Further details of the Ministry of Justice’s (MoJ) plans to curb and control no-win no-fee arrangements in employment tribunal claims were given this week.
The ministry plans to give the Lord Chancellor the power, via additions to the Coroners and Justice Bill currently before Parliament, to regulate damages-based contingency fees, where employment lawyers take a percentage of awards made to successful claimants.
Initial proposals include:
A cap on the percentage of damages that can be recovered by claimants’ legal reprsentatives.
A requirement that representatives provide claimants with clear information on costs.
A requirement that claimants are told about other methods of funding their actions.
Justice Secretary Jack Straw said: “Unregulated contingency fee arrangements expose claimants to unfair terms and conditions being imposed by those representing them, which could lead to huge slices being taken out of their damages. The measures announced by the government seek to redress this, offering proper regulation to protect the interests of consumers.”
The regulations will be drafted after a consultation period which ends 25 September. The MoJ has asked the legal profession and other interested parties, such as the TUC and the CBI, to provide input, though it said “anyone with an interest can express their views.”
The country’s most high profile no-win no-fee lawyer Stefan Cross, who handles thousands of equal pay claims, told our sister title Employers’ Law that the MoJ’s plans were “a nasty piece of work designed to drive us out of business”. He said he believes the MoJ is yielding to trade union pressure.
“The consequences could be that those who don’t have access to unions will be denied legal representation,” he added.
Damages-based agreements (DBA) can result in charges, according to the MoJ’s consultation document, ranging from 10% to 50%. A 2008 study by professor Richard Moorhead, Damages-Based Contingency Fees in Employment Cases: A Survey of Practitioners, found the mean fee charged is 31% to 33%.
Nw regulations could also see other DBA features such as penalties for early exits being banned.