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Confusion over the scope of the Damages-Based Agreements Regulations 2013, together with comments that the MOJ will ‘continually review’ the same, has led to speculation that the Government is already planning to change the rules governing the use of Damages Based Agreements (‘DBAs’), little more than a month after the LASPO Act came into force.

The Regulations, which came into effect on 1st April 2013, allow DBAs to be used in mainstream litigation in the UK for the first time. DBAs are described in the Regulations as a type of ‘no win, no fee’ agreement which permits lawyers to take an agreed percentage of the client’s damages upon success but ‘nothing if the case is lost’. Consequently, some firms have already questioned their breadth and specifically whether they will allow lawyers to work on the basis of a partial or hybrid DBA.

Nevertheless, Susan Dunn of Harbour Litigation Funding is of the view that there is nothing in the spirit of the rules which prohibits hybrid DBAs. And it is also worth noting that similar language to that used in the DBA Regulations was used in the regulations introducing Conditional Fee Agreements (‘CFAs’) which have of course been used on a partial basis frequently in the past.

It seems that Dunn’s view must be the correct one and that lawyers who choose to receive a reduced hourly rate as the case proceeds, which is payable win or lose, in exchange for a contingency fee in the event of a success must rightly be able to do so. However, it remains to be seen how the Government will deal with these ambiguities. Also, it’s perhaps unlikely that firms will choose to ‘test the water’ by offering a discounted DBA whilst the Regulations remain as they are. The message, as always, is to watch this space…

TheJudge can help support the position of both clients and law firms, whether the case is being run on a DBA, CFA or on a standard hourly rate. As the world’s leading broker of both litigation funding and ATE insurance, we help structure financing packages which remove as much of the litigation or arbitration risk as possible, be it through litigation insurance to cover the potential adverse costs risk, third party funding to pay disbursements and the lawyer’s fees or via DBA funding directly to the law firm to provide some cash-flow in respect of the outstanding WIP.

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