Singapore: JTJB Conditional Fee Arrangements Now An approved Form Of Dispute Resolution Funding In Singapore
On 4 May 2022, the Legal Profession (Conditional Fee Agreement) Regulations 2022 (the “Regulations”) came into force and heralded Singapore’s newfound acceptance of Conditional Fee Agreements (“CFAs”). Singapore-qualified lawyers and law practices and certain registered foreign lawyers and law practices are now permitted to enter CFAs with clients in relation to domestic and international arbitrations (regardless of seat), certain Singapore International Commercial Court proceedings, and related court and mediation proceedings. These proceedings also allow third-party funding of fees, which the Regulations do not prohibit from applying to such CFAs.
The intention behind the changes is to reform Singapore’s litigation funding landscape and enhance the viability and attractiveness of Singapore as a global dispute-resolution hub. The changes are a welcome recognition of the need for clients to manage disputes and dispute-resolution risks and provides improved access to justice for impecunious persons that may otherwise be unable to fund dispute-resolution.
What are CFAs?
CFAs are agreements between lawyers and their clients (or a third-party funder for the clients) which provide for payment to the lawyers upon achieving a successful outcome. CFAs can take the form of agreed flat fees or a percentage increase on the lawyers’ standard fees and can cover both hourly fee rates and disbursements.
The Regulations provide that CFAs can be structured either as “No-Win, No-Fee” or “No-Win, Low-Fee” arrangements which provide respectively that no legal fees or reduced legal fees will be paid to the lawyers if a successful outcome is not achieved.
On the other hand, contingency fee arrangements – arrangements that allow lawyers to take a percentage of the sum of damages awarded in the event of success – and hybrid contingency fee arrangements – where the lawyers are to be paid certain (likely discounted) legal fees regardless of outcome of the proceedings together with a percentage of the sum of damages awarded in the event of success – are still prohibited under the Regulations.
A key feature of CFAs, which manages the risks taken by lawyers and law practices in event of a “no-win”, is that uplift fees may be provided. Uplift fees refers to remuneration or costs which the agreement provides are payable in specified circumstances which are higher than the remuneration or costs that would otherwise be payable if there were no conditional fee agreement. Such uplift fees can be in the form of a gross sum or hourly rate and are unrelated to the damages awarded to the client. Such uplift fees cannot be claimed from the losing party as legal costs. The Regulations presently do not impose a limit on uplift fees. However, this does not mean lawyers get carte blanche to charge any amounts which suit their fancy, as professional conduct rules against overcharging still apply.
CFAs must comply with various requirements set out in the Legal Profession (Amendment) Act 2022 and the Regulations, which are specified to safeguard clients, including that CFAs be in writing and signed by the clients. Specific terms must also be highlighted by the lawyers and included in the CFAs, such as particulars of the circumstances in which fees will be payable to the lawyers under the CFA, the details and particulars of the uplift fees and an estimate of such fees, and that clients have a five day ‘cooling-off’ period from entering the CFAs during which it may be terminated. Lawyers are also mandated to provide certain information on the CFAs to clients before clients enter the CFAs, including informing the clients that they remain liable for any cost orders made against it by a court or tribunal, in order for the clients to make informed decisions on such fee arrangements.
What if a CFA needs to be enforced?
Any question respecting the validity or effect of a conditional fee agreement may be examined and determined, and the agreement may be enforced or set aside on an application to the court of justice in which the proceedings was conducted, or, if the proceedings were not conducted in any court of justice, then by the General Division of the High Court of Singapore.
Entering a CFA does not prevent a client from changing lawyers or law practices. However, in such a case, where a CFA has been concluded, and presuming the ‘cooling-off’ period provided has passed, a relevant party may make an application to the court for the enforcement or setting aside of the agreement, if any work has been done under the CFA. The court may consider such an application and decide on the validity of the CFA. In doing so, the court will have regard to the terms of the CFA and may order the amount due in respect of anything acted upon or done under the CFA to be ascertained by assessment by the Registrar. Payment of the amount found to be due may then be enforced in the same manner as if the CFA had been completely performed by the lawyer or law practice.
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