Recoverability of foreign lawyers’ fees in the BVI, Cayman Islands and Bermuda
The commercial courts in offshore financial centres (OFCs) continue to be busy with their usual diet of shareholder and corporate disputes, insolvencies, asset tracing and trust litigation, often involving vast sums. This keeps litigators in OFCs busy, but also provides a fertile source of work for onshore lawyers, often based in London, Hong Kong and elsewhere.
In high stakes “bet the company” or “bet the family fortune” litigation, the ability to recover legal fees from the unsuccessful adversary may rank low in the list of priorities for the protagonists who, understandably, may want their trusted onshore legal advisors to manage their litigation and, where possible, appear as their lead advocate in the OFC court. But, with legal fees running into several million dollars in many cases, recovery of legal costs - in particular for overseas counsel - is nevertheless an important consideration.
The three leading “Caribbean region” OFCs take different approaches to the recovery of overseas counsel’s fees, with Cayman taking the most restrictive approach and Bermuda the most permissive.
Partly in response to concerns about the prevalence of foreign lawyers in BVI commercial litigation, the BVI Legal Profession Act 2015 limited recovery of legal costs to lawyers registered in BVI. Currently, the impact of this rule is mitigated by BVI’s fairly relaxed approach to admitting London barristers and lawyers affiliated with BVI firms’ overseas offices (notably in Hong Kong). However, the BVI court has confirmed that the 2015 Act operates to prevent the recovery of fees for non-admitted lawyers, so early admission is important in BVI disputes (Dimitry Vladimirovich Garkusha v Ashot Yegiazaryan et al  and John Shrimpton et al v Dominic Scriven et al .
In the Cayman Islands, recovery of foreign lawyers’ fees is restricted by the Grand Court’s procedural rules (notably 62 Rule 3(1)) which limit recovery of foreign lawyers’ fees to circumstances where the lawyer has been temporarily admitted to the Cayman Bar for a specific case. This means that English barristers’ fees for court appearances will be recoverable but any pre-admission fees (e.g. early advice or drafting pleadings) will not. It also precludes the recovery of fees for non-admitted foreign lawyers, including English solicitors.
Whilst the Cayman position is similar to that in the BVI, the crucial difference is that the Cayman rules do not permit the recoverability of fees for admitted lawyers if they are not practising in the Islands (unless, as above, temporary admission for a particular case has been granted). This means that clients of Cayman Islands’ firms with foreign international offices cannot recover the fees of lawyers in those offices in relation to Cayman legal proceedings.
By contrast, Bermuda does not have any statutory provisions or rules of court specifically directed at limiting the recoverability of foreign lawyers’ fees (although there are strict work permit requirements for overseas lawyers who wish to practice Bermuda law within the jurisdiction or to appear in Bermuda’s courts). Instead, Bermuda courts follow the English common law approach and will allow recovery of foreign lawyers’ fees on an assessment or taxation of costs where it can be shown that the costs were necessary and proper for the attainment of justice. This has been confirmed in a number of Bermuda decisions such as Re Electric Mutual Liability Insurance Company Limited [No 436 of 1995] and Capital Partners Securities Co. Ltd v Sturgeon Central Asia Balanced Fund Ltd .
As Ground J put it in Re Electric Mutual:
It is inevitable from Bermuda’s position as an offshore business center that many commercial cases will involve lawyers in other jurisdictions. Overseas lawyers are not, of course, ‘attorneys” within the meaning of the Bermuda Rules … However that is no reason in principle why their necessary or proper time should not be allowed … In general, when dealing with the costs of commercial litigation with a foreign element, the Registrar will no doubt approach this element in a taxation realistically, and with the offshore aspects of the litigation firmly in mind.
These differing approaches illustrate the importance of considering, at the outset of a dispute, the potential for recovering legal fees for foreign counsel engaged in offshore litigation by reference to the applicable costs rules of the relevant jurisdiction.
Read other items in Offshore Professional Risks Brief - June 2019