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Ming-Yee Shiu writes Recovery of foreign lawyers’ fees in the BVI

Until late 2015 the recovery of foreign lawyers’ fees in litigation in the BVI was allowed in principle at common law regardless of whether or not the lawyers concerned were qualified to practise in the BVI. Litigants were able to recover fees incurred as a disbursement of local lawyers if the court was satisfied that the fees were justified as a reasonable expense.

The provisions of the Legal Profession Act 2015 (“the Act”) largely came into force from 11 November 2015. The stated objective of the legislation was to “make provision for the fusion of the branches of the legal profession, for legal education and for the discipline of legal practitioners”. The Act provided an entirely new regulatory regime for the legal profession in the BVI, with a new system of registration (“the Roll”) for BVI legal practitioners. Controversially, the original provisions of the Act included a definition of practising BVI law under section 2(2) which had extraterritorial reach; this provided that any reference in the Act to practising law be construed to include a reference to practising BVI law outside the BVI. In fact, this provision was never brought into force and was subsequently repealed.

Under section 18(1) of the Act, it became an offence for a person not registered on the Roll to practise BVI law or wilfully pretend to be a legal practitioner. It also became an offence under section 18(2) for a person not registered on the Roll to act in any respect as a legal practitioner in any action or matter or in any court in the name of or through the agency of a legal practitioner.

Under section 18(3) of the Act, “no fee in respect of anything done by a person whose name is not registered on the Roll or to whom subsection (2) relates, acting as a legal practitioner, is recoverable in any action, suit or matter by any person”.

Without directly referring to foreign lawyers, section 18(3) effectively abrogated the common law principle in relation to the recovery of foreign lawyers’ fees, unless the lawyers are themselves registered on the Roll. This has led to a number of cases on the subject.

The Court of Appeal in the BVI considered the recovery of foreign lawyers’ fees under the common law and the position under section 18(3) of the Act in Garkusha v Yegiazaryan, BVIHCMAP2015/0010. The Court held that the intention of Parliament in passing the Act was indeed to abrogate the common law. It was held that foreign lawyers acting from offices in Moscow who assisted with a defence to an application for security for costs in a BVI case were to be regarded as practising BVI law. As the foreign lawyers were not registered on the Roll, they were engaged in the unlawful practice of BVI law, applying section 2(2) (which was not in fact in force) and section 18(1). It was held that under section 18(3), the fees of the foreign lawyers were not recoverable in the action.

In John Shrimpton v Scriven, BVIHCMAP2016/0031, the appellants sought to argue that the judgment in Garkusha was per incuriam in relation to the prohibition on recovery of fees under section 18(3) as it was reached on the incorrect assumption that section 2(2) of the Act was in force, and that section 18(3) did not abrogate the common law position in relation to recovering the fees of foreign lawyers as a disbursement. The Court of Appeal dismissed the appeal, holding that although the Court in Garkusha might have reached a different decision, it would not have been compelled to a different conclusion, as its conclusion that the common law right to recover fees was abrogated by section 18(3) could have been supported on other grounds. Further, whilst it was accepted that Parliament did not intend the criminal offences in section 18(1) and (2) to apply extraterritorially, section 18(3) was not a criminal sanction, but a prohibition against recoverability, and was not dependent upon any illegality. The Court considered that to have a different position on recovery in relation to foreign lawyers present in the jurisdiction and those who were not would leave a “gaping hole” in the legislation. The Court in Shrimpton indicated that it might have interpreted “acting as a legal practitioner” more narrowly than the Court in Garkusha, but held that it was bound by the approach in Garkusha. Accordingly, the fees of foreign lawyers acting as legal practitioners cannot be recovered in the BVI whether or not they are within the jurisdiction.

The transitional position in respect of fees incurred prior to the Act where recovery has been sought after the Act came into force was considered in the recent first instance case of Zorin Sachak Khan v Gany Holdings, BVIHCM 2018/0045. The Court considered that the Court of Appeal in both Garkusha and Shrimpton was not addressing the specific question of whether fees are recoverable if incurred prior to the coming into force of the Act but assessed subsequently. The provisions in the Act to regulate the persons who can practice BVI law were an innovation and it was intended that such regulation should take effect upon the Act coming into force. Sections 18(1) and 18(2) were to be read prospectively, and section 18(3) should be read as part of that prospective scheme. The Court interpreted section 18(3) as excluding recovery of fees incurred in respect of any work done after 11 November 2015 by a person practising BVI law whilst not on the Roll. Consequently fees incurred for anything done prior to that date remained recoverable in accordance with the common law practice that applied then.

The decision in Zochin was appealed and the outcome is awaited; it therefore remains to be seen whether the Court of Appeal will uphold the decision that section 18(3) has no application to fees incurred before the Act came into force.

Ming-Yee Shiu is a commercial practitioner called to the Bar in England and Wales and New York

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