The Ministry of Justice has issued an update on the practical use of contingency fee agreements also known as damages-based agreements, in advance of their introduction in April 2013.
The update states that lawyers acting under a contingency fee agreement in non-personal injury cases will not be able to take a success fee of more than 50% of the client's damages. This is contrary to the recommendations of the Civil Justice Council Working Party's report published in August, which recommended that a cap of 50% should be considered in consumer cases and those involving small businesses but that there should not be a cap on the contingency fee for all other non- personal injury and non-employment tribunal case types.
As recommended by the CJC Working Party, ministers have agreed that the success fees in personal injury cases will be capped at 25% of the damages, excluding damages for future care and loss. The cap would not apply to appeal proceedings. The existing cap of 35% applicable to employment tribunal cases will remain unchanged.
Whilst the 50% cap is contrary to the recommendations issued by the CJC Working Party, in practice it is not expected to materially alter the number of contingent cases being pursued. Our experience of contingency fee agreements in the USA and of litigation funding agreements in the UK, from which DBAs are likely to take their lead, is that most DBAs would not exceed 50% of the damages in any event.
It is clear that many policy decisions still need to be made but regulations are now being drafted and we will continue to keep you up to date with any developments.
Mishcon Protect offers a variety of alternative funding arrangements designed to reduce the financial risks our clients face when bringing a claim. We currently utilise CFAs, third party funding and ATE insurance where appropriate, across a wide range of case types, including commercial litigation, trust disputes and property matters. Post April 2013, we will be considering contingency fee arrangements for suitable cases.