23 November 2021
The Legal Profession (Amendment) Bill was introduced in Parliament on 1 November 2021 (“Bill”). The Bill will introduce conditional fee agreements (“CFAs”) into Singapore’s litigation and arbitration landscape for the first time.
This article sets out some of the key highlights of the Bill.
What are CFAs?
A CFA is a fee arrangement between a lawyer and a client under which the lawyer undertakes to receive his fees only in specified circumstances e.g. if the claim is successful.
A CFA can also include an additional “uplift” or “success” fee, payable to the lawyer if, for example, the claim is successful.
The Ministry of Law (“MinLaw”) issued a press release upon its introduction of the Bill on 1 November 2021, explaining the rationale for introducing CFAs:
- Enhanced access to justice: CFAs will provide businesses or individuals with additional funding options to pursue meritorious claims, which they may otherwise not pursue. This is particularly relevant given the disruptions arising from the Covid-19 pandemic.
- Levelling the playing field: Singapore lawyers in areas such as international arbitration or Singapore International Commercial Court (“SICC”) proceedings will be better able to compete with their counterparts in foreign jurisdictions, who are already able to offer CFAs or similar agreements.
- Discourage frivolous claims: CFAs may serve to discourage lawyers from pursuing weak cases and frivolous claims, as fees will be contingent on the outcome.
MinLaw conducted a public consultation in 2019 on the proposed framework for CFAs, and feedback received from the legal profession and other respondents has generally been positive and supportive. For more on the public consultation, please read our article titled “MinLaw invites views on proposal to allow conditional fee agreements in Singapore”.
The introduction of the framework will build on the third-party funding framework, which was extended to more categories of legal proceedings in Singapore in June 2021. This development was discussed in our article titled “Third-party funding permitted for more categories of legal proceedings in Singapore”.
The Bill’s CFA framework will apply to Singapore law practices and certain registered foreign lawyers and foreign law practices.
For now, CFAs are not of universal application to all proceedings. They can only be used in selected proceedings, including international and domestic arbitration proceedings, certain proceedings in the SICC, and related court and mediation proceedings.
MinLaw informs that it will continue to review the litigation funding landscape, to consider whether CFAs can promote access to justice for other categories of proceedings, including domestic court proceedings.
CFAs vs contingency fees
CFAs (under which fees are payable only upon certain specified circumstances, such as the claim being successful) need to be distinguished from contingency fee arrangements, under which the quantum of legal fees are payable as a percentage or proportion of the sums recovered for the client.
Essentially, under contingency fee arrangements, the lawyer may share in an agreed percentage of the sum recovered with no direct correlation to the work done.
Contingency fee arrangements will continue to be prohibited under Singapore law.
There will be safeguards for CFAs, including information that a lawyer must provide to the client before entering into a CFA. These safeguards and the terms and conditions of a CFA will be implemented via subsidiary legislation.
Fees charged under a CFA will continue to be subject to professional conduct rules against overcharging.