Proposed Framework for Conditional Fee Agreements
01 Nov 2021 Posted in Press releases
- The Ministry of Law (“MinLaw”) introduced the Legal Profession (Amendment) Bill for First Reading in Parliament today.
- The proposed amendments will provide, for the first time in Singapore, a framework for conditional fee agreements (“CFAs”) to be entered into between lawyers and clients in selected proceedings. As a start, these include international and domestic arbitration proceedings, certain proceedings in the Singapore International Commercial Court (“SICC”), and related court and mediation proceedings. They also include a proposed refinement to the scope of foreign lawyers’ involvement in SICC proceedings.
Conditional Fee Agreements
- CFAs are arrangements whereby a lawyer receives payment of the whole or part of his or her legal fees only in specified circumstances, for example, where the claim is successful1.
- The proposed introduction of CFAs in Singapore is part of our ongoing efforts to review our litigation funding landscape to better support the needs of businesses and lawyers, while referencing the developments in other jurisdictions.
CFAs offer the following advantages, which ultimately strengthen Singapore’s position as an international legal and dispute resolution hub:
a. CFAs help to enhance access to justice by providing 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.
b. 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 such agreements.
c. As fees under a CFA are contingent on the outcome, CFAs may also help to discourage lawyers from pursuing weak cases and frivolous claims.
- MinLaw conducted a public consultation exercise in 2019 on the proposed framework for CFAs, and feedback received from the legal profession and other respondents has generally been positive and supportive. The introduction of the framework here will build on the third-party funding framework2, which was extended to more categories of legal proceedings in Singapore in June 2021.
Framework for CFAs
The Bill proposes to enact an overarching framework for CFAs, which will apply to Singapore law practices and certain registered foreign lawyers and foreign law practices. The key amendments in the Bill will:
a. Create a statutory exception for CFAs: A lawyer will not be prevented from entering into a CFA that complies with prescribed requirements with a client. However, fee agreements where remuneration is payable as a percentage of the damages awarded (e.g. contingency fees) will continue to be prohibited.
b. Set out key features of CFAs: Besides providing for the whole or part of legal fees to be payable only in specified circumstances, CFAs may provide for an uplift fee, which refers to fees3 payable in specified circumstances that are higher than what would otherwise be payable if there were no CFA. CFAs may cover the range of work typically done for the purposes of proceedings, as well as in the actual proceedings.
- Safeguards relating to information that a lawyer must provide to the client before entering into a CFA, and the terms and conditions of a CFA, will be implemented via subsidiary legislation. In addition, fees charged under a CFA will continue to be subject to professional conduct rules against overcharging.
- MinLaw will continue to review the litigation funding landscape, to consider and study whether CFAs can promote access to justice for other categories of proceedings, including domestic proceedings.
Refinements to Involvement of Foreign Lawyers in SICC Proceedings
- The SICC is a forum for transnational commercial matters and draws on the expertise of the world’s leading commercial judges. To enhance Singapore as a forum of choice in international debt restructuring and insolvency proceedings, Parliament passed the Courts (Civil and Criminal Justice) Reform Bill in September 2021, which amongst other matters, clarifies the SICC’s jurisdiction over international restructuring and insolvency cases. These cases typically involve a multi-jurisdiction dimension and a significant foreign element, and may otherwise not have been heard in Singapore.
To further facilitate the efficient and effective presentation of arguments and resolution of debt restructuring and insolvency proceedings in the SICC, this Bill proposes an amendment to refine the scope of foreign lawyers’ representation. Unless otherwise stated, a foreign lawyer with full registration will be able to submit on matters in specified proceedings, subject to the following restrictions:
a. They must obtain the permission of the Court in order to plead any matter; and
b. They are not permitted to make any submission on a matter of Singapore law.
- The amendment will allow local and foreign lawyers to work jointly in such SICC proceedings, which often involve transnational and inter-connected issues with a mix of foreign and local law, and a mix of law and fact. This serves to anchor Singapore’s position as a leading debt restructuring and insolvency hub.
MINISTRY OF LAW
01 NOVEMBER 2021
1. CFAs differ from contingency fee agreements, where the lawyer may share in an agreed percentage of the sum recovered by the client with no direct correlation to the work done.↩
2. Third-party funding (“TPF”) refers to the funding of legal proceedings by an entity unconnected to a dispute, in return for financial gain, such as a share of the damages awarded or a share of the settlement sum. In 2017, MinLaw introduced a framework for TPF for international arbitration proceedings and in June 2021, extended it to domestic arbitration, certain proceedings in the SICC, and related court and mediation proceedings.↩
3. Such fees can be in the form of, for example, a gross sum or hourly rate.↩
Last updated on 1 Nov 2021