UK to adopt U.S. Style Contingency Fees

On 1 April 2013, changes will take place to the English litigation rules that will represent the greatest shake up of litigation funding in over 50 years. Following a lengthy consultation process headed by Lord Justice Jackson, new rules will be implemented which will, for the first time, allow English lawyers to act for their clients in return for a share of damages.  In addition, much tighter control will be enforced by the Courts on the cost of litigation and the consequences of non-compliance could be catastrophic for clients and lawyers alike.

Funding

For the first time in the English legal system, contingency fees will be permitted. They will be known as Damages Based Agreements or DBAs. They will not be available for all forms of litigation, but in commercial and civil litigation risk sharing between lawyers and clients will be permitted for up to 50% of the damages recovered. In employment cases, the limit will be 35%. In addition, the existing system of Conditional Fee Agreements will be significantly altered. No longer will a successful party be able to recover uplifted fees from the losing party or any premium paid for after the event insurance.

Budgets

All parties to litigation will be obliged to provide detailed budgets to the Court and, critically, will be held to them. Unless budgetary overspend has been sanctioned by the Court at the time, it will not be recoverable from the losing party.

Process

When a party fails to comply with a Court Order or deadline, the Courts will now be directed to take a far more draconian approach to such failures. Courts will be ready and willing to strike out claims or defences for non-compliance and will only be persuaded to do otherwise in the face of strong, compelling arguments.