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Damage based agreements (DBAs) are not new in the United Kingdom, however, they were previously unavailable in Scotland. The introduction of the Civil Litigation (Expenses and Group Proceedings) Bill on the 1st of June 2017 will alter this and permit DBAs for the first time. Scotland are also introducing speculative fee agreements (SFAs). The purpose of this legislation is to increase the funding options available for civil claims in the Scottish courts.

DBAs allow a solicitor to take a case without any upfront payment from their client. They secure their fees by taking a percentage of the damages if they win. If they do lose then no fee is due or a lower fee. That will depend on the agreement. SFAs differ in respect that if they are unsuccessful then clients may be liable for the expenses of their opponents. The client must only pay the solicitor if the case is successful or in some cases they may be liable for a lower fee.

The Scottish bill allows for concurrent retainers that enable solicitors to charge for part of their expenses as a standard client retainer and the remaining fees placed on a DBA. Costs expert Keith Levene of Pinsent Masons stated that the maximum permitted DBA fee in commercial litigation including VAT, would almost certainly be 50% of the monetary award recovered. A partial DBA is not permitted under the English system.

The Civil Litigation Bill shows a commitment from Scotland to proactively facilitate access to justice. The introduction of DBAs and SFAs demonstrate their wish to offer a variety of options. Disclosure of funders, intermediaries and financial interest in the outcome is a bold move. It is a rule that may make some funders cautious. 

While litigators in England & Wales may be frowning at the fact the Scottish Bill proposes more flexible measures than those allowed for DBAs in England & Wales, there was some upbeat news last week in that TheJudge has launched DBA insurance, which is a tool to enable law firms to share their contingency fee risk with insurers.

Click here to read more about DBA insurance. 

By Patrick Walsh, Associate, TheJudge