, and would welcome the opportunity to be able to enter into arrangements with their lawyers on their fees.

To the extent that entering into a CFA is an important consideration in a party’s choice of legal representation in international arbitration proceedings, this further liberalisation of the legal landscape in Singapore will provide increased opportunities for lawyers and legal practices practising in Singapore. The amendment may in future be extended to domestic litigation proceedings since the Ministry of Law continues to monitor the litigation funding landscape to assess whether CFAs can promote greater access to justice in other categories of proceedings.

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[1] Maintenance is the provision of financial assistance to a party by a person who has no interest in the proceedings. Champerty is the maintenance of an action in return for a share in the proceeds of the action. As such, champerty is a sub-set of maintenance. Under contract law, agreements affected by maintenance or champerty are void as being contrary to public policy.

[2] Section 5A, Civil Law Act (Cap 43)

This article may be cited as Wei Ming Tan and Asya Jamaludin, “Conditional Fee Agreements Regime in Singapore – Liberalisation of Singapore’s Legal Landscape and Lessons Learned from Other Jurisdictions” *

*First published in CMS International Disputes Digest, December 2021, Winter Edition