The Cayman Islands is the latest territory to signal its embrace of Litigation Finance. Until 2017, champerty laws were still in force, and legal funding by third-parties was disallowed except in insolvency cases. That year, Harneys, a Cayman Islands law firm, received court approval for the practice.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
The Cayman Islands is the latest territory to signal its embrace of Litigation Finance. Until 2017, champerty laws were still in force, and legal funding by third-parties was disallowed except in insolvency cases. That year, Harneys, a Cayman Islands law firm, received court approval for the practice.
Omni Bridgeway explains that the passing of the Private Funding of Legal Services Act of 2021 is a clear welcome to third-party litigation funding. After the 2017 precedent, funders and clients alike were reticent to undertake funding agreements. Some speculate that the requirement of court approval for each case led investors to fear they could make funding agreements that are later rejected by courts.
The new Act recognizes that funding agreements will be made by experienced professionals who are unlikely to need court guidance to develop contracts that are fair and reasonable. As such, it takes a hands-off approach unless there’s a reason for court involvement.
Once the Act has taken effect, court approval will no longer be needed for third-party funding agreements. Arrangements must be in writing, and there are limits on the amounts that can be remitted to funders. These parameters apply to litigation and arbitration.
This is big news in the Cayman Islands and elsewhere. The Cayman Islands is already a leading global financial hot spot. The new Act may lead to it becoming a destination for those shopping for the right jurisdiction in which to pursue litigation.
