The Private Funding of Legal Services Act 2020 (the Act), which came into force on I May 2021, has enabled Cayman Islands litigation lawyers to act on a variety of flexible fee structures.
The Act now expressly permits the following arrangements, colloquially known as “no win, no fee” agreements:
- Conditional fee agreements (where lawyers are paid an hourly rate plus a success fee if the claim succeeds, and nothing if the claim fails). The maximum success fee permitted is 100% of normal hourly rates; and
- Contingency fee agreements (where lawyers are paid a percentage of recoveries if the claim succeeds, and nothing if the claim fails). These are known as “Damages Based Agreements” in England and Wales. The Private Funding of Legal Services Regulations 2021, which support the Act, provide that the maximum percentage of recoveries permitted to be paid under such an arrangement is 33.3% of the total amount awarded.
Before the Act came into force, conditional fee agreements were used in occasional cases (such as by Cayman Islands insolvency practitioners pursuing assets on behalf of an insolvent estate), but as they required Court approval in every case, they were not widely used in commercial litigation.
As an alternative to “full” conditional or contingency fee agreements, hybrid arrangements are also possible. Under a hybrid conditional fee agreement, a lawyer may charge 50% of her normal rates up front, with a 50% uplift on success, or 75% up front with a 25% uplift on success, and so on. Under a hybrid contingency fee agreement, she might charge hourly rates up to an agreed cap (for example, $10,000 per month), plus a percentage of recoveries if the claim is successful.
The Act also expressly permits third party litigation funding. Whilst a number of Court decisions had already confirmed that litigation funding was permissible in the Cayman Islands, prior to the Act coming into force, every litigation funding agreement required Court approval, which was cumbersome.
The Cayman Islands, like most common law jurisdictions, is a “loser pays” jurisdiction, and the fact that a party has entered into a contingency fee agreement with his own lawyer, or that his fees are being met by a litigation funder, does not absolve him of his liability to pay the opposing party’s costs if he is unsuccessful in the proceedings. A client who not have sufficient resources to meet this liability may be able to purchase After the Event insurance, or find a litigation funder who will take on this risk, in exchange for a share in the proceeds if the claim is successful.
If the party who has entered into a contingency fee agreement is successful in the proceedings, she will be entitled to recover her costs from the opposing party, at her lawyers’ hourly rates. Any additional fee payable by way of success fee, or percentage of damages, is not recoverable from the opposing party.
As a boutique litigation firm, Claritas is committed to working with its clients to come up with tailored funding arrangements that are suitable for each particular case. Our lean business model enables us to be more flexible than many of our competitors, and we are open to considering any of the above arrangements in suitable cases.
If you would like to discuss any of the above, please contact Katie Pearson at katie@claritaslegal.com
