CONDITIONAL FEE AGREEMENTS IN SINGAPORE

The CFA framework enhances the options on fee arrangements that sophisticated clients may consider when engaging lawyers in Singapore, especially for international arbitration proceedings which may be seated in or outside Singapore.

1. With effect from 4 May 2022, lawyers in Singapore may enter into conditional fee agreements ("CFAs") with their clients, with respect to certain proceedings, such as international arbitration, pursuant to the amended Legal Profession Act 1966 (2020 Rev Ed) ("LPA") and the Legal Profession (Conditional Fee Agreement) Regulations 2022 ("Regulations").

2. This has great relevance to foreign users of Singapore as the venue of their dispute resolution. Singapore is, jointly with London, the most preferred seat for international arbitration proceedings globally, according to the Queen Mary University of London and White & Case 2021 International Arbitration Survey. Among arbitration users of the Singapore International Arbitration Centre ("SIAC"), India is by far the top foreign user in 2021, according to the 2021 SIAC Annual Report.

3. The CFA framework enhances the options on fee arrangements that sophisticated clients may consider when engaging lawyers in Singapore, especially for international arbitration proceedings which may be seated in or outside Singapore. Building on previous developments, such as the formation of the Singapore International Commercial Court ("SICC") and the third-party funding framework for arbitration and SICC proceedings, the CFA framework seeks to enhance Singapore's attractiveness as an international dispute resolution hub.

I. Scope of CFAs under the LPA

4. While CFAs were prohibited under common law relating to maintenance and champerty, section 115B(2)(b) of the LPA expressly provides that subject to compliance with certain requirements CFAs are "not contrary to public policy or otherwise illegal, by reason only that it is a contract for maintenance and champerty".

5. Section 115A of the LPA defines CFAs as agreements "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". For example, CFAs may take the form of a "no win, no fee", or "no win, less fee" agreement.

6. In contrast, contingency fee agreements, which "provide for the remuneration or costs to be payable as a percentage or proportion of the amount of damages…", and have no direct correlation to the work done by the lawyers, remain prohibited: section 115B(4)(b).

7. CFAs are allowed only with respect to prescribed proceedings as set out in reg 3 of the Regulations, including international and domestic arbitration proceedings, certain arbitration-related court proceedings, litigation proceedings in the Singapore International Commercial Court ("SICC"), and mediation proceedings connected with these proceedings.

8. Notably, arbitration and related court proceedings outside Singapore are also covered in reg 3(a) and (e). Hence, even when a client engages his Singapore lawyer to represent him in arbitration proceedings seated outside Singapore, CFAs are similarly allowed.

9. There are formal requirements relating to the entering into of CFAs in order to safeguard the client's interests, which include the following:

9.1. CFAs must be in writing and signed by the client: section 115B(4) of the LPA.

9.2. The lawyer must provide prescribed information "in plain language to the client": reg 4(1)(a) of the Regulations.

9.3. There are cooling-off periods of 5 and 3 days for the entering into and variation of CFAs respectively, during which either party may by written agreement terminate the CFAs: reg 5(c), (e) of the Regulations.

II. Rationale

10. It is clear that the CFA framework is intended to enhance Singapore's position as an international dispute resolution hub, so as to "remain an attractive place for businesses to want to be at and to deal with and address their legal needs".1 It builds on the amendments to the Civil Law Act 1909 (2020 Rev Ed) which allowed third-party funding for the same categories of proceedings covered under the CFA framework.

11. Second, there is also recognition on the need to level the playing field between lawyers in Singapore and in other common law jurisdictions (such as England and Wales, United States, Australia and Canada) which have moved away from the traditional prohibitions relating to maintenance and champerty. For instance, in England and Wales, lawyers are allowed to enter into CFAs as well as contingency fee (or damages-based) agreements in relation to most legal proceedings, except criminal and family proceedings. Hence, at least to the extent concerning international commercial disputes subject to arbitration or the SICC, Singapore lawyers may now enter into CFAs just as their other common law counterparts.

12. Third, this enhances access to justice. Where business with meritorious claims may not be able to put out full legal fees at the outset, CFAs comprise an alternative method of funding and pursuing these claims. It has been observed that that "a system of payment by results should discourage lawyers from pursuing weak cases" and "would provide incentives for lawyers in respect of the cases they do pursue". 2

13. Further, the "cautious" approach in the present CFA framework maintains a balance with the rationale behind the common law rules relating to maintenance and champerty, "to protect vulnerable litigants, and to guard against potential misconduct and conflict of interest for lawyers". That said, clients intending to enter into CFAs should take the time to clearly understand their terms.

14. Finally, the court retains discretion over the enforcement of conditional fee agreements under section 115D, in particular, "every question respecting the validity or effect of a [CFA]" (section 115D(2)), as well as the situation where there is a change in solicitor after a CFA had been entered into (section 115F(1)). However, certain latitude will be given to the parties' freedom of contract, as is emphasized in the course of the parliamentary debate.3

III. Concluding remarks

15. The popularity of CFAs in the Singapore legal landscape remains to be seen. As this article is being prepared, it is intended that a Guidance Note on CFAs will be issued by the Ministry of Law working together with the Law Society of Singapore.4 This may provide further assistance to lawyers and clients considering CFAs. Regardless, it is hoped that the CFA framework, as an additional option of fee arrangement, will be able to serve the needs of clients engaging lawyers in Singapore.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.