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Marc Kish
Partner | Legal
Cayman Islands
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Marc Kish
Partner
Cayman Islands
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On Monday 14 December 2020, the Cayman Islands Parliament passed the landmark Private Funding of Legal Services Act 2020 (the Act). The Act was Gazetted on 7 January 2021, but is subject to a commencement order and is therefore not yet in force.
In the Cayman Islands, the doctrines of maintenance and champerty were both crimes and torts, which sometimes created obstacles for litigants seeking to enter into funding agreements with third parties to obtain financing for the litigation in return for a share of the proceeds.
Following the growing global prevalence of litigation funding (including in jurisdictions such as England and Wales and the British Virgin Islands, where maintenance and champerty have already been abolished) a flurry of applications seeking the approval of third party funding agreements have come before the Grand Court in recent years. In recognising the growing limitations on the application of the maintenance and champerty doctrines, the Grand Court sought to confine the question of whether a funding agreement was unlawful to whether the agreement had "a tendency to corrupt public justice" and set out and applied various factors in deciding whether to approve such agreements.
Funding agreements generally fall into one of the following categories:
Contingency fee agreements, whereby an attorney agrees that their fees will be a percentage of a monetary award or the value of assets recovered. Until now such agreements have been considered contrary to Cayman Islands public policy and therefore void and unenforceable in relation to Cayman Islands litigation.
Conditional fee agreements, pursuant to which an attorney agrees to defer payment in return for a percentage uplift in their fees in the event of success. Until now such agreements were subject to approval by the Grand Court in each case and have remained relatively rare in the Cayman Islands. The Cayman Islands Court of Appeal had also cast doubt on whether they would be held to be enforceable as between the attorney and the client.
Third party funding agreements, pursuant to which a third party agrees to provide funding for litigation on commercial terms, typically in return for the payment of a percentage of the recoveries made in the litigation. Such agreements had until recently been restricted to the use of funding for the benefit of impecunious liquidation estates in the Cayman Islands.[1]
The Act is the culmination of several years of review and consultation by the Cayman Islands Law Reform Commission, which commenced in 2015. The key sections are as follows.
Maintenance and Champerty
Litigation Funding Agreements
Section 16 of the Act permits the use of litigation funding agreements, subject to the following requirements:
Contingency Fee Agreements
Conditional Fee Agreements
The Cayman Islands legislature has recognised the changing nature of the litigation landscape, and that outdated public policy concerns have circumscribed the role of litigation funders and alternative fee arrangements which are commonplace and utilised to good effect in other jurisdictions.
The Act has been several years in the making, and builds on case law endorsing the use of regulated litigation funding in the Cayman Islands. It will give litigants greater access to justice and a wider range of funding options enabling parties to enter into agreements with funders and attorneys on negotiated terms they consider to be attractive without the need for Court approval (other than in cases involving the statutorily prescribed exceptions).
The Act may also be of wider significance given the importance of the Cayman Islands as a financial and business hub, and reinforces its position as one of the premier jurisdictions for the resolution of complex commercial disputes.
Oliver Green recently joined the Cayman Dispute Resolution team as an Associate.
Oliver, who relocated from Ogier's British Virgin Islands office where he worked for two years, has broad experience in contentious and non-contentious cross-border restructuring and insolvency matters and high value and complex international commercial and trust disputes.
He regularly acts for high net worth individuals based in the CIS, Asia, Europe and the US, banks, private and listed companies, hedge funds and the major accountancy and insolvency/restructuring firms and practitioners.
Marc Kish
Partner | Legal
Cayman Islands
Marc Kish
Partner
Cayman Islands
Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.
This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.
Regulatory information can be found under Legal Notice
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