A Civil Justice Council (CJC) report has made 45 recommendations designed to increase the uptake of Damages-Based Agreements (DBAs), which were a key part of the Jackson reforms but whose use has been limited.
DBAs are a litigation agreement where lawyer and client share the risk - and reward - of litigation. Instead of paying fees up front in the traditional way (such as an hourly rate, or a fixed fee), the lawyers will only be paid as a percentage of any damages actually recovered. If the claim fails, the lawyers receive nothing.
The recommendations in the report, The Damages-Based Agreements Reform Project: Drafting and Policy Issues, are “designed to make the statutory regime relating to DBAs simpler and clearer, in order to assist lawyers and their clients who are considering the use of that method of funding”, the CJC said.
The CJC working group, chaired by Professor Rachel Mulheron of Queen Mary University of London, distinguished between sequential hybrid DBAs and concurrent hybrid DBAs in accordance with the Government’s terms of reference.
Further, in respect to sequential DBAs the report suggested that the Government should clarify whether, in the event of success, the solicitor can retain the monies recoverable under the non-DBA funding agreement, or whether that sum should be offset against the DBA fee.
The report was produced following a request by the Ministry of Justice (MoJ) to the CJC, in December 2014, to advise on ways of clarifying the DBA Regulations 2013.
The Master of the Rolls, Lord Dyson, said: “I welcome the Government’s invitation to the CJC to address some of the issues relating to DBAs, and I now urge it consider further modifications to the regulations to help promote confidence in them as one of the funding arrangements available to those involved in a personal injury or commercial dispute. “DBAs were envisaged by Lord Justice Jackson in his report Review of Civil Litigation Costs (December 2009) as an important funding option available to those wishing to pursue or defend a claim. They have, however, been used infrequently since then by lawyers and their clients as a method of funding litigation. I hope that the changes recommended in this report will encourage the greater use of DBAs.”
Professor Mulheron said: “DBAs have been used very sparingly by the legal profession since the Jackson reforms took effect in 2013. This has been unfortunate, given that the use of DBAs in contentious litigation was, arguably, the most novel aspect of those 2013 reforms. “The working group was commissioned to explore the uncertainties which surround the current regulations, and to make recommendations to reduce or to eliminate uncertainties. The group canvassed 20 drafting issues, and 10 policy issues, which it considered would be relevant in the operation of DBAs.
“The CJC hopes that the work undertaken in this Report will help to inform, in a useful and constructive way, the redrafting of the DBA Regulations, to render DBAs a useful funding option in suitable cases. I am grateful for the hard work and support of all the members.”
David Greene, partner at Edwin Coe and member of the working group said: “The DBA regime has, thus far, not been a success. “Few practitioners are offering them as an alternative to other methods of funding, such as CFAs. The two parts of the report offer first an immediate fix to the Regulations to overcome various technical difficulties but it is the second part that really addresses the issues for making the regime work.
“The key is the introduction of hybrid DBAs, ie being able to use a DBA as part of a package of funding for clients. The committee has proffered the view they should be introduced but the government has been hesitant. The government has said it will deal with the committee's Part 1 recommendations so we expect draft legislation in the Autumn. Part 2 will have to wait but it should open up the debate on the policy issues raised.”
A copy of the full report can be found here - https://www.judiciary.gov.uk/wp-content/uploads/2015/09/dba-reform-project-cjc-aug-2015.pd
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