Government accepts need for greater clarity in regulations governing damages-based agreements

The government has today published the results of its post-implementation review of the key legislation that implemented the costs and funding aspects of the Jackson reforms in April 2013: Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2013 (LASPO). The review includes the introduction of damages-based agreements (or DBAs), as well as the removal of recoverability for conditional fee agreement (CFA) success fees and after-the-event (ATE) insurance premiums.

The government’s conclusion is that, on balance, the LASPO Part 2 reforms have been successful against their objectives, including reducing costs, reducing the number of unmeritorious cases, and promoting access to justice at proportionate cost.

However, in relating to DBAs, the government accepts that the DBA Regulations 2013 “would benefit from additional clarity and certainty”. The review notes that almost all respondents, across the spectrum, agreed that DBAs are rarely used, and that the regulations should be redrafted to ensure DBAs are a more viable funding method for a greater number of cases. Particular concerns said to be raised about the regulations include: the lack of payment of a reasonable sum for work done on termination; uncertainty around early termination and the indemnity principle; uncertainty around whether “sequential” hybrid DBAs are permitted (where a DBA and some other form of retainer are combined for different stages of the case, rather than concurrently); and the payment of counsel’s fees. Most respondents are said to have endorsed the conclusions and recommendations of the Civil Justice Council’s Working Group on DBAs, chaired by Professor Rachael Mulheron, which produced a detailed report on these issues in 2015 (see this post).

Encouragingly, the report states that an independent review of the drafting of the regulations is being undertaken by Professor Mulheron and Nicholas Bacon QC, and that the government will give careful consideration to the way forward in the light of their report, which is expected later in 2019.

What is not clear, however, is whether the government will give further consideration to issues of policy, as well as drafting, for example in relation to permitting hybrid DBAs – a reform which the review notes was strongly supported by many commercial litigators, as well as by Sir Rupert Jackson. However, it also notes that some commercial lawyers cautioned against allowing hybrids DBAs. The government’s current view on the issue is not expressed, though there is a general comment in relation to DBAs that the government “needs to exercise caution to avoid creating unintended consequences”.

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