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The Ministry of Justice has announced plans to clamp down on ‘no-win no-fee’
lawyers who are exploiting vulnerable clients by taking a large proportion
of the damages they are awarded as payment for excessive legal fees.
These damages-based arrangements, known as ‘contingency fee agreements’, are
most common in Employment Tribunal proceedings. They are largely unregulated
and concerns have been growing about claims that some solicitors have been
exploiting these contingency fee agreements unreasonably.
The government is therefore today announcing its intention to introduce
provisions in the Coroners and Justice Bill, currently before Parliament, to
enable proper regulation of damages-based agreements by putting in place
protection for vulnerable claimants against unfair or unreasonable
agreements.
The Justice Secretary, Jack Straw, said:
‘Unregulated contingency fee arrangements have been stretched to breaking
point by some no-win no-fee lawyers who have exploited vulnerable clients by
taking huge slices out of their damages, failed to provide them with proper
information, and imposed unfair terms and conditions that have locked them
into unreasonable deals. The time has come for these arrangements to be
subject to proper regulation to protect the interests of consumers, and that
is what the government will legislate to do.’
These arrangements – unlike, for example, conditional fee agreements – have
been without statutory regulation because of an anomalous and long standing
interpretation of the law which has classified proceedings in Employment
Tribunals as ‘non-contentious’.
The department will shortly publish a consultation paper seeking views on
the details of the regulatory requirements.
However, it is intended that regulations will include:
a cap on the percentage of damages that can be recovered by the legal
representative
a requirement that legal representatives provide claimants with clear and
transparent information on total costs
a requirement that legal representatives clarify the deductions made from
the claimant’s award which are to go to the representative as their fee for
taking on the case
a requirement that they provide explicit information on alternative methods
of funding.
As well as regulating their existing use, the proposals will also allow the
Justice Secretary to extend or restrict the use of these agreements in
future should the need arise.
lawyers who are exploiting vulnerable clients by taking a large proportion
of the damages they are awarded as payment for excessive legal fees.
These damages-based arrangements, known as ‘contingency fee agreements’, are
most common in Employment Tribunal proceedings. They are largely unregulated
and concerns have been growing about claims that some solicitors have been
exploiting these contingency fee agreements unreasonably.
The government is therefore today announcing its intention to introduce
provisions in the Coroners and Justice Bill, currently before Parliament, to
enable proper regulation of damages-based agreements by putting in place
protection for vulnerable claimants against unfair or unreasonable
agreements.
The Justice Secretary, Jack Straw, said:
‘Unregulated contingency fee arrangements have been stretched to breaking
point by some no-win no-fee lawyers who have exploited vulnerable clients by
taking huge slices out of their damages, failed to provide them with proper
information, and imposed unfair terms and conditions that have locked them
into unreasonable deals. The time has come for these arrangements to be
subject to proper regulation to protect the interests of consumers, and that
is what the government will legislate to do.’
These arrangements – unlike, for example, conditional fee agreements – have
been without statutory regulation because of an anomalous and long standing
interpretation of the law which has classified proceedings in Employment
Tribunals as ‘non-contentious’.
The department will shortly publish a consultation paper seeking views on
the details of the regulatory requirements.
However, it is intended that regulations will include:
a cap on the percentage of damages that can be recovered by the legal
representative
a requirement that legal representatives provide claimants with clear and
transparent information on total costs
a requirement that legal representatives clarify the deductions made from
the claimant’s award which are to go to the representative as their fee for
taking on the case
a requirement that they provide explicit information on alternative methods
of funding.
As well as regulating their existing use, the proposals will also allow the
Justice Secretary to extend or restrict the use of these agreements in
future should the need arise.
