When will the amendment come into effect?
What is a conditional fee agreement?
Which proceedings can have conditional fee agreements?
Comment
In Singapore, an amendment has been made to the Legal Profession Act to allow conditional fee agreements for lawyers in certain areas of practice.
When will the amendment come into effect?
The amendment was passed on 12 January 2022. The minister will announce in the Gazette the date on which will formally take effect.
As made clear to Parliament by the minister, the amendments to the Act are a framework to be supplemented by subsidiary regulations and these will be promulgated subsequently.
As will be seen below, some key details are missing. Therefore, it may be a few more weeks, or months, before Singapore lawyers can actually offer conditional fee agreements as an option on the market.
What is a conditional fee agreement?
The amendments now allow lawyers practising in Singapore to enter into conditional fee agreements.
A conditional fee agreement is defined as an agreement that "provides for the remuneration and costs or any part of them to be payable only in specified circumstances, and may provide for an uplift fee". Although colloquially referred to as "no win, no fee", or "no win, less fee", there appears to be no restriction on what the "condition" must be for a conditional payment. Therefore, presumably, it could be a settlement, a particular strategic goal such as obtaining security for cost or finding a defendant's valuable assets.
Interestingly, the amendments to the Act also allow conditional fee agreements to provide for an "uplift fee". This is defined as a fee that is "higher than the remuneration or costs that would otherwise be payable if there were no conditional fee agreements". This definition seems to allow lawyers to charge, for example, a "premium", either a flat fee, or a higher hourly rate, in the event a condition is met. Therefore, although this is subject to further clarification in subsidiary regulations, hourly rates may potentially now be "X dollars per hour in the first instance, but if we win, then X + Y dollars per hour".
Crucially, however, conditional fee agreements cannot provide for a "contingency fee" – that is, for lawyers to take a percentage cut of an award or judgment sum.
Which proceedings can have conditional fee agreements?
Conditional fee agreements are defined solely with reference to "contentious proceedings" and, even then, only for "prescribed proceedings". Contentious proceedings are defined to mean any court proceedings, arbitration or any other dispute resolution proceedings.
What "prescribed proceedings" are has not been made clear in the amendment, and awaits further clarification through subsidiary legislation. In the second reading of the amendment bill, the law minister made clear that the intention is to first allow conditional fee agreements in international and domestic arbitrations, certain proceedings in the Singapore International Commercial Court, and related court and mediation proceedings. This is in line with the current framework in which third party funding is permitted in these proceedings.
Apart from the above, the subsidiary legislation to be promulgated is also anticipated to regulate:
- the form, terms and conditions of a conditional fee agreement;
- the maximum limits on the remuneration or costs (including the uplift fee) that may be charged; and
- the prescribed information that must be provided to the client before entering into a conditional fee agreement.
As mentioned by the law minister, the aim of this amendment is to improve the competitiveness of the Singapore legal market and to bring it more in line with other common law jurisdictions such as the United Kingdom or Hong Kong. It also aims, in the long run, to improve access to justice by allowing clients with tight cash flow to pursue a meritorious case.
It is thought that this will be a game changer in the long run for the Singapore legal profession. In the trade and shipping industry, for example, there may be smaller disputes ranging up to S$200,000 or S$300,000, where legal fees would typically take up a significant proportion of the potential recovery. Clients are thus faced with the difficult decision of having to spend a significant amount on costs up front. Conditional fee agreements will allow clients to still pursue or defend a case of this size at a relatively manageable fee.
For further information on this topic please contact Peter Huang, Ian Teo or Geoffroy Ygouf at Helmsman LLC by telephone (+65 6816 6660) or email ([email protected], [email protected] or [email protected]). The Helmsman LLC website can be accessed at www.helmsmanlaw.com.