CONDITIONAL FEE ARRANGEMENTS –SINGAPORE’S NEW REGIME
Cost is a key factor for almost any party considering whether to defend or fight a claim. Conditional fee arrangements (CFAs) are a common way for parties to minimise exposure to legal costs in many jurisdictions, including the UK and several Australian jurisdictions, however, until recently, CFAs were not permitted in Singapore.
Amendments to the Legal Profession Act passed in January 2022 will now allow lawyers and their clients to enter CFAs in certain proceedings. This is a significant development and in this article we consider the implications for international commercial parties involved in or contemplating litigation or arbitration in Singapore. We also comment on practical steps required to agree and implement a CFA that will be relevant to parties contemplating entering into CFAs in other jurisdictions.
What are CFAs?
The terminology around CFAs is not always clear, and the concepts of ‘conditional fees’ (as implemented in Singapore) and ‘contingency fees’ (as implemented in American jurisdictions) are often confused.
Broadly, a CFA is an arrangement whereby a lawyer receives payment of the whole or part of his or her legal fees only in specified circumstances. A CFA may provide that the lawyer receives no fees if the client loses its case but receives fees plus an increased percentage (a ‘success fee’) if the client wins. This is sometimes referred to as a ‘no-win no-fee CFA’. Perhaps more common, however, is a so-called ‘discounted CFA’ where the lawyer receives a lesser percentage of fees, irrespective of outcome, plus fees at the full rate, together with any success fee, if the client wins.
It is important to note, however, that under the Singapore regime, and in contrast to the US, lawyers still cannot charge fees as a proportion of the amount of damages awarded to a client (that is, a ‘contingency fee’).
Apr-Jun 2022 issue
Ashurst