Conditional Fee Agreement

MinLaw proposes to enact through legislative amendments, a legal framework for CFAs to be entered into in relation to international and domestic arbitration proceedings, certain prescribed proceedings in the SICC, including mediation proceedings arising out of or in any way connected with such proceedings. This will align the prospective CFA framework with the third party funding framework (once expanded), to better serve the needs of commercial parties and their counsel.

Under the framework, CFAs would be available in addition to traditional options for payment of legal fees, for the prescribed categories of proceedings.

CFAs are agreements where a lawyer representing a client in pursuing a claim, receives payment of his legal fees only if the claim is successful. Such payment may include an “uplift” or “success” fee, in addition to the lawyer’s standard legal fees. CFAs are different from contingency fee arrangements, where the lawyer shares in an agreed percentage of the sum successfully recovered by the client, with no direct correlation to the work done.

Increasingly, commercial litigants seek alternative funding arrangements, such as third party funding, after-the-event insurance or conditional or contingency fee arrangements, to manage their costs and risks. In 2017, the Ministry of Law effected amendments to the existing legislation to introduce third party funding in Singapore in international arbitration proceedings, to meet this need for alternative funding arrangements [1]. On 8 August 2019, the Minister for Law announced that the third party funding framework would be extended to domestic arbitration proceedings and certain prescribed proceedings in the Singapore International Commercial Court (SICC).

Solicitors and clients are currently prohibited under Singapore law from entering into CFAs and contingency fee agreements [2]. Constraints stem from our common law originally derived from England and Wales, to protect vulnerable litigants, and to guard against potential misconduct and conflict of interest for lawyers.

However, since 1990, prohibitions against CFAs have ceased to exist in England and Wales, and contingency fees were allowed in 2013. The rationale for the change in England and Wales on CFAs included a view that CFAs would discourage lawyers from pursuing weak cases (as a weak case is less likely to succeed and would therefore result in the lawyer not being paid), while providing an incentive for lawyers in respect of the cases they do pursue [3]. Other jurisdictions such as Australia allow CFAs but prohibit contingency fees. China and the United States also allow CFAs in various forms.

[1]The Civil Law (Amendment) Act 2017.

[2]s 5B, Civil Law Act; s 107(1)(b), Legal Profession Act; Rule 18, Legal Profession (Professional Conduct) Rules 2015.

[3]The Right Honourable Lord Justice Jackson (May 2009) “Review of Civil Litigation Costs: Preliminary Report” Volume One, Page 166, Paragraph 1.5