In our last issue we reported that the Civil Justice Council (CJC) had made a series of recommendations regarding contingency fee agreements. These agreements provide for a lawyer to be paid a percentage of his client's winnings, rather than his regular hourly rates (with or without a success fee uplift). Up to now they have been illegal in most civil litigation, but from April 2013 they will be permitted as part of Jackson LJ's reform of civil costs. They will also be given a new name: "Damages-Based Agreements" or "DBAs".
Among the CJC's recommendations was a proposal that commercial litigants, as "sophisticated purchasers of legal services", should be free to pay their lawyers any percentage of their winnings they think appropriate. Only personal injury claimants, and possibly consumers and "micro businesses", should be protected by a cap on the percentage agreed.
For reasons that have not been explained, the Government has decided to ignore the CJC's recommendations insofar as they affect larger commercial organisations, and impose a 50% cap across the board. The only exception will be agreements entered into by personal injury claimants, who will be allowed to hand over no more than 25% of their winnings (excluding damages for future care and loss), as Jackson LJ and the CJC envisaged.
The precise effect of these caps will depend partly on the detail of the relevant regulations, which are currently being drafted and which will be the subject of consultation in due course. We will report again when it is known, for example, whether the cap is to extend just to solicitors' fees, or also to disbursements, counsels' fees and so on.