Egypt
The Egyptian litigation landscape is marked by several key trends. A significant rise in insolvency, fraud, debt collections and enforcement cases are anticipated, likely influenced by the economic aftermath of the pandemic and persistent financial pressures. Additionally, there is an increasing demand for alternative legal fee structures.
1. Is third party funding permissible for disputes?
The Egyptian legislation, including the Arbitration Act is silent on the issue of third-party funding. However, the absence of legislation on the matter does not impede arbitration tribunals and courts from accepting this increasingly important practice.
It is important to note that the 2022 Egyptian Model BIT contains a provision that covers third party funding. The said provision recognises that a party may have recourse to third-party funding under a strict duty of disclosure of the funding agreement, either before the commencement of the arbitral proceedings or immediately after the conclusion of the funding agreement, and such duty of disclosure is continuous throughout the proceedings.
Also, the recently issued new CRCICA Arbitration Rules, that entered into force as of 15 January 2024, provides under Article 53 that the party that is funded by a third party in relation to the proceedings and its outcome shall disclose the existence of the funding and the identity of the funder at the commencement of and throughout the arbitral proceedings.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
While contingency fees are allowed in Egypt, lawyers must adhere to the legal framework and ethical standards. The Arbitration Act does not include provisions relevant to contingency fees. However, Egyptian Advocacy Law No. 17 of 1983 allows lawyers to receive contingency fees, and therefore allows them to enter into alternative fee arrangements, in a margin of up to 20% of the outcome of the case. Alternative fee arrangements between client and counsel cannot be based on the client’s solvency as ruled out by the Supreme Constitutional Court.
3. Can the court or tribunal order one party to pay the other’s legal costs?
In Egypt, the general rule is that each side has to pay their own legal costs, regardless of whether they win or lose.
However, there are exceptions. If the court determines that the unsuccessful party has behaved unreasonably, it can order them to pay the successful party’s legal costs. In practice, this happens very rarely. Similarly, in financial remedy proceedings, the court will not typically make an order requiring one party to pay the costs of the other party unless there is conduct that justifies such an order. Additionally, if a party has conducted itself unreasonably during the proceedings, the court has discretion to penalize it by disallowing some or all of its costs and/or ordering it to pay the other side’s costs.
As to Arbitration, the Arbitral Tribunal is entitled to award costs based of the agreement of the partis under the arbitration clause. Also, Article 42 of the old CRCICA Rules and 41 of the new CRCICA Rules is clear in the definition of costs that include the legal and other costs incurred by the parties in relation to the arbitration (including party appointed experts’ fees and expenses) to the extent that the arbitral tribunal determines that the amount of such costs is reasonable.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, insurance is available to protect against adverse outcomes for funded litigation.
In Egypt, the costs and fees incurred when litigating can be significant. These include proportionate fees based on the claimed amount, fixed fees for cases filed before various courts, and other costs such as taxes, bar association fees, and expert fees.
A new Egyptian insurance law and proposed mandatory lines are expected to increase coverage and premiums. This suggests that the insurance sector in Egypt is evolving and could potentially include litigation insurance in the future.
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