Proposed Amendments to The Singapore Legal Profession Act to Permit “No Win, No Fee” Agreements Between Lawyers and Clients in Certain Types of Proceedings

On 1 November 2021, Singapore’s Ministry of Law introduced the Legal Profession (Amendment) Bill for its First Reading in Parliament. The proposed amendments will provide, for the first time in Singapore, a framework for conditional fee arrangements (“CFAs”) to be entered into between lawyers and clients in certain types of proceedings. At present, the selected proceedings include international and domestic arbitration proceedings, certain proceedings in the Singapore International Commercial Court (“SICC”), and related court and mediation proceedings

What are CFAs?

CFAs are agreements between a lawyer and client where the lawyer agrees to receive payment of the whole or part of their legal fees only in specified circumstances, for example, where the claim is successful.

What are not CFAs?

CFAs are different from contingency agreements, where a lawyer’s remuneration is pegged to a percentage of the amount of damages awarded. Those remain prohibited.

What is the current position on CFAs in Singapore?

The current law in Singapore prohibits conditional fee agreements. This has its roots in the English common law, which proscribed maintenance and champerty i.e. where a third-party provides funding for litigation, usually in exchange for a share of the proceeds.

In 2017, the Civil Law Act (Cap. 43) was amended to abolish the torts of maintenance and champerty. However, except for certain statutorily prescribed exceptions, contracts affected by maintenance and champerty are still unenforceable, being contrary to public policy. These exceptions applied to qualifying third-party funders[1] who fund “prescribed dispute resolution proceedings”[2]. 

As of October 2021, the list of prescribed dispute resolution proceedings includes:

• Arbitration (international and domestic)
• Court proceedings arising from or out of arbitration proceedings e.g. setting aside applications
• Proceedings for or in connection with the enforcement of an arbitration award
• Proceedings in the Singapore International Commercial Court (SICC), including any appeals
• Mediation proceedings arising out of arbitration or proceedings in the SICC

What is the new proposed CFA framework?

Under the draft Bill, lawyers can enter into CFAs that comply with the prescribed requirements, in effect creating a further statutory exception against contracts affected by maintenance and champerty.  

The prescribed requirements are:

• The CFA must be in writing and signed by the client.
• The CFA must not be a contingency arrangement i.e. it must not provide for remuneration to be based on a percentage of damages awarded.
• The CFA must comply with other applicable regulations or subsidiary legislation.

The draft Bill contemplates there will be subsidiary legislation prescribing, amongst other things:

• The types of proceedings in which a CFA is to be allowed, currently contemplated to be international and domestic arbitration proceedings, SICC proceedings, and related court and mediation proceedings.
• The form, terms, and conditions of the CFA.
• The maximum limits on the remuneration or costs that may be charged under the CFA.
• The prescribed information that must be provided to a client prior to entering into a CFA.

Provided that the requirements are complied with, a CFA can cover not just the costs of the proceedings, but also costs in respect of (a) preliminary or preparatory advice; and (b) negotiations and settlement, even if the proceedings not eventually commenced.

Under the proposed framework, a CFA will not affect the amount of costs recoverable from the client by another party (for instance, the counterparty in the contentious proceedings). In other words, if a CFA provides for an uplift of the lawyers’ fees, the uplift cannot be recovered as part of an adverse costs order against the counterparty.

Concluding Thoughts on the Proposed CFA Framework

CFAs represent a flexible tool that will help promote access to justice by providing potential litigants greater avenues for pursuing meritorious claims which they may not otherwise commence because of cost considerations.

The proposed CFA framework will also enhance Singapore’s position as an international legal and dispute resolution hub, by levelling the playing field for Singapore lawyers, at least in areas of international arbitration and SICC proceedings, given that practitioners from other foreign jurisdictions are not restricted from entering into CFAs or similar arrangements in their jurisdictions.

[1] Broadly, they must carry on the principal business of funding dispute resolution proceedings and have a paid-up share capital of not less than S$5 million or have not less than S$5 million in managed assets.

[2] Defined and listed in the Civil Law (Third-Party Funding) Amendment Regulations 2021