Cayman Islands Issues General Licence For Payment Of Legal Fees

• Law Firm: Conyers
• Subject Matter: Finance and Banking, International Law, Financial Services, Export Controls & Trade & Investment Sanctions
• Author: Ms Alecia Johns and Róisín Liddy-Murphy
• Published date: 31 May 2023

On 14 April 2023, the Governor of the Cayman Islands issued a general licence (GL/2023/0002) for the payment of legal fees (the "Cayman General Licence"). This means that, under specified circumstances, Designated Persons (parties who are designated by the UK under the Russian and Belarus sanctions regimes) may lawfully make payment to their attorneys for legal fees and disbursements without having to apply for a specific licence for that purpose.

Following Russia's invasion of Ukraine in February 2022, the UK government imposed hundreds of new designations under the Russian and Belarus sanctions regimes (which were extended to the Cayman Islands and other British Overseas Territories).¹ The impact of these new designations on ongoing litigation in the Cayman Islands and elsewhere was immediately felt.² While it was largely clear that the sanctions regime did not prohibit an attorney from continuing or beginning to act for a Designated Person³, receipt of payment for legal fees was prohibited without an express licence issued by the Governor's office permitting such payment.

The increase in designations led to a concurrently sizeable increase in licence applications for the payment of legal fees and consequently increased processing times. In response to this, in October 2022, the UK Office of Financial Sanctions Implementation ("OFSI") issued a general licence for the payment of legal fees (the "UK General Licence").⁴ The Cayman General Licence mirrors the UK General Licence in most material respects. It is valid for six months and expires on 14 October 2023.

Distinction between Pre-Designation and Post-Designation Work

The Cayman General Licence distinguishes between work carried out pursuant to an engagement which was entered into prior to the date of the Designated Person's designation ("Pre-Designation Work") and work undertaken pursuant to an engagement entered into after a party was designated ("Post-Designation Work").

In respect of both Pre-Designation Work and Post-Designation Work, there is a cap of US$600,000 in total which may be paid in attorney's fees pursuant to the licence. This is in addition to a separate cap of US$30,000 in expenses or 5% of the attorney's legal fees (whichever is lower).

The key distinction in respect of Post-Designation Work, is that attorneys' hourly rates are capped in accordance with the maximum hourly rates per PQE band provided in Practice Direction 1 of 2011 for the Financial Services Division. No such cap on...