A long-awaited report from the Law Reform Commission of Hong Kong was published. On the topic of outcome-related fee structures in arbitration, it recommends that prohibitions on ORFSs be lifted. By allowing outcome-related fee structures, Hong Kong will align more closely with other global arbitration destinations.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
A long-awaited report from the Law Reform Commission of Hong Kong was published. On the topic of outcome-related fee structures in arbitration, it recommends that prohibitions on ORFSs be lifted. By allowing outcome-related fee structures, Hong Kong will align more closely with other global arbitration destinations.
Burford Capital explains the specific recommendations of the commission, which reflect the growing acceptance of ORFSs around the globe. At present, lawyers cannot legally enter ORFSs for arbitration or litigation proceedings. According to the commission, there are restrictions on three specific types of arrangements that should be lifted:
- CFAs. Conditional fee arrangements involve a lawyer and client agreeing on a success fee when a case ends in an outcome favorable to the client.
- DBAs. Damages-based agreements occur when a lawyer only receives payment when they obtain a financial benefit for their client. That payment is typically calculated as a percentage of a settlement or award.
- Hybrid DBAs. A hybrid damages-based agreement involves paying a fee (often discounted) for legal services, in addition to a percentage of any award or settlement.
It’s largely agreed that allowing for more fee structure options is beneficial for clients and legal firms.
