Changes to litigation funding arrangements

11 March 2013

There are changes in litigation funding being introduced with effect from 1 April 2013.

Traditionally, lawyers are paid on an hourly rate or on a fixed cost basis.  The new rules will change the way costs are managed during the litigation process. One of the fundamental changes is to the ‘no win no fee agreement’ where the winning party is currently able to claim his costs plus a ‘success fee’ of up to 100% from the losing party.  This success fee means that lawyers can double their costs on cases that they are sure to win but from April, the success fee will not be recoverable from the losing party. This will lower the legal fees for the losing party.

Furthermore new rules are being introduced called ‘Damages Based Agreements’, which means that lawyers fees will only be paid if the client is successful and with the lawyer paid a percentage of the damages recovered.  With DBA’s a client will receive a fixed proportion of the damages recovered with the balance paid to his lawyer.

The rationale of these changes is to lower the costs of litigation and also to share the burden of the litigation risks with the client’s lawyer. The danger is that lawyers will cherry pick only those cases where there is a good chance of winning the case.

Contact Ellis Ezekiel for further information on these changes.