A Slice of American Pie

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Lord Justice Jackson's civil justice reforms will shortly be with us. In his December 2009 report, Lord Jackson recommended sweeping changes to litigation funding and solicitors' costs with a view to increasing access to justice. These changes, which are due to be implemented in April 2013 are causing no small amount of concern and controversy as to their effect. What is apparent is there are likely to be significant changes in the way in which civil disputes between parties are funded.  

The latest Jackson-related legislation to hit Parliament includes a draft Conditional Fee Agreement (or "CFA") Order, which seels to place a cap on the amount a legal representative of a party to a dispute is able to recover by way of a success fee. CFAs are more commonly known as "no win no fee" agreements and involve lawyers accepting that their costs will be performance related, although they are still paid based on the time that they spend on a case. The proposed cap on the fees that can be charged will make CFAs far less attractive to lawyers, particularly in more complex commercial cases.

What Lord Jackson takes away with one hand though, he gives back with the other. Under the reforms  Damages Based Agreements (or "DBAs") will be permitted for the first time. A DBA is a private funding arrangement between a lawyer and a client, whereby the lawyer's fees can be based on a percentage of the compensation received by the client. Historically, the position has been that DBAs are not permitted once proceedings have been issued, but the new statutory instrument incorporating Lord Jackson's reforms permits a representative and client to enter into an agreement which will entitled them to recover up to 50% of any compensation received. The result is likely to see both a shift from the traditional CFA to more DBAs being used to fund civil disputes and consequently, a significant increase in the number of cases. 

DBAs are very popular in the United States. They have made some lawyers a lot of money. Will they do the same here? Quite possibly. Certainly from a lawyer's point of view a share of the proceeds has a number of attractions and the move away from a system which in reality rewards lawyers who spend more time on a matter to one where the financial result for the client is paramount will change behaviour and probably will get quicker results for litigants. Whether moving in the direction of the notoriously litigious U.S. is a good thing generally is a different matter.