Synopsis

Boosting its popularity as a global arbitration seat, Singapore has passed a law that allows conditional fee arrangements (CFA) in international and domestic arbitration proceedings, certain proceedings of the Singapore International Commercial Court and related court and mediation proceedings. A CFA is an agreement between the client and legal counsel which provides for the whole or part of the lawyer’s fees and costs in dispute resolution proceedings to be payable only in specified circumstances, such as where the client succeeds in the claim, or where certain agreed outcomes are achieved. The introduction of the CFA framework aligns Singapore with other jurisdictions, such as England & Wales, Australia, and Canada, each of which have allowed CFAs in various forms for some time.

Article

Boosting its popularity as a global arbitration seat, Singapore has passed a law that allows conditional fee arrangements (CFA) in international and domestic arbitration proceedings, certain proceedings of the Singapore International Commercial Court and related court and mediation proceedings.

A CFA is an agreement between the client and legal counsel which provides for the whole or part of the lawyer’s fees and costs in dispute resolution proceedings to be payable only in specified circumstances, such as where the client succeeds in the claim, or where certain agreed outcomes are achieved. These agreements may include payment of an ‘uplift’ or ‘success fee’, which is a higher-than-normal fee payable if the lawyer achieves a specified result – for example, a win in the case or a favourable settlement.

Under the newly enacted law, CFAs must meet certain requirements to be valid:

  • the CFA must be in writing and signed by the client;
  • the CFA must not provide for the remuneration and costs to be payable as a portion of the damages / other amounts recovered by the client in the case. Such arrangements, known as ‘contingency fee arrangements’, remain prohibited in Singapore; and
  • the CFA must comply with any subsidiary legislation made to give effect to the CFA framework, including regulations relating to prescribed information that legal counsel must provide to the client; the form of the CFA; and the terms and conditions that must be included in the CFA.

A CFA does not affect the recovery of costs by a winning party, and nor can ‘uplift’ or ‘success fees’ be recovered from the opposing party as legal costs.

CFAs provide an additional funding option for clients and can have a number of advantages:

  • parties will be free to determine a mutually agreeable arrangement for the payment of legal counsel’s fees, subject to the requirements of the CFA framework;
  • CFAs will provide parties who have legitimate claims, but who face cash flow concerns, with an alternative method of funding meritorious claims. This may be particularly useful for those who have claims for business interruptions caused by COVID-19; and
  • CFAs can discourage the pursuit of frivolous claims, because if fees are partly contingent on outcomes then legal counsel will have ‘skin in the game’.

The introduction of the CFA framework aligns Singapore with other jurisdictions, such as England & Wales, Australia, and Canada, each of which have allowed CFAs in various forms for some time. It also builds on previous funding reforms in Singapore that allowed third-party funding for arbitrations and certain other proceedings.