'Let Lawyers Charge More For Successful Arbitration'

The Law Reform Commission on Thursday proposed that Hong Kong should start allowing lawyers to charge success fees in arbitration cases, saying it is “essential” for the city to compete with other jurisdictions as an international arbitration centre.

Current regulations in the SAR forbid lawyers from charging success fees, and the commission stressed that the ban on such charges in litigation proceedings should stay.

The head of the commission’s subcommittee in charge of the proposal, Kathryn Sanger, said the recommendations were made after studying the arrangement in other arbitration centres, including the mainland, Singapore, England and Wales, as well as Australia.

“We think that clients will increasingly look to choose to arbitrate elsewhere and to use lawyers outside Hong Kong in jurisdictions where outcome-related fees are permitted and have been now permitted for some time if Hong Kong does not follow suit,” she said.

She also noted that while Singapore does not allow such conditional fees, the city-state is looking into tweaking such rules after completing a public consultation on the subject.

“What we are trying to do is put Hong Kong on an even playing field with those jurisdictions, we want Hong Kong lawyers to be able to compete with their counterparts in those jurisdictions, including in China, where contingency fees have been permitted for a number of years,” she said.

The commission suggested the success fee could be a form of “no win, no fee” arrangement where the lawyer charges the usual fee, plus an uplift, if the case is successful, or a “no win, low fee” framework where the lawyer charges for the legal services provided and an addition fee if the case is successful.

It also recommended that success fees should be capped.

“This is consistent with other jurisdictions,” explained Sanger.

She added that England and Wales allow lawyers to charge up to an additional 100 percent of benchmark costs for successful cases, while Australia has a lower cap of 25 percent.

“In many cases, that success fee would be pure profit for the lawyer, and so as the subcommittee we felt that there was scope for capping the success fee at lower than 100 percent cap.”

A three-month consultation on the proposal is underway and will run until March 16 next year.