Draft law proposes allowing lawyers to charge fees based on whether client wins or loses court case

• A draft law tabled in Parliament, if passed, allows lawyers and clients to enter into payment agreements based on the outcome of a court case
• A lawyer may decide not to charge if the client loses the case, or charge more if the client wins
• Such agreements were previously prohibited under Singapore law

SINGAPORE — Lawyers and clients in certain types of cases may soon be able to set how legal fees will be paid depending on the outcome of a case.

A Bill introduced in Parliament on Monday (Nov 1) proposes amendments to existing laws that will allow, for the first time in Singapore, lawyers and clients to undertake these so-called conditional fee agreements.

This means that a lawyer may decide not to charge legal fees if the client loses the case, or charge more if he wins.

Current laws prohibit such agreements. Lawyer fees are therefore fixed regardless of the outcome of the court case.

In a statement, the Ministry of Law (MinLaw) said that as a start, these agreements can be undertaken in selected proceedings including international and domestic arbitration, “certain proceedings” in the Singapore International Commercial Court (SICC) and related court and mediation proceedings.

“Conditional fee agreements help to enhance access to justice by providing businesses or individuals with additional funding options to pursue meritorious claims, which they may otherwise not pursue,” the ministry said.

“This is particularly relevant given the disruptions arising from the Covid-19 pandemic.”

It added that such agreements may help discourage lawyers from pursuing weak cases and frivolous claims since the legal fees a lawyer gets under these agreements will be based on the outcome of a case.

The Legal Profession (Amendment) Bill was tabled for first reading in Parliament by the Ministry of Law. It is set to be debated by Members of Parliament in January.

HOW IT WORKS

Under the proposed amendments, a lawyer may charge an additional “uplift fee” payable in specific conditions, such as when the client wins the case.

Take, for example, a lawyer who ordinarily charges S$50,000 for a case under the current standard legal fee arrangements.

If the lawyer and his client decide on a conditional fee agreement beforehand, he may charge S$1,000 if the client loses, but S$60,000 if the client wins.

What this means is that a person who has a credible case to bring before the courts may be less discouraged by high legal costs by entering into agreements that charge less or nothing when he loses and more when he wins.

This uplift fee can be in the form of, for example, a gross sum or hourly rate. It cannot, however, be set based on a percentage of the damages awarded in a court case, MinLaw said. This will continue to be prohibited.

Safeguards relating to the terms and conditions of these conditional fee agreements, as well as those concerning information a lawyer must provide the client, will be rolled out through subsidiary legislation, the ministry said.

Fees charged under such agreements will continue to be subject to professional conduct rules against overcharging, it added.

Jurisdictions that have adopted the English common law, including Singapore, have traditionally prohibited such conditional fee agreements. The reason was to prevent a lawyer from being tempted to enhance his client’s chance of success at the expense of his duty to act in the client’s best interest and his duty to the court.

Globally, however, jurisdictions including England and Wales have abolished these prohibitions. Other jurisdictions such as Australia, China and the United States also allow for such agreements in various forms.

MinLaw said introducing conditional fee agreements will strengthen Singapore’s position as an international legal and dispute resolution hub. It will also level the playing field for Singapore lawyers in international proceedings where lawyers from other jurisdictions may offer such agreements.

Besides conditional fee agreements, another payment arrangement known as third-party funding allows an independent funder — typically litigation financing firms — to pay for legal proceedings in return for financial gain, such as a share of the damages awarded or settlement sum.

Singapore allowed third-party funding in 2017 for international arbitration proceedings and expanded it in June this year to domestic arbitration, certain proceedings in the SICC and related court and mediation proceedings.

SCOPE OF FOREIGN LAWYERS REFINED

A section of the amendment Bill also seeks to refine the scope of foreign lawyers in SICC proceedings.

In the Courts (Civil and Criminal Justice) Reform Bill that was passed in Parliament in September, it allowed the SICC to hear cases of international and cross-border debt restructuring and insolvency.

These cases often involve transnational issues with a mix of foreign and local law, and may otherwise not be heard in Singapore.

Monday’s Bill proposes restrictions for a foreign lawyer with full registration to submit on matters in the SICC.

They must first obtain the permission of the court in order to plead any matter. They are also not permitted to make any submission on a matter of Singapore law.

“The amendment will allow local and foreign lawyers to work jointly in such SICC proceedings,” the ministry said.

“This serves to anchor Singapore’s position as a leading debt restructuring and insolvency hub.”