Consultation 012.09

Regulating Damages Bases Agreements ( DBAs)

Ref: 012.09

This consultation paper seeks views on the requirements to be introduced for statutory regulation of DBAs (sometimes referred to as ‘contingency fees’). Under these agreements the fee which the person providing services under the agreement (the representative) receives is ‘contingent’ upon the success of a claim. The fee is payable only upon success and is calculated by reference to the damages awarded.

Unlike conditional fee agreements (CFAs), a similar form of contingency fee, DBAs are not regulated by statute.

CFAs are used primarily in litigation where rights of audience and rights to conduct litigation are restricted to legal professionals. DBAs on the other hand are not permitted in litigation. However, their use developed in some tribunals, primarily in Employment Tribunals, but without the specific regulatory framework that Parliament provided for CFAs. DBAs are recognised by professional regulatory bodies such as the Law Society. As there are no restrictions on rights of audience and or the right to conduct litigation in the tribunals’ jurisdiction, persons other than legal professionals can also bring claims under DBAs. The use of the term ‘representative’ in relation to DBAs therefore covers solicitors, claims managers and others.

Concerns have been growing around the potential for consumer detriment in the absence of a statutory framework for regulating DBAs. The Government believes that there is evidence that many do not understand these fee arrangements which could sometimes include terms which might be unfair to consumers. The Government, therefore, believes that a statutory framework for regulating these agreements would help provide a level playing field between consumers and representatives and remove the unfairness to consumers which can otherwise exist.

A new clause in the Coroners and Justice Bill, as introduced in the House of Lords on 1 July at Annex B, would provide the statutory framework for regulating DBAs. The clause would give the Lord Chancellor the power to make provisions in respect of these agreements, including the power to prescribe requirements which the agreements must meet in order to be enforceable. Any agreement which does not meet the specified criteria may be unenforceable.

The consultation will end 25th September 2009

The Consultation can be accessed on this Ministry of Justice link: