Home > News & Perspectives > Private Legal Services Funding Act, 2020: Codification and Clarity in Cayman Islands If you have any questions about litigation funding in the Cayman Islands or would like to discuss confidentially the potential funding of a claim in the jurisdiction, please contact the authors listed below. For many years, it has been possible to obtain funding for litigation in the Cayman Islands in certain circumstances (for example, in a liquidation scenario where the resources available in the estate are limited). However, it is up to the Cayman courts to regulate the financial environment, and the lack of a legal framework carries ongoing risks and additional costs. Accordingly, the Act aims to remove barriers and facilitate access to justice under prescribed conditions. The passage of the Private Legal Services Private Funding Act, 2020 (the “Act”) sounded the death knell for Cayman Islands alimony and conservation offences, ushering in a new era of litigation funding and contingency fee agreements in the jurisdiction. The law was passed on January 7, 2021 and is expected to come into force soon. Once the law comes into force, the Cayman Islands will be closer to other common law jurisdictions such as England and Australia, where litigation funding is common. As things stand, the law in this jurisdiction is governed by the common law and is considered unclear, so it is desirable for a party to obtain the approval of the Grand Court to enter into funding agreements to avoid conflict with the “old laws” of Champerty and Maintenance3. The Act aims to modernize and codify the litigation funding process to reflect changes already made in the UK, US and other onshore jurisdictions. Christopher Harlowe and Harry Rasmussen of Mourant expect the litigation finance market in the Cayman Islands to grow rapidly following the recent codification of the current rules.
Learn more. While restrictions in most common law countries have eased over time in favour of regulated litigation financing, the scope of contingency fees and financing arrangements in the Cayman Islands has been uncertain and limited primarily to debt financing in the insolvency context. In 2017, Justice Segal approved a third-party financing agreement in A Company v A Funder [2017(2)CILR 710] , but the legislation is expected to have a greater impact on litigation funding and contingency fee agreements, providing greater certainty to those involved in funded litigation in the jurisdiction. The Act also includes provisions relating to contingency fees and litigation funding agreements, which it is hoped will provide additional guidance on the requirements of the various agreements entered into under the Act. Ultimately, the introduction of the Act is a positive development for Cayman Islands litigants, as it aligns litigation financing options in Cayman Islands with those of a number of major jurisdictions with which the Cayman Islands overlaps. This change in the Cayman legal environment is welcome as it finally offers the versatility of financing options our clients are accustomed to in key markets. This is a useful and eagerly awaited development. It is essential that the Cayman Islands keep pace with terrestrial jurisdictions and that there be certainty for litigants seeking to sue in this extremely complex legal environment. The British Virgin Islands Illegality Act: The British Virgin Islands` Position on Patel v Mirza 2016 UKSC 42 The Act also provides for third-party funding, but leaves considerable scope for this form of financing in order to develop according to market needs. i.
Contingency Fee Agreements: The client agrees to pay a success fee as an increase to the usual attorneys` fees if the client is successful. If the client is unsuccessful, no or lesser amount may be paid to the lawyer. Success or failure may be defined differently in different cases; Apart from court-approved funding for official liquidators, litigation funding in the Cayman Islands was until recently considered a violation of Champerty and Maintenance`s common law; Doctrines to prevent frivolous litigation. The Act now explicitly excludes the funding of criminal offence litigation under the common law of the Cayman Islands, subject to certain important control mechanisms described below. The law regarding civil and commercial litigation litigation funding agreements in the Cayman Islands will change dramatically with the introduction of the Private Legal Services Funding Act 2020 (the Act). The law now expressly allows for litigation financing agreements by clients. Although these agreements had already been approved by the Cayman Court on a case-by-case basis, the terms of the agreements had to be carefully crafted to avoid the risks associated with cultivation and maintenance. With respect to the law and approaches of other jurisdictions, it makes sense to divide litigation funding agreements into three subcategories: Clients and the legal industry will undoubtedly benefit from expanded funding opportunities, allowing parties to conduct meritorious litigation in circumstances where lack of funding under the current regime is an insurmountable obstacle. depicted. The law originated in a 2015 bill of the same name, which was revised and reintroduced in 2020. The stated purpose of the Act is to regulate Contingency Fee Agreements (“Contingency Fee Agreements”) and Litigation Funding Agreements (“CFAs”) in order to provide an alternative means of funding legal services.
The Act defines the “procedures” to which it generally applies as those before a court or similar court or officer and expressly includes arbitration. Part 4 of the Act expressly cancels any common law offence of support, including Champerty. A LFA is defined in subsection 16(1) of the Act as an agreement under which a funder undertakes to finance, in whole or in part, the provision of legal services to a client by a lawyer, under which the client agrees to pay an amount to the lender in certain circumstances. Part 3 of the LFA Act is less detailed than the sections of the Act concerning FTAs. 1www.conyers.com/publications/view/application-granted-for-sanction-to-enter-into-a-litigation-funding-agreement/ www.conyers.com/publications/view/the-cayman-islands-welcomes-third-party-litigation-funders/ www.conyers.com/publications/view/the-changing-landscape-of-litigation-funding-in-the-cayman-islands/ www.conyers.com/publications/view/non-party-cost-orders-an-inevitable-consequence-of-funding-litigation/ 2 The La The law was published on January 7, 2021, but is not yet in force. 3 However, this practice has been criticised by the Great Court. 4 Also published on January 7, 2021, the Private Funding of Legal Services Act, 2020 (the “Act”), published on January 7, 2021. January 2021, but not yet in force, aims to align the Cayman Islands` position on litigation funding with rules established in other common law jurisdictions. The Act will open up litigation funding to litigants in the Cayman Islands by removing criminal and civil liability for maintenance and champerty and providing legal provisions for entering into litigation funding agreements without court approval. Stay up to date with our latest legal information and subscribe today In conjunction with the Legal Services Act 20204, which aims to establish a binding code of conduct and disciplinary tribunal for lawyers, the Cayman Islands legal sector continues to modernise and adapt alongside other similar common law jurisdictions. Under the current system, maintenance and civil liability continue to give rise to criminal and tortious liability.
However, the Cayman Islands judiciary has recognized that the availability of justice is an important feature of access to justice in any demanding judicial system, and the Court has ruled that litigation funding in the jurisdiction is permitted provided that the terms of the proposed funding agreement do not violate public justice, but only with court approval.