Breaking Down Barriers to Commercial Litigation Finance in the Cayman Islands

The Grand Court of the Cayman Islands rendered a notable decision on November 23, 2017 in A Company v A Funder[i], where they issued a declaratory judgment finding that a litigation funding agreement was not illegal for reasons of public policy under Cayman Islands Law. The decision is significant because the Cayman Islands is a jurisdiction where champerty and maintenance are still actionable criminal and civil offenses, except in the context of official liquidation.

Instead of waiting for new legislation, the Grand Court found it appropriate to take an active role in chipping away at these ancient doctrines. The Grand Court recognized that third party litigation funding can and has served to increase access to justice for indigent claimants that otherwise could not have pursued their meritorious claims. It noted that laws on champerty and maintenance are being amended or done away with completely in common law jurisdictions around the globe as public policies are changing to fit the social needs and financial constraints of today’s justice system.

While the opinion does not serve as binding precedent for future cases, the principled analysis set forth in the Grand Court’s opinion provides helpful guidance to claimants and practitioners seeking to use litigation funding in the Cayman Islands. Specifically, the Grand Court identified three key questions and seven factors to consider when reviewing a funding agreement. 

As a preliminary matter, funding agreements should not have a tendency to corrupt justice, undermine the integrity of the litigation process, and/or give rise to risk of abuse. Further, courts will review the control granted to the funder under the agreement, the potential prejudice to the defendant if the claim fails, and the fairness of the economic deal struck between the parties. Applying the facts of the case, and after a revision to the contract, the Grand Court held the agreement did not run afoul of Cayman Islands public policy.

The Grand Court’s opinion is being viewed by practitioners as a significant step toward sanctioning the use of litigation finance in the Cayman Islands. While this may be correct, it’s important to remember that legislative action is required to abolish the torts and offenses of maintenance and champerty in the jurisdiction. The draft Private Funding of Legal Services Bill, 2015, proposed by the Cayman Islands Law Reform Commission, would accomplish this objective. The Bill would also open the door to U.S. style contingency fee agreements and U.K. style conditional fee arrangements. 

Bentham will be watching closely for any legislative progress and/or further developments in the case to see whether the litigation funding agreement is contested by the defendants or pursued by the Attorney General. If the claimant succeeds in enforcing its funding agreement, this well-reasoned decision, though lacking binding precedential force, may serve as a roadmap for judges faced with future funded claimants. It can likewise provide useful guidance to claimants and their potential funders when drafting funding agreements to pursue Cayman-related matters.

For expertise in navigating the laws of various jurisdictions and properly obtaining litigation finance for your case, contact us for a consultation.