Anecdotal evidence from lawyers & insurers demonstrates low take-up
Commercial litigators wary of damages-based agreements (DBAs) because of “poorly drafted” regulations have urged the Ministry of Justice (MoJ) to deliver on anticipated amendments.
Although no official figures are available, lawyers and insurers anecdotally report low take-up of DBAs since their introduction more than six months ago. Lawyers attribute this to uncertainty over their operation.
Rocco Pirozzolo, underwriting manager at specialist insurance provider QBE, says: “No-one is touching DBAs—in the last six months only three have crossed my desk. The regulations are poorly drafted and have left too much uncertainty. Why would a lawyer sign up for that? A number of lawyers are disappointed that the DBA regulations have not been amended because they saw it as a given.”
Pirozzolo’s view chimes with responses recorded in the inaugural NLJ/LSLA litigation trends survey due to be published next week. Questioned on DBAs, over 70% of respondents said they had not started using, or did not intend to use, them.
Richard East, partner at Quinn Emanuel Urquhart & Sullivan, says: “We would like to use DBAs but like everyone else we really need the flexibility of being able to combine conditional fee agreements (CFAs) and DBAs. At the moment the regime is not clear enough.
“Ideally you would combine a CFA requiring the client to pay you an element of your ordinary hourly rates, but on success claim a contingency payment. That way everyone is a winner: the law firm is sufficiently incentivised, but not so much that it is effectively the entire economic risk in the case. This also means that the law firm retains an independence and can advise the client properly on settlement.”
An MoJ spokesperson says the department is considering suggestions which have been put to it for ways “to further improve the system.”
The Damages Based Agreements Regulations, which allow for DBAs to be used for the first time in civil litigation, came into effect on 1 April.
Litigation trends—the post-Jackson effect
The first NLJ / LSLA litigation trends survey, covering practitioners’ views on the use of CFAs, DBAs, and costs budgeting post-Jackson, is the discussion topic in an NLJ newscast, to be chaired by David Greene. The newscast & survey, both online exclusives, will be available on this site from 30 October 2013.
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