Member Article

While the motivation behind the Civil Justice Commission’s consultation paper – aimed at enhancing the Court system – is laudable, the proposed introduction of litigation scale costs may hurt Singapore’s standing as a global litigation hub.

In 2015, the Chief Justice established the Civil Justice Commission (CJC) to review Singapore’s civil justice system, with the goal of transforming and modernising the litigation process. The CJC’s report, issued in October 2018, contained wide-ranging recommendations. These include overhauling the Court process and enhancing early judicial oversight of Court proceedings, ensuring a more time- and cost-effective administration of justice.

The constant enhancement of Singapore’s judicial system to achieve the twin goals of making access to justice available for the man on the street, and to develop Singapore into an international legal hub, is both necessary and welcome.

Litigation scale costs

One of the recommendations in the CJC Report is the implementation of scale costs for litigation, with professional fees pegged to the sum in dispute. The scale prescribes fees at a fraction of what it now costs to conduct litigation effectively. For example, the professional fees for the entire trial process for a High Court claim of $250,000 is set at $15,500. The scale goes up in tandem with the claim amount but in decreasing percentages, such that the fees for a $5 million claim would be $98,000. Based on my experience, the proposed scale costs represent less than 20 per cent of fees currently charged for an average litigation suit in the High Court conducted by non-Senior Counsel (Senior Counsel being able to command higher fees).

While making the litigation regime more accessible to the public is an important public interest, it is questionable if litigation scale costs are the best way forward, or if a combination of other industry innovations – ranging from flexible fee arrangements to a tech-assisted small claims resolution process – could be a more effective solution.

The proposal has predictably caused consternation among the legal fraternity.

Lawyers have described it as an existential crisis to the domestic litigation bar, a solution where no real problem exists. It also poses a threat to the bar’s pro bono culture: many small-firm practitioners, who punch above their weight in providing pro bono legal support to segments of the public who cannot afford lawyers (an important aspect of providing access to justice for the needy), will find themselves in the trenches just fighting for survival.

If this clamour is only the noise of lawyers protecting their rice bowl, it should carry less weight. But are litigation scale costs in line with our aim to innovate and develop Singapore into an international and commercial law-making hub and a global restructuring centre?

Embracing innovation

Singapore has worked hard to establish itself as a legal, dispute and restructuring hub on the Asian and international stage. The Singapore International Arbitration Centre is recognised as a leading arbitration institute. It handled a record 452 new cases in 2017, experiencing faster growth (in new cases) than its competitors, including London’s Court of International Arbitration.

Singapore has also set up the Singapore International Commercial Court and the Singapore International Mediation Centre, and is, in the words of Minister for Law Mr K. Shanmugam, “well positioned to offer commercial parties a comprehensive suite of dispute resolution options to support their business needs”.

One big factor in determining if Singapore is an appropriate forum for dispute resolution is the depth and maturity of its jurisprudence: whether Singapore’s case law is sufficiently well developed and articulated in judgments. At the Singapore Academy of Law Conference in 2011, Chief Justice Chan Sek Keong emphasised that “our ultimate objective is to build up a large body of local jurisprudence, so that local decisions can be cited first instead of English decisions”.

If scale costs are implemented, the lower fees would mean that lawyers will not have the resources to delve into more novel or complex aspects of the law. Instead, they may find themselves constrained to making basic arguments that work, not those that advance the law. This will stymie the continuing development of Singapore law, critical to our continued status as a legal innovation hub.

Hollowing out of the talent pool

Another key component of developing our country into a world-class legal centre is our human capital. Our established law faculties continue to rise in international rankings. The National University of Singapore’s Law School has been ranked 15^thin the world and top in Asia for the past two years. But our law firms must be able to attract these top candidates.

The scale costs are not intended to apply to arbitrations or cases before the Singapore International Commercial Court, both forums where international firms can practise freely. With foreign law firms not bound by these scale costs, there will be pressure on bright law graduates wanting to handle complex cases, to join international law firms. As talent migrates to international firms and other practice areas, the local litigation bar will be hollowed out. If access to justice requires a high quality of legal practitioners, then litigation scale costs may be counterproductive.

Industry stratification and elitism

The litigation scale costs will create greater stratification in the legal market. The scale costs will apply by default unless clients agree to opt out. More-established litigation practitioners will be in a stronger position – as compared to up-and-coming lawyers and those in lesser-known firms – to negotiate higher fees. This will intensify the stratification in the industry – a form of legal elitism.

As I pen this, I am conscious that I have had the privilege of standing before the Singapore Bench as a Senior Counsel for 10 years. The past decade has seen fewer members of the bar admitted as practising Senior Counsel. The scale costs proposal would be advantageous to existing Senior Counsel and more-established litigation practices – particularly large blue chip Singapore firms – who have more leverage to negotiate fees. But it will also potentially limit the development of rising legal stars, which would hurt the industry as a whole and Singapore’s development as a legal hub.

They say a rising tide lifts all boats. The reverse is true of an ebbing one.

Scale costs are anti-competitive

Price-fixing in any form is anti-competitive. The legal industry used to be subject to scale costs for conveyancing transactions, pegged to the property’s value. These scale costs were removed on the basis that the free market should be allowed to set the value for professional services.

The same argument holds true for litigation fees. Charges should depend on the complexity of the issues and the client’s needs, not just the claim amount. For example, a simple debt recovery of S$5 million may not require complex arguments of law; while a shareholder dispute for the same amount involving constructive trusts, breaches of fiduciary duty and novel points of law could drag on for years. In such a complex case, justice would not be done to the legal issues on a budget that the scale prescribes.

In addition, scale costs structures would – counterintuitively – encourage proliferation of litigation. If litigants know that their professional fees are in effect capped, they would be incentivised to fight the litigation through to the end and take their chances in the Courts. This may lead to more, and protracted, litigation.

In other words, scale costs could disincentivise litigants from reaching amicable settlements. Consequently, the litigants’ interests would be misaligned from those of their counsel, creating potential conflicts of interest.

The future

It has been said that the best way to predict the future is to invent it.

We live in an age of disruption, and lawyers are not immune. We must embrace change and improvements, but they have to be the right change, and real improvements. Perhaps, rather than fall back on an old regime like scale costs, our industry must find a bigger canvas and reinvent itself in even more transformative ways to serve its clients, the public, and the nation.

A version of this article was published by the Business Times on 15 November 2018.