Litigation Funding - Conditional and Contingency Fee Agreements

A discussion paper entitled “A review of litigation funding in the Cayman Islands - Conditional and Contingency fee agreements”.

The Law Reform Commission submits for public comment a discussion paper entitled “A review of litigation funding in the Cayman Islands- Conditional and Contingency fee agreements”. The review is being carried out pursuant to a referral from the Attorney General and a call by the Court of Appeal for an examination of the law governing such agreements in the Cayman Islands.

    
A general definition of a conditional fee agreement is an agreement where the lawyer accepts the client's normal fee only if the action was 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.

    
Both types of agreements have been viewed by proponents over the years as fundamental routes to access justice by lower income persons. 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 jurisdictions such as the UK, Australia, Canada and the USA.

    
A Private Funding of Legal Services Bill attached as the 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.