From April 2013, the UK Legal Aid, Sentencing and Punishment of Offenders Act will introduce a contingency fee agreements system.
Contingency fee agreements are also known as damages-based agreements and provide a mechanism for lawyers to charge fees as a percentage of the amount the court awards in damages.
This legislative change will see the UK move more towards a US litigation funding model.
Possible consequences:
- Australian (and other) companies in the UK may face the possibility of an increased risk of litigation
- Contingency fee agreements will provide another method to fund litigation, aside from existing legal expenses insurance, legal aid and litigation-funding
- Increased competition may force existing litigation-funding companies to reduce their charges
- The prospect of greater reward may encourage Plaintiff lawyers to take on high-risk class actions against well-funded corporations.
Litigation funders here already take a proportion of their clients' win on a contingency basis. Recently, more than 2000 victims of the Brisbane floods signed funding agreements with IMF (Australia) that will deliver IMF up to 30 per cent of any ex-gratia payments received after 1 January 2013, or after issuing proceedings.
The question whether Australia will, at some point in the future, introduce similar legislative change allowing lawyers to enter into contingency fee agreements with their clients remains to be seen.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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