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Cayman To Review Litigation Funding

by Mike Godfrey, Lowtax.net, Washington
01 January, 2016

The Cayman's Law Reform Commission has launched a discussion paper entitled "A review of litigation funding in the Cayman Islands – Conditional and Contingency fee agreements."

The paper looks at regulating conditional and contingency fee agreements for the protection of clients.

A conditional fee agreement is an agreement where a lawyer accepts a client's normal fee only if the action is successful and he accepts the client's normal fee with an agreed uplift amount in the event of success so as to be compensated for the risks of not being paid in the event of failure. A contingency fee agreement is one in which the lawyer is paid nothing if the action is unsuccessful but he retains an agreed percentage of the client's recovery if the action is successful, also to compensate for the risks of not being paid in the event of failure.

Conditional fee agreements are more prevalent in jurisdictions such as the UK, Australia, and New Zealand, while contigency fees are more prevalent in the Canada and the US. Conditional fee agreements have been used in the Cayman Islands for more than a decade.

Launching the review, the Commission noted that both types of agreements have been viewed by proponents over the years as fundamental routes to access justice by lower-income persons. The Commission said: "The agreements are used in civil cases and can be of particular value where a person does not qualify to obtain legal aid but also cannot afford to pay a retainer. However, opponents to the use of such agreements view them as incentive to excessive litigation and argue that they promote a 'compensation culture.'"

The discussion paper examines the current law in the Cayman Islands as well as the history, advantages, disadvantages, and the social impact of such types of agreements in the UK, Australia, Canada, and the US.

A Private Funding of Legal Services Bill attached (in an Appendix to the paper) is also submitted for comment. The Bill provides not only for both two types of agreements but also for litigation funding agreements under which third parties can fund litigation in return for a share of the proceeds.

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