The Cayman Lawyer: Episode two - The Private Funding Legal Services Act

In this episode of The Cayman Lawyer, Litigation and Insolvency Partner Paul Smith and Senior Associate James Eggleton discuss the ins and outs of the Private Funding Legal Services Act.

The Cayman Islands has recently welcomed the Private Funding of Legal Services Act (the Act), bringing much-needed certainty in relation to the availability of contingency fee agreements, conditional fee agreements and third-party funding agreements.

Key takeaways:

  • The Act repeals the old common law torts and criminal offences of maintenance and champerty, which have long since been repealed in other jurisdictions such as England. It provides a statutory framework for the entry into different forms of funding agreements. This is a welcome change because until this point, the law in relation to funding agreements had been unsettled and largely determined by case law.
  • The Act refers simply to "contingency" fee agreements as encompassing two types of agreement: those where the lawyer’s success fee is calculated by reference to his or her normal rates (this is often referred to in the common law world as a "conditional" fee agreement), and those where the success fee is based on the amount recovered, or the value of the property recovered, in the proceedings (this is often referred to as a "contingency" or a "damages based" agreement). The key points are as follows:
      • For "conditional" fee agreements, the Act provides that the success fee cannot exceed: (i) 100 per cent of those fees; or (ii) in respect of money claims, 33.3 per cent of the total amount awarded.
      • For "contingency" or "damages based" agreements, that same 33.3 per cent cap also applies.
      • It is also possible, upon an application to the Court, to enter into an agreement whereby the amounts paid to the lawyer exceed the 100 per cent or the 33.3 per cent caps. However, under no circumstances will it be possible for lawyers to be paid an amount exceeding 40 per cent of the total amount awarded in the proceedings.
  • The Act also permits third-party funding agreements, subject to certain conditions, including that the agreement is in writing, and that it complies with any requirements prescribed in regulations. As yet, no detailed regulations have been released.

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