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Consultation on regulating use of ‘damages based agreements’

Consultation on regulating use of ‘damages based agreements’

The Government is consulting on the regulation of damages based agreements (DBAs) or contingency fees, a type of ‘no win no fee’ agreement. The proposals, to be introduced by way of the Coroners and Justice Bill, address concerns that unregulated contingency fee arrangements expose claimants to unfair terms and conditions being imposed by those representing them.

Under a DBA, a representative is not paid a fee if they lose a case, but are paid a percentage of the damages recovered if they win. DBAs have normally played a role in tribunals where the claimant cannot afford legal representation. However, there is no guidance on how the percentage of the damages that goes to the representative is agreed or determined. As DBAs are unregulated, there has been growing concern about their abuse.

The Government proposes to insert a new clause in the Coroners and Justice Bill, which would amend the Courts and Legal Services Act 1990 to give the Lord Chancellor the power to make provisions in respect of DBAs. Proposals for the regulatory powers include: (i) a cap on the percentage of damages that can be recovered by the representative; (ii) a requirement that representatives provide claimants with clear and transparent information on total costs; (iii) a requirement that representatives clarify the deductions made from the claimant’s award which are to go to the representative as their fee for taking the case.

The consultation ends on 25 September 2009.

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