The Arbitration and Legal Practitioners Legislation (Outcome Related Fee Structures for Arbitration) (Amendment) Bill 2022 (the “Bill“) was gazetted on 25 March 2022. The Bill seeks to allow the use of outcome related fee structures (“ORFS“) for arbitration by lawyers in the following three forms of agreements:
- conditional fee agreement (“CFA“), which refers to an agreement under which the lawyer agrees to be paid a success fee for the matter only in the event of a successful outcome for the client in the matter;
- damages-based agreement (“DBA“), which refers to an agreement under which the lawyer agrees to be paid only in the event the client obtains a financial benefit in the matter (“DBA payment“). The DBA payment is calculated by reference to the financial benefit that is obtained by the client in the matter; or
- hybrid damages-based agreement (“Hybrid DBA“), which refers to an agreement under which the lawyer agrees to be paid (a) the DBA payment in the event the client obtains a financial benefit in the matter, and (b) in any event a fee (usually calculated at a discount) for the legal services rendered by the lawyer for the client during the course of the matter.
The Bill proposes to introduce a new Part 10B into the Arbitration Ordinance (Cap. 609) to remove the prohibition on ORFS for arbitration. It is also proposed that section 64 of the Legal Practitioners Ordinance (Cap. 159) be amended to enable the validity of ORFS agreements for arbitration. The legislation will bring Hong Kong’s legal fees position into line with other major arbitral seats.
The full text of the Bill is available here.