Private Funding Of Legal Services Act, 2020 ' A New Age Of Litigation Funding In The Cayman Islands

• Published date: 16 February 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Campbells
• Author: Mr Andrew Pullinger and Harry Shaw

The passing of the Private Funding of Legal Services Act, 2020 (the "Act") sounded the death knell of the torts of maintenance and champerty in the Cayman Islands, and paves the way for a new age of litigation funding and contingency fee arrangements in the jurisdiction. The Act was gazetted on 7 January 2021 and is expected to come into force shortly. Once in force, the Act will bring the Cayman Islands more into line with other common law jurisdictions such as England and Australia in which litigation funding is commonplace.

The Act has the potential to significantly alter the litigation landscape in the Cayman Islands. In addition to facilitating justice by assisting parties that could not otherwise afford to bring good claims, the Act will permit sophisticated parties to pursue valuable claims without deploying their own capital, allowing them to better manage their cash flow to support their operations and growth.

Background

English legal systems historically prohibited arrangements through which a stranger to proceedings either funded or "maintained" litigation in which he or she had no interest (known as "maintenance") or in which the stranger would receive part of the proceeds of any successful claim (an aggravated form of maintenance known as "champerty").

While restrictions in most common law jurisdictions have relaxed over time in favour of regulated litigation funding, the scope for contingency fee and funding arrangements in the Cayman Islands had been uncertain, and limited primarily to funding of claims in the insolvency context. In 2017 Mr Justice Segal approved a third party funding agreement in A Company v A Funder [2017 (2) CILR 710] ¹, however, it is anticipated that the Act will have a greater impact on litigation funding and contingency fee arrangements, and provides greater certainty to those involved in funded litigation in the jurisdiction.

The Act

The Act has its origins in a 2015 Bill of the same name, which was revised and re-introduced in 2020. The stated objective of the Act is to regulate contingency fee arrangements ("CFAs") and litigation funding agreements ("LFAs") in order to provide an alternate means of funding legal services. The Act defines the "proceedings" to which it applies broadly as including those before any court or comparable tribunal or functionary, and expressly includes arbitration proceedings. Part 4 of the Act expressly repeals any offence under the common law for maintenance, including champerty.

CFAs

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