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Changes to the No Win No Fee System

A Conditional Fee Agreement (CFAs), more commonly known as a ‘no win no fee’ agreement, is an extremely common litigation funding option. Whilst it is still a very viable funding option, new changes in the law could see successful claimants having to give away a percentage of their award to lawyers. When you consider that access to legal aid in 2013 is becoming even more stringent, these changes could see more people dissuaded from mounting legal action.

The basic idea

Conditional fee agreements work very simply: the litigant and the lawyer agree that the lawyer fees be determined by the outcome of the case.

If the case is lost

If the case is lost, the litigant will not be required to pay the lawyer fees. The only exception to this is if the litigant is required to pay for expert services or court fees, or is ordered by the court to pay the other side’s costs. This means that many people also take out ATE policies to insure themselves. ATE or after the event insurance policies protect people from having to pay the legal fees themselves.

If the case is won

If the case is won, your lawyer is entitled to receive his or her payment, but these costs are paid for by the losing party. Lawyers normally also receive a percentage from their client for taking a risk on the case, commonly referred to as a success fee.

Proposed changes

As of 1 April there will be new legislation that will change the way the system works. There are worries that the current system enforces a compensation culture where people are prepared to take proceedings to court because they have nothing to lose. CFAs were initially introduced to help people who couldn’t afford legal costs for representation, however, many feel that this system is not working and leading to even higher legal costs.

The Jackson reforms to civil litigation, propose a change that will potentially stop people from being overzealous with it. Under the new reforms, success fees will no longer be recovered from the other side should a case be won. This means that litigants who win their cases will have to pay their lawyers success fees as well as their ATE premiums. As a result, claimants will leave significantly less well off after a successful claim. The hope is that this will make no win no fee UK cases much less attractive.

The new alternative proposed to help people gain funding is referred to as damages-based agreements. For these agreements, the lawyer’s fees are calculated as a percentage of the damages awarded.

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