Public Consultation on Conditional Fee Agreements in Singapore

27 AUG 2019

Public Consultation on Conditional Fee Agreements in Singapore

Consultation Period:
27 Aug 2019 to 8 Oct 2019

Consultation Paper on Conditional Fee Agreements in Singapore

  1. INTRODUCTION

  1. The Ministry of Law (“MinLaw”) invites members of the public to provide feedback on its proposal to allow conditional fee agreements (“CFAs”) for prescribed categories of proceedings. Amendments to the Civil Law Act and the Legal Profession Act shall have to be effected to bring about the proposed changes.

  2. 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.

  3. 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).

  4. 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.

  5. 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.

  6. MinLaw now proposes to introduce a framework for CFAs in Singapore in certain categories of proceedings for the reasons set out below.

  1. KEY FEATURES OF PROPOSED LEGISLATIVE AMENDMENTS
  1. SCOPE OF CFA FRAMEWORK
  1. 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.
  1. Under the framework, CFAs would be available in addition to traditional options for payment of legal fees, for the prescribed categories of proceedings.
  1. A separate study will be conducted on whether CFAs will promote access to justice for categories of proceedings that are presently not being considered under the CFA framework.
  1. MinLaw seeks your views on the proposal to introduce CFAs, and the present categories of proceedings where CFAs will be permitted.
  1. MODALITY OF INTRODUCING CFA FRAMEWORK
  1. The proposed framework will be housed under a Civil Law (Amendment) Bill (“the Bill”), in a similar manner as the framework for third party funding. The Bill will provide that in prescribed categories of dispute resolution proceedings, CFAs are not contrary to public policy or otherwise illegal by reason only that they are contracts for maintenance or champerty [4]. The Legal Profession Act will also be amended such that a solicitor who enters into a CFA with a client will not fall foul of the relevant restrictions.
  1. CONDITIONS / SAFEGUARDS
  1. The proposed framework will provide safeguards which CFAs will be subject to. The following requirements are currently under consideration:
    General formalities
    1. That the CFA be in writing and signed by the client [5];
    2. That the client be fully informed of the nature and operation of the CFA [6] and confirm that he has been told of his right to seek independent legal advice before entering into the agreement. [7]
    Inclusion of mandatory terms in CFA
    1. The provision of a “cooling off period” during which the client may by written notice terminate the agreement [8];
    2. Parties’ definition of what constitutes a “successful outcome” [9];
    3. If there is an uplift or success fee, to state the basis of calculation of the uplift fee [10] and provide an estimate or a range of estimates of the resulting quantum of uplift or success fee [11];
    4. Acknowledgement by the client of the client’s continued liability for any costs orders that may be made by the Court or arbitral tribunal (where relevant).
  1. Non-compliance will render the CFA void, and solicitors’ fees for any work done will be subject to taxation in the event that the client is successful in the proceedings. However, in these cases, the solicitor will not be entitled to recover any amount in excess of the amount that he would have been entitled to recover, if the CFA had not been void. [12]
  1. MinLaw seeks your feedback on the proposed conditions/safeguards, including:
    1. Whether there should be any cap to the “uplift” or “success” fee and if so, what that cap should be and why;
    2. Whether any additional requirements should be imposed; and
    3. The consequences of non-compliance with the requirements.
  1. PROFESSIONAL CONDUCT RULES
  1. In line with the regime applicable to third party funding, MinLaw proposes to impose professional obligations on the conduct of solicitors entering into CFAs with clients. These are:
    1. Disclosure obligations placed on solicitors to disclose the existence of the CFA, to the Court or tribunal (where relevant), and to every other party to those proceedings [13];
    2. Reinforcing the lawyer’s duty to act in the best interests of his or her client and that the client is to retain control over the conduct of the litigation, including the decision whether to settle [14].
  1. MinLaw seeks your feedback on the proposed professional conduct rules, including whether any additional requirements should be imposed.
  1. COSTS ORDERS CONSIDERATIONS
  1. It is proposed that in the event that a successful party in the proceedings has in place a CFA with his solicitor, an order for costs made in the proceedings against the losing party (where relevant) shall not include any part of the success or uplift fee which the successful party may have to pay to his solicitor under the CFA.[15]
  1. INVITATION FOR VIEWS AND FEEDBACK
  1. Interested persons are invited to provide comments and feedback on the proposed framework for CFAs. Please note that the final framework may differ substantially from the current proposal. We also welcome any other comments or suggestions.
  1. Respondents are requested to indicate your name and the organisation you represent (if applicable), as well as contact details (email address and/or telephone number) to enable us to follow up and seek clarification, if necessary. Please title all comments and feedback “Proposed Framework for Conditional Fee Agreements Public Consultation Comments” and send them by 8 October 2019 via post or email to:

Policy Advisory Division

Ministry of Law

100 High Street

#08-02 The Treasury

Singapore 179434

Email: MLAW_CFA_Consultation@mlaw.gov.sg

[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
[4] “Maintenance” can be defined as officious intermeddling in litigation, while “champerty” is a particular form of maintenance where one party agrees to aid another to bring a claim on the basis that the person who gives the aid shall receive a share of what may be recovered in the action (Law Society of Singapore v Kurubalan s/o Manickam Rengaraju [2013] SGHC 135)
[5]Section 58(3)(a) of the UK Courts and Legal Services Act 1990 (“UK CLSA”) and Clause 25(3)(c), Schedule 3 of the Legal Practitioners Act 1981 (South Australia, which is similar to legislation in other Australian states such as Victoria and New South Wales) (“South Australian LPA”).
[6]Recommendation by the Committee to Develop the Singapore Legal Sector in their September 2007 Report, adopting recommendations in a paper by the Law Reform and Revision Division, AGC, Proposal to Allow Conditional Fees in Singapore (2004).
[7]Clause 25(3)(d), Schedule 3 of the South Australian LPA
[8]Clause 25(3)(e), Schedule 3 of the South Australian LPA
[9]Clause 25(3)(a), Schedule 3 of the Australian LPA, and recommended by the Committee to Develop the Singapore Legal Sector (supra note 8)
[10]Clause 26(2), Schedule 3 of the South Australian LPA, and recommended by the Committee to Develop the Singapore Legal Sector (supra note 8)
[11]Clause 26(3), Schedule 3 of the South Australian LPA
[12]Clause 29, Schedule 3 of the South Australian LPA
[13]This disclosure requirement is similar to that under the third party funding framework (Rule 49, Legal Profession (Professional Conduct) Rules 2015), as a safeguard against the potential conflict of interest that may arise when there is a CFA.
[14]Recommendation by the Committee to Develop the Singapore Legal Sector (supra note 6).
[15]Section 58A(6) of the UK CLSA, and recommended by the Committee to Develop the Singapore Legal Sector (supra note 6)

Last updated on 27 Aug 2019