Further liberalisation of Singapore legal market to strengthen Singapore’s position as dispute resolution hub

This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.

In a new development for Singapore, the Ministry of Law has proposed a framework for conditional fee arrangements (“CFAs”) that may be entered into between lawyers and their clients in prescribed proceedings. This liberalisation of the legal landscape in Singapore will strengthen Singapore’s position as an international legal and dispute resolution hub. It will also level 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

On 1 November 2021, the Ministry of Law introduced the proposed framework for CFAs as part of the Legal Profession (Amendment) Bill (the “Bill”), which was tabled for First Reading in Parliament.

CFAs are arrangements whereby the whole or a part of a lawyer’s fees only become payable in specified circumstances, for example, where the claim is successful. Such arrangements have long been prohibited in Singapore because of 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.

The Bill thus seeks to create a statutory exemption for CFAs in relation to fees or costs for prescribed proceedings that comply with specified requirements. It 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.

CFAs are to be distinguished from contingency fee arrangements. In a contingency fee arrangement, a lawyer will ordinarily receive an agreed percentage of the of the sum recovered by the client, with no direct correlation to the work done. Such arrangements will continue to be prohibited under the Bill.

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.”

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.

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 had there not been a CFA.

To come within the purview of the Bill, the CFA must:

• be in writing and signed by the client,
• 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
• comply with the regulations made by the Minister of Law to carry out or give effect to the Bill. These include regulations to prescribe any of the following:
  • the class or classes or descriptions of contentious proceedings to which a CFA may relate;
  • requirements relating to the form of a CFA;
  • requirements relating to the terms and conditions of a CFA;
  • requirements relating to maximum limits on the remuneration or costs (including the uplift fee) that may be charged under a CFA determined or calculated by reference to a prescribed amount, a prescribed fixed or hourly rate or a percentage of the prescribed amount or rate or any combination thereof;
  • requirements relating to prescribed information that must be provided to a client before any CFA is entered into;
  • requirements relating to a party to a CFA.

The presentation of the Bill to Parliament follows the results of a public consultation exercise conducted by the Ministry of Law in 2019. The feedback from the legal profession and other respondents had been generally positive and supportive.

It was recognised that CFAs would improve access to justice by providing litigants with additional funding options to pursue meritorious claims, which they may otherwise not pursue. Further, 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 legal and dispute resolution hub. This builds on the third-party funding framework, which was introduced in 2017 for international arbitrations and extended to domestic arbitrations, certain proceedings in the SICC, and related court and mediation proceedings in June 2021.

As mentioned, the prohibition against maintenance and champerty stemmed from the English common law. However, 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.

In areas such as international arbitration, lawyers and legal practices practising in Singapore were clearly at a disadvantage when compared to their counterparts in other jurisdictions that allowed CFAs. Parties involved in international commercial arbitrations would generally be more commercially sophisticated, and would welcome the opportunity of being 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. This amendment may in future be extended to domestic proceedings, as the Ministry of Law monitors the litigation funding landscape to assess whether CFAs can promote greater access to justice in other categories of proceedings.

[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)