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08 Dec 2023

Arbitration – Contingency Fee – Champerty and Maintenance – Enforceability – Public Policy BB v KO [2023] HKCFI 2661

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While Hong Kong has recently enacted legislation to allow outcome related fee structures in relation to arbitration, and despite the fact that contingency fee arrangements are common in many jurisdictions around the world, such arrangements remain illegal in respect of Hong Kong litigation. In BB v KO the Hong Kong court was asked to consider the validity of an arbitration award entered pursuant to an arbitration agreement in a lawyer's retainer agreement. The engagement in question contained 1) a contingency fee arrangement and 2) concerned multiple pieces of cross-border litigation and included reference to litigation in Hong Kong.

The application before the court was an application to set aside the arbitration award made in Chicago under Illinois law awarding the law firm US$50 million in fees pursuant to a contingency fee arrangement. One of the grounds for set aside was the fact that, although the principal litigation to be dealt with under the engagement was in the Nevada courts, there was reference to strategic advice in relation to Hong Kong litigation. In exercising her discretion not to extend time the Hon Mimmie Chan J concluded that in examining whether or not a relationship offended the rules of champerty the totality of the facts must be examined to ask whether they pose a genuine risk to the court's processes.

This article was first published by LexisNexis on 6 December 2023.

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