SINGAPORE CONSIDERS CONDITIONAL FEE ARRANGEMENTS

4th November 2021
Third-party-funding-is-now-permitted-as-part-of-the-Judicial-Management-process-in-Singapore

Singapore Considers Permitting Conditional Fee Arrangements in Select Legal Proceedings

3 November 2021

On 1 November, Singapore’s Ministry of Law (“MinLaw”) introduced amendments to the Legal Profession Act in Parliament, to permit conditional fee arrangements (“CFAs”) in certain types of legal proceedings. This is the early stage of the legislative process before the bill becomes law.

If enacted, the bill would be ground-breaking for it seeks to provide, for the first time in Singapore, a regime for CFAs, which are agreements entered into by a lawyer and the client, under which the lawyer is paid his fees (wholly or partly) only if the claim is successful.

No doubt in an effort to continue solidifying Singapore’s status as a hub for international dispute resolution, the amendments seek to permit these “no win, no fee” arrangements (which are more common in jurisdictions such as England and Wales and the United States) in international and domestic arbitrations, certain proceedings before the Singapore International Commercial Court, and related court and mediation proceedings in Singapore.

Aside from bolstering Singapore’s status as an international legal hub, permitting the use of CFAs in these proceedings also presents advantages to clients and the dispute resolution process in general.

First, CFAs promote access to justice by providing companies or individuals an additional method of financing litigation for meritorious claims in instances where they would not otherwise be able to financially pursue the claims. Combined with third party funding, which is already permitted in a number of legal proceedings in Singapore, CFAs would further expand the available modes of financing litigation. CFAs thus give companies and individuals a greater choice when managing litigation.

Second, CFAs promote efficiency in the dispute resolution process by discouraging lawyers from pursuing frivolous or weak claims, and conversely, encouraging them to pursue winning claims by allowing them to have more “skin in the game.”

From a third party funding perspective, CFAs align the economic interests of funders with lawyers who enter into CFAs since their ultimate and common objective would be to win and to recover, an outcome that would also only strengthen the alignment of their interests with their clients. This alignment of interests demonstrates how CFAs can be complementary to ligation funding, and not necessarily mutually exclusive. Indeed, LCM frequently funds proceedings in conjunction with lawyers on a CFA.

Even more, the availability of a CFA for a proceeding makes more disputes viable for litigation funding because CFAs can have the effect of reducing the amount that the litigation funder is required to invest. For example, with a CFA in place, the litigation funder may only be requested to finance arbitral institution fees, arbitrator fees, experts’ fees, and other disbursements. Thus, this would allow more cases (especially lower value disputes) to meet the economic funding criteria of those litigation funders – like LCM – which approach the metrics of funding opportunities by assessing the necessary budget which can be advanced as a proportion of the quantum sought (as opposed to those funders which have claim thresholds based solely on the value of the Claimant’s claim and do not focus on proportionality).

Third, CFAs align Singapore more with other foreign jurisdictions that permit this type of practice, thus levelling the playing field between practitioners in Singapore and their counterparts overseas.

While the amendments still need to go through the legislative process, that they have been introduced signals Singapore’s continuing commitment in taking the lead in the promotion of dispute resolution in the region. We shall continue monitoring updates on the bill as it is debated in Parliament.

LCM Contact

William Panlilio, Investment Manager
wpanlilio@lcmfinance.com
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