28 January 2022
The Legal Profession (Amendment) Bill (“Bill”), which will introduce conditional fee agreements (“CFAs”) into Singapore’s dispute resolution landscape, was passed on 12 January 2022 and gazetted on 22 February 2022. The changes are not yet in force. The framework will allow CFAs in prescribed categories of proceedings which, for a start, will comprise international and domestic arbitration proceedings, certain proceedings in the Singapore International Commercial Court (“SICC”), and related court and mediation proceedings.
What are CFAs?
In his speech at the second reading of the Bill, Second Minister for Law Edwin Tong described CFAs as arrangements where a lawyer receives payment of a part, or all, of his or her legal fees, only in specified agreed circumstances, e.g. if a client’s claim is successful. CFAs may take the form of a “no win, no fee”, or a “no win, less fee” agreement, depending on how the fees are to be paid to the lawyer if the claim is unsuccessful.
Advantages of CFAs
Minister Tong outlined the following advantages that CFAs can bring:
- Enhanced access to justice: CFAs help to enhance access to justice by providing claimants with legitimate claims, but facing cash flow problems, with an alternative method of funding meritorious claims which they may otherwise not be able to pursue. This is particularly relevant given the business interruptions arising from the Covid-19 pandemic.
- Levelling the playing field: The framework will level the playing field for Singapore lawyers in areas such as international arbitration or SICC proceedings, vis-à-vis their counterparts in foreign jurisdictions, who are already able to offer CFAs.
- Discourage frivolous claims: As fees under a CFA are contingent on the outcome, CFAs may discourage lawyers from pursuing weak cases and frivolous claims.
- Key features of CFA framework
The CFA framework will apply to Singapore law practices and certain registered foreign lawyers and foreign law practices.
Key features of the CFA framework are set out below:
- Types of proceedings covered by framework: CFAs will be enforceable only in prescribed proceedings. These proceedings will be prescribed in subsidiary legislation and will, for a start, comprise international and domestic arbitration proceedings, certain proceedings in the SICC, and related court and mediation proceedings. The Ministry of Law is concurrently studying the feasibility of allowing CFAs in other categories of proceedings, such as domestic proceedings.
- Range of work covered: The range of work that can be covered by a CFA includes work done for the purposes of, and before, contemplated proceedings, such as preliminary advice, negotiations or the settlement of disputes. The CFA will apply even if those proceedings are not eventually commenced, or if the claim or dispute in those proceedings is settled. However, in such cases, the terms of the CFA must appropriately reflect the specific conditions on which the uplift or additional fee structure can be triggered.
- Uplift fees: A lawyer and his or her client may agree on the specific circumstances under which an uplift fee should be paid. “Uplift fees” are fees payable to the lawyer in specified circumstances, that are higher than what would otherwise be payable if there were no CFA.
- Freedom to structure CFAs: CFAs are not intended to replace traditional fee structures, but instead, provide an additional funding option between a lawyer and his client. Parties will be free to determine a mutually agreeable arrangement for the payment of fees, subject to the prescribed requirements in the CFA framework. For example, lawyers and clients can agree on a combination of the traditional fee structure in one area of work and a CFA in another area.
- Safeguards to protect clients: A CFA must be in writing and signed by a client to be valid, and must not provide for the remuneration and costs to be payable as a proportion of the amount recovered by the client. Such arrangements, often known as contingency fee agreements, will continue to be prohibited in Singapore. There will also be safeguards prescribed in subsidiary legislation such as the information that the lawyer must provide to the client and the terms and conditions that must be included in the CFA.